In a democracy governments cop criticism: that’s a rule of politics. Opposition parties and politically-aligned organisations will always exploit opportunities to have a go at the government. But it is particularly irritating for a government when criticism comes from institutions noted for their political independence, and when some of its own agencies don’t seem to be fully on message.
It is tough for a treasurer, intent on talking up the economy, when the Reserve Bank issues a subtle warning that Australia’s policy settings could necessitate higher interest rates to head off a housing bubble.
It is tough for the whole government, so committed to supporting the coal and iron ore industries and so hostile to action on climate change, when knowledgeable investors start selling down shares in resource companies. They can’t do much to hit back at the Rockefeller family’s decision to sell its oil investments in favour of renewables but when the ANU makes a similar move with its modest portfolio Jamie Briggs is able to hint that such disloyalty to the official line could jeopardise university funding.
Joe Hockey was quick to dismiss the Reserve Bank’s warning about a housing bubble, and as doubts about the future of the coal industry intensified, Tony Abbott, at the opening of a coal mine, took the opportunity to announce that “coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future”.
When treasurers and prime ministers talk up particular sectors and industries, they risk misleading naive investors, particularly on housing. And, unwisely, they put their own credibility on the line.
But there are greater risks when governments react negatively to reasoned warnings and criticism. It’s unwise to damage the credibility of a nation’s economic institutions, and bypassing them in favour of other (often partisan) sources of advice is politically risky for the government itself.
Don’t trash our institutional capital
If Australia is to be “open for business”, local and foreign investors need to have confidence in a nation’s economic institutions – its central bank, its statistics office, its economic management departments, and its public auditors, to name the main players.
Beyond these central institutions, at greater distance from government, there are universities, think tanks, and even a few investigative journalists, analysing the flow of communication from governments. Their job is delve into the sources behind the carefully spun ministerial press releases, to dig deeply into statistics, to cross-check official data with data from other places, and to clarify issues.
It would indeed be worrying if their findings always reflected the government’s line, and wouldn’t do much to help investors.
It’s not clear, however, that the Abbott government fully appreciates the value of such institutions, or the political danger it faces when it draws only on those who share its views.
Just 12 days after being elected to office, it announced the abolition of the Climate Commission, a body established in 2011 to communicate “reliable and authoritative information” about climate change. Publicity around that abolition and Tim Flannery’s successful campaign to resurrect it with public donations distracted us from other moves, such as the government’s decision to abolish 20 advisory bodies, and to absorb others into portfolio departments.
It is easy to see how some business lobbies would be pleased to see the departure of such bodies. The coal industry was no friend of the Climate Commission, and the fast food and alcohol industries must have been happy to see the demise of the Australian National Preventative Health Agency, which had made its first task an examination of the causes of obesity.
The ostensible reason for these cuts was to save fiscal outlays. Less evident, however, is the cost of the loss of sources of objective advice.
Having abolished a number of analytical agencies, the government appointed a Commission of Audit, to report on “the performance, functions and roles of the Commonwealth government”. The Commission was headed by the President of the Business Council of Australia, which also provided the head of its secretariat. The Commission has been criticised for its narrow terms of reference, its tight time frame, and for its lack of public consultation. And in appointing such a body the government passed over its own organisation with an international reputation for sound economic advice, and with a repository of knowledge and experience, the Productivity Commission.
Be mindful of political risks
A view based on crude military strategy rather than practical politics is that the Coalition, having been elected, was entitled to enjoy the spoils of victory, and to clear out those who had been serving the previous administration.
But have these moves really served the government well?
Heavily influenced by the Commission of Audit, this year’s Budget Paper 1, which in past years has contained a wealth of objective economic and fiscal information, reads like a political tract. Gone are figures showing Australia’s government debt position in relation to other countries, but there is room for optimistic figures on economic forecasts for economic growth, inflation and commodity prices.
It is possible an enquiry conducted by more trusted agencies would have charted more publicly acceptable ways to reduce the budget deficit. Even if there are to be some tough recommendations, a more open process helps a government to make hard decisions. Before appointing the Commission of Audit, the government would have been well-advised to consider opinion polling showing that the public trusts the Commonwealth Public Service far more than business groups.
In devaluing public institutions and in trying to quell voices of dissent, the government does itself no favour. It is tempting for Treasurer Hockey to take a swipe at the Bureau of Statistics when it’s rethinking seasonal adjustment. It would be so much more comfortable for the government to see the ABC reduced to broadcasting BBC crime dramas on TV and reports of livestock auction prices on radio. But cutting off bearers of bad news and dissenting voices provides a government no more than a short-term benefit, while entrenching a culture of “groupthink” and an overconfident feeling of infallibility.
Around now the processes leading up to the May 2015 budget will be cranking up. It may be a good time for Abbott and his ministers to get out their copies of Machiavelli’s advice to the Medici Princes. Don’t populate the court with flatterers; rather, listen to your critics — they may help you avoid making stupid decisions.