There is a tide in the affairs of men which, taken at the flood, leads on to fortune; omitted, all the voyage of their life is bound in shallows and in miseries.
(William Shakespeare, Julius Caesar)

Australia is in danger of unlearning the lessons of the past and regressing into a slow-growth, high-inflation, low-opportunity nation with declining living standards.

Before the global pandemic, Australia had spent several years reversing economic reforms that ensured efficient and effective allocation of scarce resources. It was almost like the successes of previous generations allowed us to engage in harmful self-indulgence. Rational arguments for reform and change, gave way to irrational appeals to our emotions, demanding that we care more about symbolic gestures rather than meaningful outcomes.

The impact of this over a large gamut of policies damaged our nation, our people and our institutions. Instead of the Australian economy expanding citizens’ prospects, we have steadily reduced rungs on the ladder of opportunity. We have entrenched in legislation the power of vested interest. 

Since 2007, there have been several major changes to public policy, all of which have had the impact of reducing productivity growth. The most problematic interventions have been in housing, finance, energy, industrial relations and education. A lack of will to reform Australia’s fundamentally unfair and complex taxation system has resulted in opportunities being denied to current and future generations because our tax system incentivises destructive economic behaviour.

All these reversals and reform failures make Australia more vulnerable to external shocks. Australia is now going through a prolonged period of inflation, and the poor policy settings in each of these areas mean that the cost of adjustment is higher. These costs are only recognised long after they are paid, and the causes are too often apportioned to symptoms that have nothing to do with the situation. Resulting in corrective action that makes things even worse.

If we as a nation undertook fundamental reform it would be the spark that set off a renaissance. The reason productivity is so important is that it allows a society to provide a better life for its citizens. Martin Luther King said that the long arc of history bends towards justice. This is true because capitalism compels it to do so.

The human spirit demands the fundamentals of justice: equality, freedom and fairness. Economic productivity not only embodies these values but also enables them. Seen through this lens, economic reform is not just a financial issue or even a vote-winning tactic, it is a moral issue as old as the scriptures.

Australia’s history with economic reform is not a glorious one. Our federation was cobbled together after the Left opposed it because they wanted to protect state-sponsored industry at a state level. It was only a ‘dirty’ deal between the Free Traders and the Protectionists, in which Protectionists agreed to free trade amongst the colonies while Free Traders agreed to protectionist policies outside those colonies.

From this point, it was mostly downhill. The Australian Settlement had three key pillars: the white Australia policy; protected industries behind a tariff wall; and centralised wage fixing. Each had long-term deleterious impacts on Australia and its people. The White Australia policy was racist, it is a stain on our national history. It further isolated Australia both in the region and the world. It also meant that the best and the brightest who wanted to contribute to our nation’s future were prevented from doing so for no better reason than the arbitrary place in which they were born.

Once you accepted that discrimination based on race rather than merit as a founding principle other silly and destructive ideas become much easier. In this case, it was embedding the power of unions and industry groups through government-supported companies hiding behind a tariff wall. This then enabled the preposterous idea that a commission sitting in Melbourne could set not only pay rates but also work conditions for all companies right across the country. Both foundations were disenfranchising. In Australia, it became more important to have the right people in your back pocket rather than getting your product in the consumers’ back pockets.

In such an environment corruption became rampant. Gerard Henderson highlighted not even the tip of the iceberg of this in his article The IR Club. The Hawke Government was forced to deregister the BLF, the forerunner of the CFMMEU.

When the ALP went to the next logical step of proposing the nationalisation of banks, something that some members of the National Party today are not opposed to, Australians responded negatively and elected the Menzies Government in 1949.

The Menzies Government was not a reformist government. It was a competent government. Changes were small and gradual. Having said that Robert Menzies, against the opposition of the Left, dismantled the White Australia policy, leading to Harold Holt’s announcement that it had been abandoned in 1965. His government also undertook the great project of bringing Australians together, firstly by giving everyone a stake in the Australian economy through home ownership, then by seeking to dismantle anti-Catholic sentiment, and finally with the 1968 referendum that empowered the federal government to make laws for the benefit of Indigenous Australians.

