Henry: politicians fail while Australia burns

That was the title of Phillip Coorey’s article in the AFR about Ken Henry’s withering speech to the Committee of Economic Development. For those who came in late, Dr Ken Henry was secretary of treasury from 2001 to 2011, appointed originally by Peter Costello and served during the Rudd/Gillard years. He is now chairman of the NAB board.

I think it was the news story of the week.

    NAB chairman and former Treasury secretary Ken Henry has damned modern politics for degenerating into trench warfare where populism is the ammunition and the reform narrative has been replaced by the language of fear and anger.

    In a withering speech to the 2017 Committee for Economic Development of Australia summit, Dr Henry said politics is failing the people on budget repair, tax reform, population growth, infrastructure, energy security and climate change.

    He called on the business community, which largely shares his views, to step up where it could to deliver policy.

He said:

    “today’s dysfunction” was in stark contrast to previous periods of policy success when politics was every bit as adversarial and partisan “but when the tribal tensions within parties were generally well-managed and the political contest appeared to energise policy, not kill it”.

From the ABC:

    “The reform narrative of an earlier period has been buried by the language of fear and anger. It doesn’t seek to explain; rather, it seeks to confuse and frighten.”

He identified four priorities:

  • budget repair,
  • a plan for a growing and ageing population,
  • a settled policy for energy security and climate change,
  • an approach to “make the most of the Asian century”.

He said we need to build a city the size of Sydney or Melbourne every decade, but our only plan was to stuff more people into Sydney and Melbourne.

The biggest challenge confronting the energy sector was the “shambles” masquerading as climate policy. We’d known 14 years ago that we needed to do something, but the whole thing is now very much worse.

Every government proposal of the last 10 years to reform the tax system has failed.

We used to be an optimistic nation pioneering some of the world’s best policy and nurturing world-class institutions, but no-one looks our way now to see what we are doing.

He said the four priorities could be met by adopting, as a minimum, eight reform proposals. These are:

  • Apolitical infrastructure planning and pricing, including the widespread use of road user charging;
  • A much lower company tax rate achieved much more quickly than is presently under consideration by our Parliament;
  • The removal of stamp duties on residential property;
  • Symmetrical tax treatment of interest and capital gains;
  • An overhaul of state-based royalties;
  • Market-based price signals to guide climate change mitigation and long-term investment in the energy sector;
  • A broader base and higher rate of GST;
  • A substantial adjustment to roles and responsibilities between the Commonwealth and the states.

The main thing missing for me is skills development and research.

Not surprisingly, Malcolm Turnbull thinks he’s doing OK. Not sure what he actually said.

On Friday, Reserve Bank Governor Philip Lowe took aim at negative gearing, and questioned the wisdom of a global race to cut corporate taxes.

    Australia could “take the heat out of the housing market” and make home prices more affordable by cutting negative gearing and capital gains tax concessions, the head of Australia’s Reserve Bank admitted.

He wasn’t advocating that as a policy, he was just saying. Anyone listening?

I note that Ken Henry says we should cut corporate taxes hard and quickly. Lowe is saying that globally that just changes the location of investment, it doesn’t increase it.

I heard an extended commentary on corporate tax cuts a few weeks ago. The essence was that, for us, the Government’s salami-slice approach would make no or negligible difference. However, if you went low enough to join the race to the bottom, then yes, companies would invest here, or move here, and our tax take might even go up. It’s a big bang approach, or not at all.

I think no-one in politics here has the balls to try. In the long run I suspect we’ll conform closer to international norms on corporate tax and the GST, but we’ll have to fix our political/media culture first. Malcolm Turnbull was the one who said:

    our nation required a style of leadership that respected the people’s intelligence, that explained complex issues, then set out a course of action and made a case for it.

The chances of that happening while he’s there approach zero.

11 thoughts on “Henry: politicians fail while Australia burns”

  1. I guess I agree with most of what Henry said in both his 4 priorities and list of 8 with the exception of prioritizing budget repair and his outdated call for “Market-based price signals to guide climate change mitigation and long-term investment in the energy sector;”
    My problem is that he concentrates on economic policy based solutions instead of more direct approaches to solving our problems. Probably can’t help it poor man but we have heard too much of what he says before and the reform has come to be Murdoch speak for screwing the poor.

