and political leadership? Are they mutually exclusive? Does dysfunc-tional political leadership at national level impact on the economy? With the resources boom threatening to run out of steam, can leaders confront the new challenges? Such navel gazing is a national pastime and the aftermath of a bitterly fought federal election in Septem-ber 2013 is as good a time as any to contemplate these issues. The elec-tion saw Labor leader Kevin Rudd – who had removed Julia Gillard to become prime minister only in July 2013, having been ousted himself as prime minister by Gillard in July 2010 – defeated by Tony Abbott’s Liberal-led coalition. Labor lost more than 20 seats as the coalition won 90 seats in the 150-seat lower House

Is Australia Still the Lucky Country?

It is almost 50 years since writer, aca-demic and republican campaigner Donald Horne dubbed Australia the ‘lucky country’. The famous ‘lucky’ tag has been variously used to de-scribe the country’s climate, standard of living and natural environment. Latterly, Australia’s ‘luck’ has taken the form of a second resources boom. A flourishing minerals and exports trade has seen Australia survive the effects of both the Asian financial crash in 1997 and the global finan-cial crisis in 2008. Still riding high in most comparative economic country indicator lists, Australia has retained its sense of luck.

Horne’s words, written in 1964, are worth repeating in full: ‘Aus-tralia is a lucky country run mainly by second-rate people who share its luck.’ Horne identifies an important conundrum: how can a country with such a strong economy be so poorly led? Leaders of the main parties have come and gone with alarming rapidity in the past few years. The turf battles, most obvious in the Australian Labor Party (ALP) but also evident in the centre-right Liberal Party, have tended to con-centrate on narrow personalities rather than policy. An elitist style of Canberra-centric politics has failed to articulate a convincing Australian identity. Australia has struggled with big issues of immigration, indigenous reconciliation, climate change and the country’s position in the world.

Horne was not alone in noticing the parlous state of Australian politi-cal leadership and elite failure. But what relationship, if any, is there between the economic success story

Despite enjoying almost two decades of continuous economic growth, Australian politics has become increasingly dysfunctional. In the wake of September’s general election, Mark Bennister asks if Australia’s luck is starting to run out.

of Representatives. Abbott will be forced to work with a hotchpotch of minor parties holding the balance of power in the Senate. After a chaotic period of Labor government, Ab-bott’s leadership skills will be under great scrutiny.

Economic Boom

It is tempting to see the Austral-ian economy as a great success story, punctuated only by signifi-cant downturns in the 1970s and again in the early 1980s. Australia’s abundant reserves of coal, iron ore, copper, gold, natural gas, uranium and renewable energy have attracted high levels of foreign investment. Commodity exports underpinned

18

16

14

12

10

8

6

4

2

0

Other exports

Mining exports

1975 1980 1985 1990 1995 2000 2005 20101970

% o

f GD

P

FIGURE 1 The growth of Australian mining exports against other exports as a percentage of GDP, 1970–2010Source: Australian Bureau of Statistics, 2011.

An elitist style of politics

has failed to articulate a convincing Australian

identity

9December 2013

the post-second world war boom from 1949 until 1970. The foundation for a prosperous and developing Australia was set with 6 per cent growth and virtual full employment for much of this time. Policy reflected this settled state of affairs. From the establish-ment of modern Australia as a Federation in 1901, Australian policy was characterised by a level of consensus around five aspects identified as ‘the Australian Settlement’ by Paul Kelly: White Australia, industry pro-tection, wage arbitration, state paternalism and imperial benevolence.