Today, the Whitlam Government would be described as a hot mess, rather than the visionary crusaders that Left-wing historians paint them as. If you are in any doubt as to which characterisation is most accurate, please take the time to read the front pages of the Sydney Morning Herald from 1972 to 1975. It is hard to pick a favourite scandal from this time but certainly, the decision of a minister to raise funds privately through a middle-man using petrodollars so he could buy Australian mines is hard to top. You can imagine Rex Connor ringing his broker buying BHP shares on his private account which in due course he would transfer to the Treasury along with his privately arranged debt facility.

Gough Whitlam introduced economic programs that created a Keynesian debt trap and supercharged inflation. As his programs doubled inflation, he responded by doubling wages, which then doubled prices, leading to higher wage demands, and higher price increases, baking in inflationary expectations.

Such were the fruits of Left-wing economic programs. He lost in an absolute landslide after a controversial dismissal that should have set him up for a resounding victory.

If possible, history should judge the Fraser Government even more harshly. It knew better and still did not act. Fraser held a record number of cabinet meetings, to reach a record low number of meaningful decisions. Fraser thought the problem was managing the system when the system was not managing.

Australian policymakers resumed the historical trend, making the right decisions having exhausted all other options. Through the 1980s and 1990s, a series of economic reforms lead to important advancements for Australia and its citizens. By reforming product markets, it became possible to run the economy faster without triggering inflation. We were able to achieve this by deregulating Labor markets, capital markets, tax and welfare and federation reforms. Governments at the State and Federal levels were focused on outcomes for citizens rather than powerful sectorial interests.

These reforms opened Australia up to the world, created boundless opportunities and in turn, we became more globally integrated and more influential. We were key to significant agreements that made our nation, our region and our world safer, more prosperous and peaceful.

Australia avoided three major global downturns, our national income per capita rose in real terms by 73%, our current account moved from systemic deficit to surplus, and income inequality was reduced. Not to mention Australian diplomats were central to ending apartheid in South Africa, an Antarctic treaty and the formation of APEC, all while reducing our carbon emissions by 21%. 

That all came to an end in 2007. The Rudd government was elected to do three fundamental things: sign the Kyoto Agreement, apologise to the Stolen Generation and rewind WorkChoices. Of course, Rudd did far more and far worse. He used the Global Financial Crisis to bake in permanent deficits, reallocated money from productive to unproductive sectors, and began reregulating the banking sector through legislation like the Responsible Lending Act and the Fair Work Act.

It never ceases to amaze that political commentators seem unable to follow the direct line between record-low real wage growth and the implementation of the Fair Work Act.

The Abbot, Turnbull and Morrison Governments at various points did try to undertake moderate reforms, but at every point were met with vehement opposition from entrenched interest groups without any counterbalance. Indeed the opposite happened, to get several issues off the table, legislation was introduced that made bad situations worse. The most egregious example would have to be the Gonski 2.0 reforms. From today’s perspective, it makes the achievements of the Hawke Government even more admirable.

It is possible to take some hope too. We are almost certainly about to go through a period of elevated inflation. Inflation, unlike unemployment, hurts everyone, the vulnerable most. It is no coincidence that at the end of the 1970s, our last period of sustained inflation, the people of the United Kingdom and the United States elected two leaders who were considered dangerous right-wingers.

Ronald Reagan and Margaret Thatcher managed to get elected by promising to fix the underlying problems facing their nations. They were credible because they spoke to the moral imperative of their programs and the logical nature of them. Then, as now, the Left were morally suspect on a whole raft of issues including race, human rights and irrational outcomes of their supposed compassion.

If Australia is to return to a high growth, low inflation economy with opportunities for all, the program is pretty simple to outline, even though it will be difficult to implement.

It is time to admit that Gonski 2.0 is a failure. The billions that have been outlaid have made education outcomes for students and families worse. No one wants to say this because it activates the education unions and academics whose livelihoods rely on generous public sector subsidies without accountability.

What has emerged from overseas experimentation with education policy from Asia to North America and Western Europe are some very clear principles: decentralised schools with maximum freedom to experiment with different methodologies; funding follows students so when families move their children from a failing school to a succeeding one, the failing school stops operating; teacher quality and curriculum matters far more than class size. And more technology does not lead to better outcomes.

Other elements are up for debate. In some countries later starts to formal schooling seems to have beneficial outcomes, in others earlier schooling seems to have some benefits. Experts now agree that physical activity has a material impact on social development and academic success. 

One thing for which there is no evidence is more funding equates to better outcomes.

In Australia, we have done the opposite, not just failed to do this, but done the opposite over the last two decades.