  2. I wouldn’t be so hard on him, John. I don’t think we know how Ken Henry would slice the cake if he had the power. He’s only been a public servant without broad political responsibility.

    I recall that towards the end of Howard’s reign, Costello was consistently bypassing Treasury for economic advice. Rudd and Gillard certainly valued his advice, but the Henry Tax Review of 2010, over which he laboured mightily, went nowhere much.

    So he is understandably a bit splenetic.

    However, his comment now is mainly about the parlous state of politics rather than about any specific economic recommendations.

  3. Essential Report has some interesting figures on LNP voter support for a number of propositions:
    Banking Royal Commission – 56%
    Believe climate change caused by human activity – 49%
    Support Labors 50% renewables target – 55%
    Believe blackouts were caused by too much renewables – 26%
    Believe renewables are the solution to future energy needs – 58%
    When you have a government that is so out of step with its supporters you wonder who the hell they think they are representing?

  4. I can understand Ken Henry’s frustration.

    A few years ago, when pro-Gillard Ministers bagged Mr Rudd’s behaviour as PM, a theme emerged about erratic policy development. Ideas floated, not followed through. Zig zags. Also, public servants reported weekend overtime stints developing policy papers that were then ignored. Not responded to. Ignored.

    This was news to those of us not working in Canberra.

    But it also played out in public, with the Henry Review of taxation. Highly qualified, experienced staff. Long and detailed report.

    Did the Govt say, “well, we will implement some of the recommendations (here are our reasons); we reject these other ones (for the following reasons); and the rest will be sent to relevant Departments for further work.” Not as far as I recall.

    Report released, articles in the Press, discussion in Parlt.
    Then silence.

    Eerie silence.

    In my view, that’s worse in some ways than PM Turnbull
    1. saying everything is on the table, then back-pedalling
    2. announcing the idea of transferring income taxing powers back to the States, apparently without preliminary analyses or scenario testing…..

    No wonder Ken Henry is angry.

  5. If he want to try and legislate, run for a Seat.

    Excellent advice Jumpy.

    Which seat will you be standing for?

  6. I’ll just vote, too busy earning taxes.
    I do respect Mercurious though, he had a go.
    Must look up the results in his electorate some time….

  7. He was paid to do a job, by a Govt which said it wanted advice on tax reform.

    Usually such a review isn’t just to keep accountants, statisticians, experts and report-printers in work.

    Usually the Govt which commissions the report considers the advice and acts on some of it, and explains its reasons.

    “I was paid to build a house, but nobody ever lived in it.”
    “Really? I was paid to build a dam, but it never filled because someone diverted all the inflow streams.”
    “You were lucky mate. Someone paid me to manufacture forty thousand cardboard boxes, then had them shipped out to sea and thrown overboard.”

    Best practice.
    Vision.
    Forward planning.
    Sensible reform.
    Using expertise when available.
    Modelling, scenario guessing.

    Programmatic specificity.

    What a Dudd!

  8. Ken Henry, while working on saving the northern hairy-nosed wombat during his holidays, got an idea from a bloke in a bar in Central Queensland that he incorporated in his tax review.

    That’s listening to the people.

    Anyway, from memory Wayne Swan claims to have implemented 70-something of what I think were over 120 recommendations in the report.

    My impression is that they were the ones that were sensible but didn’t make much difference.

    Henry now is entitled to say what he thinks, and also has a duty to represent NAB and by implication bankers.

  9. However, Brian

    I am still impressed by his description and despair over the current state of Canberra politics.

    I agree with John that the word “reform” has in recent decades been dragooned into the neoliberal herd. Mr Keating used to deploy the rhetorical device that “reform isn’t really reform unless it’s the kind of change reform I want to bring in”.

    All politicians attempt to move particular words to their purpose.

    Ken Henry works for a bank. Indeed. But many who don’t work for banks probably think his critique was spot-on. But they might then disagree with his priorities for economic and political policy.

    Since he’s not standing for office, pace Jumpy, I’m not forced to accept the whole Henry package. I can pick and choose, and will.

    Cheers.

  10. BTW Brian

    Thanks for the 70 out of 120 figure.
    That puts my complaints in perspective.

    Cheers

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