Populism Trumping Policy

Populism is on the march around the world. Populist movements have swept the UK, US, Europe and the Philippines. But Australian policymakers must resist the tide and implement desperately needed reform.

A version of this opinion piece from John Brogden, AICD Managing Director & CEO, appeared in The Australian Financial Review on 1 November 2016.

In recent months the western democratic world has come face to face with modern populism. Brexit in the UK, the Alternative for Germany, Donald Trump in the US and President Duterte in the Philippines. This new populism has been seen variously, or in combination, as a surge in nationalism, fear of terrorism, the return of protectionism, opposition to mass immigration and most often the watershed of globalisation.

An opinion piece by David Brooks in the International New York Times in September 2016 found the words I've been looking for to describe where we are:

“In the 21st century, politics operates around a different axis. It’s not left/right, big government/small government. It’s openness and dynamism versus closedness and security. It’s between those who see opportunity and excitement in the emerging globalized, multiethnic meritocracy against those who see their lives and communities threatened by it.”

For Australia I see it this way. The community has changed the rules. For the last 30 years public policy reform was achievable if there were more winners than losers. Now there can be no losers at all.

Whilst economic growth is strong and unemployment is actually dropping, the 'narrative' is remarkably negative. We've never been richer, lived longer or enjoyed greater opportunity. But the prevailing pessimism reflects high personal debt, individual stress, fear of unemployment, unaffordable housing for our children and a deep and growing foreboding for the future.

Malcolm Turnbull found out the hard way what people think when you tell them “there has never been a more exciting time to be Australian”.

However the reality is Australia desperately needs long term policy reforms to extend our prosperity. But public policy makers are getting away with ignoring three critical issues - increasing debt to fund recurrent expenditure, comprehensive tax reform and productivity.

Budget repair (a new political slogan for our lexicon) matters because we are acquiring bad debt daily - we are borrowing to fund recurrent expenditure like pensions and public service salaries. Good debt is borrowing to build infrastructure for the future that adds to the nation’s productive capacity.

Tax reform matters because our tax system is stalled between the old and new economies. The GST is unfinished work, personal income tax is too high and the smorgasbord of state taxes are ridiculously inefficient.

And poor productivity means we face real challenges in sustaining our living standards now that the commodity prices boom is over. We've seen no real wages growth at all in recent years and are kidding ourselves that we can continue to ignore the serious impediments to productivity embedded in our workplace relations.

So where is the leadership?

The shape of the current national Parliament and its performance to date gives no hope at all that any of these issues will even begin to get addressed. The domination of minor party and individual agendas has cancelled out the elected mandates of government.

'Big business' calling for business tax cuts, including reductions for small business, isn't cutting it. While lower corporate tax is good, the business community needs to prosecute the case for broader reforms.

In the living memory of most we have not seen such a severe anti-big business sentiment in Australia. Witness the strong and growing popular support for a banking Royal Commission.

It's not clear what the game changer will be for Australia to swim against the tide of populism. I pray we won't need a recession to force us to reform. The hardest decisions are always best made in better times.

Large corporates need to understand it's about profit for shareholders and benefits for the community, not just the former. Unethical business practises, poor behaviour and scandal is not cleansed by strong numbers. I don't know any director who disagrees, yet the message from Australia's biggest businesses is simply too weak and the reaction to poor practices too slow and too little.

The Australian Institute of Company Directors remains a strong voice for reform. A higher GST and lower personal income tax, increased investment in productivity building infrastructure, workplace reform, fixed four year-terms for the Federal Parliament and a serious update of Australia’s second rate not-for-profit regulatory system.

It's not clear what the game changer will be for Australia to swim against the tide of populism. I pray we won't need a recession to force us to reform. The hardest decisions are always best made in better times. Let's not lose our strong economic position by being unnecessarily reactionary and negative.

The AICD earlier this year released Governance of the Nation: A Blueprint for Growth, an important national reform document that sets an agenda for political leaders based on principles of good governance.

To read more about the report, click here.