The cost of continuing with this policy is that eventually millions of Australians will find it more difficult to find fulfilling work in an increasingly globalised labour market. This is the simple choice facing leaders in Australia today: do they continue to acquiesce to an establishment whose interests are primarily its own, or support the disempowered students and families who are just looking for a better future?

Australia’s housing market has a claim to be our worst policy failure since federation. As a nation we have everything going for us: we have plentiful land, cheap materials and relatively efficient capital markets enabling borrowing for housing. And yet home ownership has been falling because we have failed to build enough houses.

The impact of this is fewer people own a stake in the future of our nation and are less incentivised to preserve and promote its success. Further, and more seriously, the fall in home ownership is the biggest cause of wealth inequality in our nation, indeed globally.

Listening to the experts explain the reasons for our housing crisis is hilarious. A more talented writer, say, Dave Chappelle, could turn it into a five-hour skit. People who are responsible for the education of the next generation of housing planners intone seriously that increasing the supply of housing increases prices. This is the equivalent of a physicist doubting the existence of gravity and arguing for it to be ignored.

The very same people who argue strenuously that we need to increase the supply of ‘social’ housing (which is the Left’s rebranding of public housing) will then in the next paragraph vote against increasing the supply of private housing. The over-regulation of housing by the same people who decry its cost is hypocritical. The case for increasing supply is clear, it is morally right, and its denial is a betrayal of younger generations.

If we cannot undertake reform of these two critical areas which have outsized impacts on the prosperity of our nation what chance do we have of undertaking significant and critical renovation of our tax and welfare system including our superannuation system? At the moment, our tax system is a black box in which governments ask the ATO to collect as much money as possible to fund programs that do very little good. The ATO has asked for and received extraordinary powers that deny Australian citizens basic rights.

If many government programs were subjected to the rigours of private sector analysis their lack of delivery would see many discarded. Indeed, many do more harm than good much less enough good to justify their ongoing funding.

Our tax system is complex, uncertain, counterproductive, difficult to comprehend, inefficient and unfair. It has been designed to raise money, not operate as part of an entrepreneurial and fair nation. The tax system punishes reward and discourages risk.

Instead, its complexity incentivises economic activity for the pure purpose of optimising a tax outcome rather than providing a needed service or product. In other words, our tax system incentivises companies to only innovate with their accountants rather than their research and development department.

Many bemoan the fact that we do not have enough world-class companies. The tax system is largely the explanation for that. Those global companies when you look beneath the hood have a healthy capability set in tax optimisation structures which they then deploy in other parts of the world. Australia leads the world in tax planning and funding of class action lawsuits.

This is how our human capital ends up being misallocated and wasted. In most other nations the best and the brightest go to work for entrepreneurs like Elon Musk putting spaceships on Mars, or electric cars through tunnels created by the state-of-the-art boring machines that are making tracks for a hyperloop controlled by someone’s brain through a neural link.

Who knows maybe in the future our best and brightest will be able to use devices from neural link to interface directly with our tax system.

It may come to pass that Australia’s tax system saves humanity. If ever an evil AI becomes conscious and gets loose, humanity will be able to buy enough time to get all of us off the planet by throwing the Income Tax Assessment Act and enabling legislation at it. That is one maze it ain’t finding its way out of any time soon.

There is a myriad of other areas just screaming out for reform, especially in industrial relations, energy, health, transport and infrastructure. Better alignment of expenditure and revenue would be a first step, so instead of States doing the spending while the federal government does the taxing, there is alignment. States run away from this idea like Dracula from a sunrise.

Put together this would allow our community to more efficiently and effectively allocate scarce resources where it can do its best for all Australians, indeed for everyone on this planet. Each reform suggested above empowers individuals, encourages them to take responsibility and ensures public servants are more accountable. It is the ultimate program of equality and fairness.

More important than all of that is that it provides more opportunities for people to live the best lives of their choosing. This should be the key objective of every government, in every part of the world: to maximise the freedom of the individual wholly consistent with others, so that they can live the best lives of their choosing. As John the Savage at the end of a Brave New World would have it free to succeed and free to fail, we would have all of it.

Those who so often claim the mantle of justice are the very ones most active in opposing the reforms that enable its emergence. It is long overdue that this was made clear.

Jason Falinski is the chair of Airtrip. He was the Member for Mackellar between 2016 and 2022.