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The failure for the Abbott government was in both communication and policy development. Alan Porritt/AAP

Team Turnbull’s challenge is to fix our economic reform malaise

The message from the challenger Malcolm Turnbull to the then-prime minister Tony Abbott was simple: it’s the economy.

Turnbull’s message at a press conference on Monday afternoon was clear:

Ultimately the prime minister has not been capable of providing the economic leadership our nation needs. He has not been capable of providing the economic confidence that business needs.

The Abbott government’s failure to consistently improve business and consumer confidence is reflected in the numbers. Consumer confidence has been weak since early 2014. Business confidence has grown over the past year but is volatile.

Some of this failure has been outside the government’s control. Resource prices have fallen and the mining boom is fading in our memory. This has sent our major resources competitors – Brazil and Canada – into recession. Australia, so far, has avoided this fate, thanks to an agile economy and a large depreciation of the Australian dollar.

But the failure of confidence is mostly home-grown. The significant fall in the Australian dollar is increasing the competitiveness of a range of our export sectors. Overseas sales in tourism and education are growing. Doom and gloom may reign in mining areas. However, Melbourne, Sydney and tourist centres like Cairns should be on the way up. This has not fed into consumer and business perceptions.

The problem is the Abbott government failed to deliver economic policy reforms to build consumer and business confidence. While Turnbull’s speech concentrated on communication, the failure was both communication and policy development. The electorate felt the Australian economy was drifting and that Captain Abbott was not at the helm.

Early retreat

The Abbott government had two phases of economic policy.

Phase one focused on the 2014 budget. The government adopted a crash-through-or-crash approach. It tried to introduce a range of economic changes without building a community consensus. There was little attempt to sell the merits of economic reform other than spurious claims of a budget crisis. Unsurprisingly, the public were sceptical and the reforms never made it past the Senate.

Phase two was retreat. Despite having a pile of reports filled with good ideas for economic reform, the Abbott government decided to retreat and lick its wounds. Serious reform was largely off the table.

Take, for example, competition policy. The Competition Policy Review sat with the Abbott government for more than six months. The review outlines important reforms in a wide range of areas. Its work in human services is world-leading and can form the basis of both a more caring and a more prosperous society.

How did the government handle the review?

Some recommendations, such as pharmacy reform, were quickly dismissed, as the Abbott government bowed down to vested interests. Most recommendations have been ignored.

The recommendation that was publicly seized by the government – the reform of “abuse of market power” laws – was debated on a take-it-or-leave-it basis. Business and independent commentators raised concerns. But there was no attempt to modify the review’s recommendation, to build a consensus and work on a package of reforms. As a result, the reform didn’t even make it to the parliament. It died in the party room.

Unsurprisingly, consumers and business see such failures and their confidence in the government’s economic management dives.

Quick but significant gains needed

The real issue for Prime Minister Turnbull is how to turn around this policy failure in the next year. This will be hard, but not impossible.

Good policy takes time to develop and sell. It is not a linear process but one that depends on consensus building and a willingness to listen and adjust.

As communications minister, Turnbull showed both patience and a willingness to respond to “adverse winds”. This is reflected in his approach to both the NBN and media laws. His “victory speech” showed that he understands both the importance of communication for policy reform and the importance of consumer and business confidence.

The new Turnbull government has a surfeit of potential economic policy reforms in taxation, financial services, superannuation and other areas. It needs to be selective. It needs to pick areas with low-hanging fruit; where the reforms align with common sense and can lead to quick but significant gains.

Again, the human services reforms outlined in the Competition Policy Review are a good place to start. However, I suspect there are similar excellent prospects in the other reports currently gathering dust on the Treasury shelves.

After carefully picking the areas for reform, the Turnbull government needs to show its skill at communication and policy design. It must argue the case for reform and bring the electorate with it. Some chosen reforms will end up in the too-hard basket. But the government will need to have some wins to show the electorate before next year’s election.

Importantly, Turnbull cannot do it alone. He needs a team of ministers in key economic portfolios who can follow the new running sheet.

As Turnbull noted in his victory speech, this is an exciting time to be alive and to be an Australian. As a nation we should be brimming with confidence. Turnbull knows the economic message that needs to be communicated. He has shown he can build consensus and drive reform. However, can he build the team in the current government that enables him to deliver?

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