The civil rights movement in the 1960s challenged this ‘Settlement’, leading to the dismantlement of the ‘White Australia’ policy that favoured migration from Europe and particularly Britain. The 1970s saw a decoupling from the old imperial power as Britain joined the European Community. Australia felt the brunt of the global oil crises and increasing pressure to open up its protected markets. The breakdown of the Settlement in the 1970s was compounded by the adoption of neoliberal economic pol-icies under the Labor governments of Bob Hawke and Paul Keating. After opening up markets, deregulation and the floatation of

the dollar, Australia slumped (in Keating’s words) to ‘the recession that Australia had to have’ in the early 1980s. Boom times returned in the 1990s, this time fuelled by the Chinese demand for primary source material. The Australian economy grew for 17 consecutive years before the global financial crisis and beyond as the country, weathered the global storm and held on to its ‘AAA’ credit rating.

During the period of the first Rudd government (2007–10), the minerals and energy export boom continued, with the in-dustry making up about 56 per cent of total exports near the time Rudd was replaced in July 2010. Mining contributed 10 per cent to GDP in 2012, double the percentage of 2000 – a growth rate that now sees mining exports overtaking all other exports as a percentage of GDP (see Figure 1).

The demand for minerals and energy had almost nothing to do with internal policy and much to do with the very strong de-mand for coal, liquefied natural gas (LNG) and iron ore in China, India and other emerging economies. The strength of min-eral exports undoubtedly helped to temper the effects of the financial crisis on the

Australian economy, particularly as China began to recover more quickly than many analysts expected. Rudd injected an eco-nomic stimulus package and with foreign receipts boosting the economy, Australia was able to avoid dipping into recession during the global financial crisis. The ex-tent of recovery was shown in advance of the 2013 budget, with an economy 13 per cent larger than six years previously and a respectably low (if rising) unemployment rate of 5.5 per cent. On a range of indica-tors the Australian economy still compares favourably with a range of countries (see Table 1).

The export boom has, however, had a downside. The strength of the Australian dollar during the latter part of Rudd’s lead-ership put downward pressure on export earnings in other sectors of the Australian economy. The rural sector – only just begin-ning to recover from the severe droughts of the early to mid-2000s – was dealt a major blow by stronger exchange rates, which significantly reduced income from exports. Australia’s relatively high interest rates dur-ing the financial crisis increased demand for Australian dollars, contributing to a higher

Labor leader Kevin Rudd was defeated by Tony Abbott’s Liberal-led coalition in September’s elections. Reuters

10 Political Insight

exchange rate. Significant borrow-ing by the Rudd government to fund spending policies put further upward pressure on interest rates. Unlike parts of the mining sector, the rural, manufacturing and services sectors face much competition in interna-tional markets and are largely price takers, unable to affect the price received for exports in international markets.

By August 2012, the Financial Times was speculating that the re-source boom may be at an end. BHP Billiton, the world’s biggest mining company, shelved more than US$30 billion (£19 billion) of planned de-velopments in Australia; 24 hours later the price of iron ore, Australia’s biggest export, hit a three-year low of less than US$100 (£63) a tonne. All this, and China’s uncertain economic outlook, prompted the resources minister, Martin Ferguson, to declare that the boom was over. The mining sector as a whole remains buoyant, but capital investment in the sector may have peaked, signalling a pos-sible slowdown.

The dollar continued to climb under Julia Gillard’s premiership, severely impacting on Australia’s manufacturers. One of Australia’s largest car manufacturers, Holden – a subsidiary of General Motors – had to shed 500 jobs in April 2013,

leading the managing director to claim that ‘[t]he currency’s rise meant that making things in Austral-ia is almost three-fifths dearer than it was 10 years ago’. The car industry is not the only part of the economy to suffer; wine exports from South Australia slumped in 2012, exposing a patchy regional dimension to the economy. Tax receipts fell and the desire to present surplus budgets has remained a political aspiration only. Comparing Australia to countries within the region rather than the

struggling Western European econo-mies tells a story that is perhaps not so rosy (Figure 2).

