The election showed Australians are annoyed by main political parties

Posted by AFN Staff Writers on 4th July 2016

joe website photo_i260This article was amended on 6 July 2016:

The voting patterns in Australia’s federal election on 2 July 2016 show Australians to be somewhat disillusioned with the main political parties. However, there was a significant difference between the Australian poll outcome and that of the British electorate in the referendum vote to leave the EU (‘Brexit’) and the American voting trends in the US presidential race.

Although the voters in each of the three liberal democracies all have shown disaffection with the mainstream political establishment, the uncertain result of Australia’s federal election also showed that political dissenters in Australia do not suddenly veer to the most extreme political Right or Left. It is true that the team of the polarising Pauline Hanson of the far-Right appears to have attracted sufficient votes to win possibly 3 out of the 76 Senate seats. However she has no seats in the House of Representatives and, in voting percentage terms,  her Australia-wide vote does not reflect any huge swing to the far-Right.

From the other side of the political spectrum, the Greens (a party to the Left of the Labor Party) failed to capture the anticipated votes or extra seats it was thought would be winnable in the Lower House, nor does it appear the Greens made any gains in the Senate but face the prospect of a reduced number. Perhaps the Greens are now perceived as part of the political mainstream, having once formed an alliance in the Senate to support the earlier Gillard-led Labor Party government.

My hypothesis is that the Australian “swinging voter”  disaffected with both major parties has swung to the middle, rather than the extremes.

The widespread political disenchantment with the main political parties and the the big shift in this election that best demonstrates this push for a political middle-path in Australia, is the success of the Nick Xenophon Team (NXT) in both the Senate and the Lower House. NXT  gained votes directly from swinging voters.

Perhaps this push towards the middle can be attributed to three distinctive Australian electoral features that are also the most stabilising features of  Australian democracy:

(1) compulsory voting;

(2) the preference system that gives Australians the ability to make a first, second and subsequent choice in the order of preferred candidates; and

(3) allowing voters in the Senate (the upper House) to consider an alternative choice of political party or candidate line to the party (or preferred candidates) of choice in the House of Representatives (the lower House). The role of the Senate in Australia’s bi-cameral Parliament is as a House of Review. Unlike the British House of Lords, the Australian Senate is fully elected with State-based lists of candidates voted upon on a proportional voting basis. This is a system that creates opportunities for political independents and minority parties to achieve the quota number to obtain representation.

These features of the Australian political system mean that the Australian voter who is dissatisfied with the mainstream parties will usually still vote – if only in order to avoid a penalty fine for not having voted. The voter can also choose to direct his primary vote or voting preferences to a minority party or an independent candidate without losing the effectiveness of his or her vote. This appears to have occurred on a large scale in this election.

The end result of this election appears to be a minority government that will be forced to negotiate to govern with support from independents and minority parties.

Unlike the US and the UK, many Australian independent candidates are from the political centre or have leanings that are not anti-business but lean towards protection of the Australian manufacturing sector and the small businesses sector and the family-based farmers sector. The result makes it possible these sectors will be in a better position to pressure the government for greater support – despite likely opposition from the Federal Treasury.

How the past 30 years changed Australia

One interesting question to ask the political class is whether there is any prospect of seeing changes being made to temper the role of Australia’s Federal Treasury in government policy decision-making.

The Australian political system has the same theoretical constitutional concept of separation of powers between legislative, executive and judicial branches of legal authority, as the UK and the US. The Australian ‘public-service’  is supposedly based on the model of the British civil service and its Westminster tradition of independence and impartiality. However, in recent decades the Australian political system has shifted towards a more American-style of politics with the involvement of lobbyists and with the government of the day becoming more involved in the selection process and penetration of pro-free trade policy instincts within senior postings in the public service.

The central role of the National Competition Council and the Productivity Commission (as part of the Federal Treasury) based in Canberra cannot be under-estimated. For three decades  –  starting with the Hawke/Keating era, and subsequently in the Howard/Costello era and for later governments –   the Federal Treasury has assumed top, front and centre of everything that gets done in Canberra. The philosophy of opening up the Australian market to greater competition is espoused in the meetings and reports of the National Competition Council and the Productivity Commission and dominates all government policy-making agendas. Treasury representatives sit on nearly all policy committees overseeing government departments and agencies across the Public service.

