Australian politics has been even more entertaining than New Zealand’s. But aside from the ambitions of the comedians is there something else going on?
One New Zealand MP explained the Australian political turmoil in terms of New Zealand having MMP which, he said, gave us greater political stability. In fact, since the introduction of MMP in 1996, Australia has had six prime ministers and so have we.
The exit patterns are different. Bolger was deposed in 1997, three lost elections – Shipley (1999), Clark (2008) and English (2017) – with only Key gracefully retiring (2016). John Howard lost in 2007; Kevin Rudd was deposed in 2010 and lost in 2013 after, in turn, deposing Julia Gillard in 2013. Tony Abbott was deposed in 2015 and Malcolm Turnbull in 2018. Notice that turbulence of four coups has happened only in the last decade – Howard had an 11-year tenure.
There is also a difference in the economies. This column concentrates on that last decade. But by way of background, yes, Australia has done better in economic growth for the last fifty years, for two major reasons. Their mineral boom took off at the same time as the New Zealand sheep industry collapsed following the huge and permanent drop in the price of (crossbred/strong) wool in 1966. In the 1980s and the 1990s the Australian economy handled their economic liberalisation (under Bob Hawke and Paul Keating) pragmatically while, led by Roger Douglas and Ruth Richardson our response was extreme, with disastrous outcomes. (One of the oddities of New Zealand neoliberals is that they bewail the superior performance of the Australian economy after their policies contributed to our poorer result.)
Both economies benefited from improving terms of trade (higher export prices relative to import prices) during the first decade of the 2000s. In simple terms, East Asia was increasingly consuming minerals (notably coal and iron) and foodstuffs (dairy products and meat), driving up their prices while Asian low wages enabled them to undercut the world price of the manufactures which the two countries imported.
Australia’s export price gain was about three times New Zealand’s. Roughly, their rising terms of trade added annually about 2 percentage points to real incomes in the first decade – more than what ordinary economic growth was doing.
Observe that while we tend to focus on material output – GDP (per capita) – the prices that the output gets also matter. You can be the world’s best producer of fenceposts with output steadily expanding but the exercise is pointless if the price of fenceposts is zilch. A lift in the price of fenceposts may make a substantial lift to your income even though you do not produce any more.
Shortly after the Global Financial Crisis the prices for Australia’s mineral exports collapsed. Basically, world consumption slowed down so there was an oversupply – there may also have been a speculative price boom earlier.
It is difficult to estimate a long-term trend when one has only short-term volatile data, but it looks to me that the overall export price downswing was in the order of 20 percent. That, not incidentally, is a bigger fall than New Zealand experienced from the 1966 wool price collapse. Whether the Australian economy is up for a similar three decades of economic turmoil I cannot tell because I don’t know whether the depressed mineral prices are permanent or temporary although coal is going out of fashion.
During the great export price boom, there was political stability, notably during the Howard years. Come the mineral price collapse and there has been political turmoil. The smaller economic surplus means that annually there are fewer political goodies to hand out so that ambitious men (well mainly men) blame the current incumbent for the difficulties, promise to do better (there is never a lack of quacks offering solutions) but they don’t. So the next group of snake-oil merchants comes along and there is another coup.
The New Zealand story is different. Our terms of trade growth has been modest by comparison adding perhaps 0.7 percent a year to our incomes. But the rise continued after the GFC because the world demand for food continues to rise. So we have had stability in the nation’s leadership: first the Clark era, then the Key era.
Where there was instability was in the Opposition. National had four leaders in its nine years of opposition; Labour had six leaders. (Now you know why Bridges is a bit anxious. The main activity in the Opposition caucus seems to be plotting.) The difference from Australia is that the ugliness of ambition is not so evident in New Zealand coups.
What does a government do when there are fewer goodies to hand out and when, instead, one has to restrain or cut public and private spending? The practice among rich countries has been to protect the incomes of the rich (a standard snake-oil remedy is to cut taxes at the top). That means reducing the living conditions of the poor and those on middle incomes who have more votes, and are not entirely gullible in regard to quack remedies. So the politicians have to offer alternative non-economic policies which respond to perceived threats; indeed it is the politician’s interests to make the threats worse than they are.
The easy threat to pose is something which the leader says challenges national integrity. In my student days it explained Indonesian president Sukarno’s ‘confrontation’ with Malaysia but there are many other historical examples.
It is not accidental that the two final contenders for the Australian leadership had both held the border control portfolios (and both, in my opinion, did so repressively). Trump’s supporters are equally concerned – recall his Wall. A number of continental European regimes are shifting toward repression, in part arising from fears of refugees. There was a similar migration concern among many ‘leavers’ during the Brexit referendum. Nor should we be complacent here. Australia protects us from the boat people, but there are anxieties about the plane people.
We are ending up with a public economic rhetoric of neoliberal nostrums and a populace rhetoric concerned about national integrity. Since neoliberals do not value the nation state, there is a strange disjuncture. No wonder there is political turmoil when the economy sours.