Struggling manufacturing and the possible end of the resources boom returns us to Donald Horne. If Australia’s economy is less likely to be driven by the export of primary resources and struggles to develop a viable manufacturing sector, what is the economic plan B? The ‘luck’ of abundant natural resources will surely run out and the markets will dry up. Horne decried the lack of an

TABLE 1 Fiscal position of Australia compared to Euro area and European Union averages (percentage of GDP)

Country Growth Unemployment Inflation Current account

2012 2013–18 2012 2013–18 2012 2013–18 2012 2013–18

Australia 3.58 3.14 5.24 5.15 1.76 2.50 –3.66 –5.57

Canada 1.84 2.22 7.29 7.04 1.52 1.88 –3.68 –2.93

Denmark –0.57 1.38 7.55 6.93 2.41 2.00 5.25 4.79

Finland –0.21 1.53 7.68 7.79 3.16 2.23 –1.71 –1.79

Germany 0.87 1.20 5.46 5.59 2.14 1.77 7.01 5.28

Netherlands –0.88 1.31 5.31 6.06 2.82 1.70 8.35 8.94

Norway 2.99 2.17 3.22 3.35 0.71 1.97 14.20 9.73

Sweden 1.20 2.13 7.90 7.05 0.89 1.95 7.14 7.19

Switzerland 0.98 1.79 2.90 2.98 –0.70 0.62 13.40 11.93

UK 0.17 1.76 8.02 7.16 2.84 2.23 –3.51 –3.70

USA 2.21 3.01 8.08 6.64 2.08 1.98 –3.03 –3.20

Advanced economies 1.25 2.29 8.00 7.51 1.96 1.95 –0.13 –0.18

Source: IMF World Economic Outlook Report. Note: Figures for 2013–18 are estimated averages. Budget balance means revenue minus expenditure. Primary balance means budget balance plus interest on debt.

By August 2012, the Financial

Times was speculating

that the resource

boom may be at an end

FIGURE 2 Average annual GDP growth, 2001–07 and 2008–12Source: IMF World Economic Outlook Report.

6

5

4

3

2

1

0

2001–2007

2008–2012

Aus

tral

ia

Hon

g Ko

ng

Kore

a

Mal

aysi

a

New

Zea

land

Sing

apor

e

Taiw

an

11December 2013

intellectual, skills-driven market. This is where political leadership comes in: successive governments have been happy to ride the wave of the resources boom without thinking carefully of how an alternative economic strat-egy may be developed.

Leadership Dysfunction

Economic success has been accompanied by a decline in democratic leadership. John Howard staggered into the premiership in 1998 and clung on until 2007. He shored up his position with a populist brand of conservative small-mindedness that appealed to Australian ‘battlers’. Howard’s centralising premiership was characterised by deceit over boat people arriving on Australia’s shores and hard-nosed demagoguery to keep one step ahead of the opposition and neuter any challengers from within his party. Meanwhile, the ALP went through the type of lead-ership churn that had afflicted the Liberals earlier. Labor – in thrall to the messiah complex of leadership change being the only way to win elections rather than policy renewal – eventually settled on the often autocratic Kevin Rudd as leader. Rudd’s elevation coincided with How-ard’s final demise. Howard had lived up to Paul Keating’s acerbic reflection that Australian leaders were ‘araldited’ to the position, so reluctant were they to leave the stage. And so it proved with Rudd, a man seemingly hated by his party. Ousted by Julia Gillard in 2010 after less than three years in office, he refused to go away, convinced of his own qualities. His return to office after appealing to the desperate nature of ALP MPs who swallowed any pride they had left to save their seats in 2013 was the final instalment of an embarrassing merry-go-round for the ALP. The Liberals have not been immune, going through several leaders after Howard before settling on the centre-right heavyweight Tony Abbott.

