Malcolm Turnbull

For Malcolm Turnbull, politics seems to be obeying Murphy’s Law at the moment. Whether his fault (his GST floor thought bubble) or not (the census, Long Tan), virtually nothing is going right. Even his major economic speech this week was overshadowed by a protest about asylum seekers and a startling security lapse. Meanwhile, Tony Abbott has made plain that he’s ready for another go as leader — and that there remains no love lost between his camp and Scott Morrison. Not that that was ever unclear — ask anyone in the Abbott camp and they’ll eloquently detail the contempt in which the Treasurer is now held.

The extent to which politics in 2016 has come to resemble that of the Gillard years is wondrous, and terrifying, to behold. A government one vote from minority status, a wounded leader who looked much better in prospect than when they actually had the job, a disgruntled former leader waiting in the wings — even a Treasurer happy to make clear his differences with the former leader.

There are some noteworthy economic and fiscal differences. Wayne Swan had a mining investment boom to deal with — which presented him with the challenge of mitigating its inflationary effects and coping with a rampant Aussie dollar that wreaked havoc on our exporters. Part of his success on the former task was due to getting spending below 25% of GDP — indeed, it reached 24.1% of GDP in 2012-13, but has since surged back over 25% of GDP and stayed there. Turnbull and Morrison have no mining investment boom, and the housing investment surge created by the Reserve Bank that has replaced it is patchy and now weakening, and while the dollar is a long way below US$1.10, it’s still stubbornly high. They also have the challenge of weak wages growth: in the Gillard years, wages grew at what now look like fantastical rates between 3.5-3.9%.

In another respect, Turnbull also has it worse than Gillard. The latter might have been in permanent legislative limbo in the lower house, but she at least had a straightforward run in the Senate, where the Greens and Labor could control proceedings; the only independents were John Madigan and Nick Xenophon (back then, Xenophon liked to joke about his transformation from Senate rooster to feather duster). Turnbull at least on paper is well placed in the House of Representatives, but he faces a nightmare crossbench in the Senate with the racist One Nation as well as a resurgent economic nationalist in Nick Xenophon and unpredictable pollies like Leyonhjelm and Day.

Turnbull’s economic speech on Wednesday indicated he understands the challenge now posed by economic populism. He referred to “populist politics that denies reality — hiding under the doona hoping the real world will go away”. And he gestured towards why many feel the urge to turn inward saying:

“While we recognise that these times offer extraordinary opportunities for Australians, the changes they bring with them will not always be welcome. Yes new jobs are being created — but old ones are being lost. New firms are being established, but some old ones are shrinking or closing. Our economy continues to grow well, by any measure, but there is hardship too.”

Looking internationally, he observed:

“Protectionism and inward-looking policies are starting to gain a foothold. Political divisions in advanced economies — particularly where there is high unemployment or a high risk of unemployment — are feeding on a sense of disenfranchisement among many people who feel the rapid economic changes of our time have left them behind.”

“Nobody,” he said, “should underestimate the importance of this moment as a test of the capacity of our political system to make the right calls on the nation’s behalf.”

This was the correct diagnosis. What was missing was a meaningful response. The government’s defence protectionism is designed to appeal to pro-manufacturing sentiment in the electorate as represented by Xenophon and others. But Turnbull still insists cutting company taxes is a kind of economic panacea, rather than likely to exacerbate exactly the “sense of disenfranchisement” he warns of. Similarly, he sells trade agreements as major economic achievements when their benefits are minimal at best and voters are starting to wonder if they are actually good for jobs — and never mind handing multinationals the power to veto public policy through investor-state dispute settlement provisions. He devoted an entire section of his speech to attacking Labor, declaring that voters would not “tolerate a repeat of Labor’s most recent exercise in fiscal cynicism”.

And while Labor was mentioned a dozen times, infrastructure was mentioned, purely for rhetorical purposes, just once. Any mention of the NBN was entirely missing, as was climate change, the biggest long-term economic issue facing Australia. Turnbull, at least, doesn’t insist on being called “the infrastructure Prime Minister” but his indifference toward it is the same as that of his predecessor, who presided over a collapse in public investment compared to levels under Labor, not to mention the transformation of the NBN from national project to national joke.

Australia desperately needs Turnbull to get this right — to respond creatively and effectively to the populist politics he warns of, to find ways to curb the sense of disenfranchisement, to pass this test of the capacity of our system to make the right calls. Julia Gillard found ways to get much done despite her minority government status and a leadership rival. Turnbull needs to be at least as effective and more so: the stakes are now even higher.