Yet, Treasury is not politically accountable for the broader economic and social fallout of the excesses of this de-regulatory framework. Free trade and freedom of choice and lower prices are all good, but what should be an appropriate response from Treasury officials when market power is concentrated in the hands of too few?  Or when the free trade agenda promotes the interests of Australia’s trading competitors ? Or when the taxation policy promotes the interests of those companies head-quartered outside Australia and whose interests may not align with Australian strategic policy interests or may pose the risk of serious detriment to the interests of Australian-based taxpayers and voters?

Who are the winners and the losers?

As mentioned, the big winner of this election appears to be the Nick Xenophon Team (NXT).

Its leader, Senator Nick Xenophon, is now being dubbed the “King Maker” as his team will have at least one critical seat in the House of Representatives in addition to three Senate seats on the cross-benches. There might even be a close result in a second possible House of Representative seat.

If Australia is to return to political stability, the question that needs to be asked is whether this requires more than superficial lip-service by handouts here and there to a few beneficiaries to be nominated by the NXT.

Perhaps it is time for a restructuring of policy-making processes that will moderate the harsh or anti-social policies that might otherwise be likely to emerge again and again.

In recent years, the main political parties appear to have delegated policy-making to Treasury bureaucrats.

Governments of the day choose to attribute their failures in the Senate to pass government legislation to political blackmail by minority parties in the Senate but the problem may be more complex than this.  I would argue that considerable blame lies with the fact that legislation is being drafted by politically out-of-touch bureaucracy. I would say that the poorly-drafted laws are often also cast too broadly in a blanket ‘covers all’ approach and this create unacceptably harsh effects without sufficient appreciation of the impact and flow-on social effects.. Perhaps therefore the  Senate cannot be blamed for rejecting so much prescriptive anti-social legislation.

One could therefore argue that it is time for Australian political leaders to re-assume their duties and to lead by articulating ways to improve things.

That then means introducing more detailed policies that implement the vision, rather than having the two main political parties rely on Treasury for policy plus legislation, while the politicians spend their time attending to lobbyists in Canberra for politically-attractive ideas that merely become part of a political platform because the ideas sound sufficiently vote-catching for the next election in the context of holding or gaining power before the end of the next 3-year electoral cycle.

Meanwhile, there is a big question-mark as to whether Malcolm Turnbull can do anything to negotiate with the NXT to find a political middle path without generating opposition from within his own party.  The prospect of Turnbull facing considerable internal dissension or destabilisation from within the Liberal-National coalition poses a serious threat to his leadership. In particular, the conservative faction of his political rival the former prime minister Tony Abbott  (whom Turnbull deposed in a party-room coup not long ago) makes Turnbull’s task in forming a unified minority government very difficult.

The Federal Treasury therefore may continue to dominate major political outcomes while its budgetary decisions and guidance to legislative draftsmen are given largely in a policy leadership vacuum.

Xenophon and industry

Senator Nick Xenophon has played a critical role in the negotiation of important recent changes in Australian laws:

  • Strengthening the protection of small business against the supermarket duopoly
  • The introduction of an ‘Effects test’, updating part of Section 46 in the Competition and Consumer Act
  • Country of origin labelling

In addition, Xenophon is a strong supporter of Australian manufacturing, in particular South Australian manufacturing.

Xenophon has a strong desire to protect and restructure employment opportunities for those who have been, or are likely to be dislocated by cut-backs at the troubled Arrium steel plant in Whyalla as well as by the imminent shut-down of the General Motors car-making plant in Elizabeth, South Australia and the flow-on impact for Australian engineering businesses and other businesses in the automotive-related supply chains. South Australia is also the heartland of Australian horticulture, food processing (apart from dairy and meat), and the wine industry.