Such leadership churn may be alarming – the function of a short three-year electoral cycle – but the quality of election campaigns has been equally dispiriting. The Abbott–Gillard election in 2010 represented a new low for many commentators. The 2013 election proved just as uninspiring, characterised by a singular lack of vision and a depressing focus on bland soundbites and empty rhetoric. The result was a flight to minor parties and an alarming dip in turnout. Australian politics has been personal and vicious for many years, a reflection of the macho environment associated with the country. Paul Keating’s famous put-downs in Parliament were typical of the personal nature of leadership, a political culture that was exposed in the misogyny directed at Gillard as Australia’s first female prime minister. With such a state of affairs it is hardly surprising that leaders strug-gle to gain positive satisfaction ratings in opinion polls. One argument is that as the economy rolls along and the federal system ensures that government functions at state level, what’s left are personal battles and ego-driven leadership. Political parties have become empty vessels for leaders. Compulsory voting negates any need to get out the vote. Party membership has plummeted. Centralised campaigns and low-level corruption around candidate selection characterise party competition.

Out of Luck?

Australian democracy may be characterised by leader-ship churn, weak parties and dull policy debates, but do leaders matter when broader issues of macroeconomics are under the spotlight? Hawke and Keating opened up the country to market forces, reducing the protection-ist tendencies of an inward-looking and still dependent state, generating profound change in Australia in the 1980s. John Howard benefited from the boom times and made much of an Australia whose growing wealth apparently made its citizens ‘relaxed and comfortable’.

Although the Australian economy continues to per-form well, opinion polls show that Australians them-selves seem not to appreciate this. Debt ratios remain low with plenty of scope for government intervention.

In recent elections, political leaders have been happy to play to (and cultivate) fears about living standards, energy prices, budget deficits and – saliently – immigra-tion and asylum. Successive leaders have made political capital from taking a tough, anti-immigration stance,

Former prime minister Julia Gillard was unable to avoid the long knives of her own Labor party

Corb

is

12 Political Insight

clamping down on the often desperate plight of those seeking to enter Australia via boat. Yet although these arrivals spiked in the mid-2000s, refugee and humanitar-ian visas make up less than 10 per cent of the annual immigration programme. This hardening of rhetoric by successive leaders has masked a significant change in Austral-ian demographics. From the ‘£10 poms’ who flocked to Australia after the second world war to today’s temporary workers, Australia’s economic needs have always attracted foreign labour. This labour is now more likely to come from India and China than the UK.

The good times may have peaked but politicians have been happy to stoke the fears that disaster is lurking around the corner. Successive leaders have been un-able and unwilling to grasp the nettle and tackle some of the big issues (in particular climate change) that you would expect to be addressed in a high-performing economy. Australians zealously guard their low tax and relatively low debt economy. Rudd promised to confront the challenge of climate change then shied away from implementation when faced with the might

of the mining industry. Tony Abbott, the new prime minister, swiftly removed the carbon tax and hardened up coalition policy on border controls. With such a depend-ence on primary material exports, it could

be exogenous factors that have the great-est impact. Once the slowdown in China’s economy begins to bite, political leaders may find they have run out of luck.

References

Australian Bureau of Statistics (2011) Balance of Payments and International Investment Position, Australia, March, cat. No. 5302.0. Canberra:

ABS.

Horne, D. (1964) The Lucky Country: Australia in

the Sixties. Ringwood, Victoria: Penguin.

Horne, D. (2000) Looking For Leadership: Aus-

tralia in the Howard Years. Ringwood, Victoria:

Penguin.

International Monetary Fund (2013) World

Economic Outlook: Hopes, Realities, Risks, April.

Washington, DC: International Monetary

Fund.

Kelly, P. (1994) The End of Certainty: Power, Politics

and Business in Australia. St. Leonards: Allen

and Unwin.

Walter, J. and Strangio, P. (2007) No, Prime

Minister: Reclaiming Politics from Leaders. UNSW

Press: Sydney.

Dr Mark Bennister is a Senior Lecturer in Politics at Canterbury Christ Church University. He is the au-thor of Prime Ministers in Power: Political Leadership in Britain and Australia (Palgrave, 2012).

Once the slowdown in China’s economy begins

to bite, Australia’s political leaders may find they have run out of luck

Australia’s economic success has been built on a booming minerals sector, but how long can the boom last? Reuters

13December 2013