Australia’s trust emergency will stymie year of reform

Forced to defend the broken promises embedded in its budget, the government has left people worried about hidden post-election agendas. Penny Bradfield/AAP

Political and business leaders are touting the next 12 months as a make-or-break year for the country’s reform agenda - and Australia’s economy.

A number of big changes will be proposed and debated. These include tax reform, a major shake-up of federal-state relations and workplace relations change.

The stakes are high. With global growth faltering and concerns about our own economic performance rising, our leaders are urging the public to support the changes.

The alternative is that Australia risks returning to the dark days of 1970s stagnation. Yet these ambitious reforms have little chance of becoming reality. The likelihood is the electorate will reject each in turn – or at least force them to be significantly watered down.

Why will this happen? It won’t be for the reasons likely to be advanced by our political and corporate elites in 12 months time.

It won’t be because the public is too “immature” to accept the tough reform medicine required to underwrite future prosperity. And it won’t be because the Senate’s minor or micro-parties will have put their own political interests ahead of the national interest by blocking reform.

Australia’s trust emergency

It will be because Australia is the midst of an emergency that is bigger than the so-called budget “emergency”. It’s bigger than our infrastructure backlog and the urgent need to tackle our over-complicated tax system.

It’s a trust emergency. This is a deepening lack of public trust in the ability of our political and business elites to advance a viable reform agenda for Australia’s future. It’s a lack of public trust in our elites to understand and address the fault lines now opening up in Australia’s society and economy.

The critical importance of trust in achieving change is obvious. Without trust in leaders and their agendas, there is no buy-in or consensus from the public. And without consensus there is no reform.

Here are five reasons why the biggest barrier to reform is now those most loudly advocating it.

1. Federal budget

The Coalition based its 2013 election campaign on the singular issue of “trust”. It promised to replace the previous Labor administration - which had created its own trust crisis with a broken carbon tax promise and dysfunctional leadership - with “adult” government. This would be one that would “do what we say, and say what we mean”.

Yet the federal budget in May contained an unprecedented number of broken promises and other far-reaching policy reversals that disproportionately targeted the poor. In the process, it awakened the idea among many Australians that “reform” now equates to hidden post-election agendas and “winner-takes-all” policies.

In one swoop, it drained public trust in the government’s ability to advance more credible reform. Trust has been further depleted by government semantics that the cuts do not amount to broken election pledges. All this has energised the Senate to stymie reform on the grounds that anti-reform is the “new” public interest.

2. Forgetting the ‘battlers’

The last 20 years in Australian politics have been defined by a contest between the major parties to win over the “battler” vote (think “Howard’s battlers”). Major changes to Australia’s economy and workforce underpin the critical political importance of this demographic.

Jobs are being casualised at an increasing rate. Even in the midst of two decades of prosperity, poverty and inequality have been on the rise. In a post-financial-crisis world where economies are being battered by relentless volatility, more and more Australians feel at risk of falling into the “poor” category.

Yet the budget seemed deliberately designed to alienate and antagonise Australia’s growing numbers of battlers, not just by taking the axe to welfare and family support, but also by labelling as “leaners” many who are doing it tough.

3. Big business lobby

Responsibility for Australia’s low-trust environment also rests with our current crop of senior business leaders.

In reform terms, the government has aligned itself closely with Australia’s corporate CEOs, favouring them with major influence over the tone and substance of its economic agenda, notably the budget. The optics, however, of some Australia’s wealthiest people helping to construct a budget that disproportionately hit the poor was politically disastrous. Claims by a number of corporate leaders that the budget was “fair” were damaging.

At a time when the rich-poor gap is firmly back on the public agenda, these comments confirmed the public’s view that corporate leaders on stratospheric salaries were out of touch and not worth listening to. The government is asking these same corporate elites to take the case for tax reform, federal-state relations and workplace relations change directly to the public.

So why the surprise when the reform debates of next year generate more public cynicism than traction?

4. Old-school leadership

In the 21st-century world, where information and influence is increasingly networked and authority more contested, leaders secure trust not simply by telling others what to do. They need to walk the talk through personal example that demonstrates they are “one of us”.

Yet our political and business leaders “lead” the reform debate by communicating the reform imperative in a top-down way that would not be out of the place in the 19th century. They “urge” and “call for” others to do this and that, expecting the community to passively agree.

Yet as the government tells the community to tighten its belt, it spends $500 million hosting the G20, seen largely as an elite talkfest. Corporate leaders advocate youth wage and welfare cuts while their salaries drive Australia’s rich-poor divide.

Governments and business have kicked off a tax reform debate that is already dominated by questions over why many large companies seem unable or unwilling to pay their fair share of tax.

5. Tired agenda

Growing volatility and low growth in a post-financial-crisis world, combined with rapid digitisation of the economy, require governments and business to think more creatively about policy settings.

We talk of the “new” normal. Yet Australia remains largely fixated on the “old” normal. Its “rear-view mirror” reform agenda is aimed predominantly at preserving 20th-century market structures.

Yes, we need to get the basics in order, like building a more sustainable tax system and minimising red tape. But we also need an agenda that engages the public by giving them a tangible sense of a country seeking to regain control of its economic destiny.

Australia’s economic policy agenda remain largely focused on “old” energy, “old” manufacturing and “old” retail. This comes at the expense of 21st-century sectors like renewable energy and digital-driven manufacturing, which have the potential to reverse Australia’s woeful innovation record and deliver big growth dividends.

Addressing growing inequality is likely to dominate government agendas and public policy debates across the West over the next decade. Yet Australia’s economic reform agenda remains predicated on a 1980s “trickledown” view that more wealth at the top automatically means more flowing to the bottom. In other words, fixing Australia’s inequality problem simply requires more of the settings, like the budget, that have driven our widening wealth gap in the first place.

Fixing the trust emergency

Our political and economic elites refer nostalgically to the 1980s as Australia’s “how-to” textbook on economic reform. But if they want to set Australia on a re-energised reform path, they need to seriously reflect on what reform leadership during that period was about.

It was about leaders forging innovative alliances with the community to gain their trust and consensus on hard decisions. It was about replacing tired frameworks with new policy directions that anticipated far-reaching change and embraced innovative, future-oriented industry. It was about demonstrating good faith with the community by advocating a reform agenda where sacrifice was shared, not outsourced to the less well-off.

As a policy and strategic communications adviser to a number of Australia’s political and business leaders for nearly two decades, I am deeply concerned with the way the reform debate has been conducted over the past year. The disconnect between elites and the public is palpable.

This is making major reform to position the country for long-term opportunity far more than difficult than it should be. And it increases the chances of Australia once again becoming an also-ran economy.

It is in everyone’s interest to address Australia’s trust emergency. The initial step is for leaders to embark on an honest and inclusive conversation about a reform agenda more in tune with the 21st century.