Xenophon also opposes the expansion of gambling interests (this was his entry point into State and Federal politics). In this regard, any curtailment of the pokies industry could have an impact on Woolworths supermarket group, which has a major investment in the gambling sector through its interest in pubs. Xenophon too appears to be sceptical of the argument that globalisation has sufficient flow-down benefits for Australian workers and has also questioned why the profit margins of banks and major retailers have increased despite being given the opportunities through free trade and globalised sourcing of product to import cheaper products against Australian-produced equivalents.

The problem with the main political parties

Each of the main political parties appears to have its focus directed towards its own narrower constituency.

In the case of the Australian Labor party, the focus is on unionising the workforce despite the fact that this goes against the trends for small businesses being created with lower cost-thresholds using simpler and smaller infrastructure through the use of modern digital technologies.

In the case of the Liberal party, the focus of economic policy is still on benefiting the larger retailers by eliminating restrictions on their freedom to import and on supporting less restrictions on bank capital inflows and outflows. The original drivers for this economic policy were the fear of inflation, and therefore the development of policies to encourage competition and cheaper imports to lower prices. The second driver was the resources and energy sector which needed to import vast amounts of capital to build infrastructure to extract and export resources and to generate large capital inflows into Australia.

The biggest change that is still not adequately recognised in Canberra is that Australia’s mining boom (other than the gold sector), and in particular mass commodity resources, has slowed down considerably and the Australian dollar is trading much lower. Furthermore, inflation as measured by the Consumer Price Index (which conveniently ignores the huge hyperinflation in real estate prices) has been transformed into price deflation in mass consumables. This is because of a mix of factors such as:  maturity of markets, rapid technological change that accelerates obsolescence, and oversupply caused by less predictable global markets and even by changes in the weather from season to season.

At the same time, global capital markets and currencies are in a volatile state of flux caused to some extent by a mix of excessive debt, both in the private and public sector, and fears and uncertainties as to what may happen next in large economies such as China or parts of Europe.

Globally, banks are offering negative interest rates which means that they are charging their customers for the security of looking after their money whilst at the same times the banks are cutting back on credit and tightening any loose lines of credit.

The world has changed but Canberra continues to believe that free trade is expanding when it is actually contracting. Customers, workers and voters are feeling the pinch. The Federal Treasury is unmoved while the politicians seem to stand still but shouting louder at one another.

Currently Treasury-instigated policies in Australia are ignoring the fact that other countries are protecting their markets and developing greater self-sufficiency in domestic food processing and manufacturing generally. Australia’s Federal Treasury does not see the benefit of any Australian-based safety net or production quotas or  maintaining energy reserves for domestic markets, nor in creating any supportive framework for new industries. The Turnbull government’s “Innovation Policy” was rightly seen by voters as superficial at best.

Australians have got used to the existence of some safety net features such as the Medicare healthcare system and the pharmaceutical benefits rebate scheme which are important elements of the fairness of Australia and reducing the prospects of ill health to cause poverty and social disruption.

There are other government areas that have already been cut back in recent times that have made Australians feel less secure as less secure times approach them. These include the lack of coordinated social housing policies for the homeless and for those who simply cannot afford to buy in. The residential rental market is also confused by mixed and conflicting messages discouraging residential investment such as in relation to negative-gearing, increasing land taxes and signals towards the imposition of tougher controls on residential landlords. At the same time, there are market distortions that see a surplus of empty city apartments being built for absentee landlords while more people are seen sleeping in their cars or on the streets.

Australians have a strong political gut-instinct

This election has shown that Australians are looking for the middle-path and are more skeptical about ideology than their British, European and American counterparts  –  just as Australians seem to be more skeptical about organised religion than their American counterparts (some might say the closest belief that Australians have to organised religion is their tribal belief in their football team).

However most Australians also believe in a ‘fair go’ and a fair reward for effort, without fear or favouritism.

If the main Australian political parties are to get back on track and give Australians political stability again, the political leaders will need to acknowledge that Australians want some of the political ideologies dampened. In recent times, there has been too much hot air blowing in from the remoteness of Canberra. Maybe now is the time for a fresh wind to be blowing…