The Insufficiency Of Economic Weaponry

Gareth MorganEconomics

Gareth Morgan, Director of Gareth Morgan Investments

The Australian public were spooked last week by the clinical solution the Hewson opposition had for Australia’s future. Despite the transparency which Hewson’ s Fightback document brought the Coalition’s policy alternative, the public simply didn’t want a bar of it. Indeed in the last week of the campaign Hewson personally had to face the vitriol of extremely angry audiences.

In the event the Coalition won every State except one – New South Wales – and that was lost because they managed to win only one seat south of Sydney harbour. So what was it about South Sydney that buried the Coalition’s chances ? Further the conventional press and the financial market commentators universally misread the mood of the Australian electorate by predicting a Coalition victory. Was the Keating victory “remarkable” as those embarrassed pundits claimed after the event, or was their reading of the election just incompetent?

The south Sydney electorate is heavily populated by Australia’s migrant groups. It’s predominantly blue collar and has borne a substantial portion of the unemployment costs of the recession. Hewson promised this economic cohort higher taxes and health charges. Why would they volunteer as sacrificial economic lambs for Hewson’s bigger picture, medium term vision ? It seems incredible that the Coalition weren’t expecting to lose heavily in South Sydney. The ethnic press all picked a Labour victory with an increased majority.

The other aspect of Keating’s victory is the humiliation it represents for the conventional press and financial sector commentators. Their failing mirrored that of Hewson himself. They were duped into believing an economic formula alone was capable of winning a political mandate. Fear of a recipe that sacrifices values for hypothesised economic excellence clearly was felt by the electorate but their mood wasn’t anticipat y market participants.

In NZ where Hewsonomics has now been practised for nine years, there exists a risk that the Wellington establishment – both its financial sector and conservative political coteries – will be similarly blind to the electoral mood. In danger of believing their own propaganda that NZ is undisputedly on a self-sustained economic growth path, these groups are equally capable as their counterparts across the Tasman of being oblivious to the desires of the electorate. Reform of health and education, coming on top of a flood of deregulation and monetary policy reforms, are pretty hard to sell to an electorate that’s reeling under ongoing labour market weakness.

Many of the pressures destroying full time jobs in NZ and Australia are beyond the control of government policy – brought on by global competition and automation in services for example. This doesn’t change the electorate perception that policy reforms are exacerbating rather than ameliorating the prospects for a rise in living standards for all citizens. The lesson from the Australian election is that without communicating what values they stand for, candidates for government here will suffer the electorate’s wrath. An economic formula alone is drastically insufficient.

The Insufficiency Of Economic Weaponry was last modified: December 15th, 2015 by Gareth Morgan
About the Author

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.