By Peter Boyle
In a frank essay for the March 22 Time magazine, retiring industry minister Senator John Button summed up the federal election result: Labor was seen to have "stuffed it", but "in the end, a skeptical electorate decided that the Coalition might stuff it even more". The morning after the vote, many voters felt the limited relief at a hangover that could have been worse. So it was not surprising that federal politics in the two weeks after the elections were duller that usual. Paul Keating picked his new cabinet, John Hewson was unsuccessfully challenged by his predecessor, John Howard, while most of Australia yawned.
Paul Keating's new cabinet has been described by many commentators as dominated by factional and personal friends. The soon to be editor of the Canberra Times, Michelle Grattan, says that Keating has gathered power into his own hands with key areas of responsibility going to intimates from his NSW Labor Right faction: Laurie Brereton, industrial relations; Graham Richardson, health; Alan Griffiths, industry; Michael Lee, resources.
John Dawkins, who headed the Keating for PM campaign in the Hawke days, retains Treasury, and fellow Keating campaigner Kim Beazley keeps Employment, Education and Training.
Keating bluntly told the caucus that the NSW Right was where the real political talent was to be found in the ALP. The seedier side of that faction's reputation was not mentioned.
The "Left" had to be content with the leftovers — portfolios like Social Security and Immigration, where their prime function will be to take the flak for changes that will continue to hurt the public. They also qualified for relatively powerless positions (Jeanette McHugh for Consumer Affairs) or closely supervised positions (Robert Tickner, Aboriginal Affairs, now under the wing of the PM's Department.
To underline his dominance, Keating insisted on selecting Frank Walker over the Left's choice, Peter Staples, for another junior cabinet position.
Keating was still splashing rhetoric about a new direction. In the 1970s Labor was ruled by its heart, he said, in the 1980s by its head but in the 1990s it had to rule with heart and head. He was about to fashion a new blend of free market economics and the Social Democratic welfare state. Similar pap was coming from the Opposition as it licked its wounds. The GST was dropped and a new, "more caring" image was to be constructed.
Images aside, what will the new government do? Even immediately after the election campaign, political scientist Brian Galligan of the Australian National University's Federalism Research Centre noted that it was not clear what Labor stands for, except for a more humane tionist policies embraced by the Coalition.
This uncertainty about Labor's direction reflects two factors. First, the dilemma of how a Social Democratic image can be reconciled with the relentless demand from global capital for deregulated markets. Second, the uncertainty in ruling circles about how to break the prolonged recession.
The answer to the first dilemma is that it cannot be done. Senator Button says: "Labor paid a huge price in credibility with the people" for its pursuit of financial deregulation, tariff reductions and other measures to "internationalise the economy".
This has not changed. The best Labor can do is to try to preserve a thin veneer of Social Democracy. Perhaps Graham Richardson's role will be to manipulate Medicare as the symbol of Labor's caring image, after his previous success at seducing the peak environmental lobbies into supporting the ALP in the 1990 election. But at the same time, the rest of "Keating's boys" will do the real work. "The Keating ministry is reassuringly open for business", according to Age business commentator Stephen Bartholomeusz.
The first policy signals from the new cabinet were directed straight at big business. The selection of the unabashedly pro-development-at-any-cost Alan Griffiths as industry minister spoke for itself. The yet-to-be-elected Michael Lavarch pledges to use his promised attorney-generalship to clean up company law along the lines of the less-regulated model clearly preferred by business lobbies. The shift of the Trade Practices Commission from the Attorney-General's Department to Treasury is also a pro-business move.
And on March 25, Dawkins reaffirmed the Labor government's "One Nation" commitment to more tax cuts for big business. These include:
- a further reduction in the company tax rate from 39% to 33% in 1993-94 (Labor previously reduced it from 46%);
- a 10% break on investment in plant and equipment ordered by businesses by July 1, 1994, and installed for use within the following year;
- the reintroduction of quarterly company tax payments.
There was some concern expressed by economists in the Treasury and Reserve Bank about this course because the federal budget deficit is already ballooning as a result of the recession (as government revenue falls along with business activity and social security expenditure rises along with unemployment). There is also concern that the economy may grow too fast, prompting a flood of imports that would not be matched by exports and hence raising the foreign debt.
Other economists point to more "ideological" problems with Labor's course. They worry that the economic rationalist orthodoxy of the last decade is being challenged as Labor intervenes in the economy to try els and boost flat investment. Some fear that Labor may try to "pick winners" in its attempt to promote greater exploitation of the opportunities in Asian economies.
Most of these ideological fears cut little ice with the business elite. The real debate was had out in 1992, when "One Nation" was released.
The free market was cutting costs but not producing the promised recovery, so by and large big business welcomed Labor's promised handout of some $9 billion in tax cuts and $3 billion in extra government spending by 1996. Big business can make use of the ideological puritanism of the economic rationalists when that suits, but it is itself pragmatic. So it opted for a course which seemed better able to protect profits.
Stephen Bartholomeusz aptly summed up big business's central policy demand on the Keating government as "rekindling business investment", getting "quality growth in the economy" while at the same time accelerating "the processes of micro-economic reform to improve the overall relative competitiveness of the economy". There is nothing in that program for the millions of working people who re-elected Labor.