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PM should follow Kiwi path to reform

OH - PM should follow Kiwi path to reform 01-12-2014Published in The Australian (Sydney), 1 December 2014

IT’s lonely at the top, especially when circumstances are tough. After 14 months in office, Tony Abbott’s bold ambition to be a reforming prime minister is in danger of being crushed by political reality.

Yet as retiring Treasury secretary Martin Parkinson warned last week, if Australia fails to make tough decisions in the next few years, its future is bleak.

“We know what failure looks like,” said Parkinson. “Declining growth in living standards, perhaps even falling living standards, lower wages, few opportunities for our young and, in all likelihood, declining public services and rising personal tax burdens.”

If Abbott needs moral support, he should look across the Tasman where his New Zealand counterpart, John Key, is demonstrating that successful, reforming, popular centre-right government is still possible.

In many ways, Key is not too dissimilar to Abbott. Abbott may be more socially conservative than Key, and Key is probably more of an economic liberal than Abbott but both are proponents of the new centre-right which is less ideologically committed than earlier conservative leaders such as Ronald Reagan or Margaret Thatcher.

The crucial difference between Abbott and Key lies in the latter’s phenomenal popularity. Key, who has been in the job for six years and just started his third term, is enjoying one of the longest political honeymoons in history, whereas Abbott hasn’t really had one at all. The feat is all the more astonishing when one considers that Key has governed his country in challenging times and asked it to swallow bitter political pills.

Since Key became Prime Minister in 2008, New Zealand has reformed a number of areas. The top income tax rate was slashed to 33 per cent while GST rose to 15 per cent. The government part-privatised some state-owned companies, particularly in the energy sector. It has become more difficult to remain on welfare in New Zealand with stringent work expectations introduced for benefit recipients. Fiscal policy has been tight with the budget on track back to surplus.

All of this was achieved against the backdrop of the global financial crisis and the devastating Canterbury earthquakes, the largest peacetime disaster in New Zealand’s history.

Key’s recipe for implementing reforms is simple. His government spends at least as much time on carefully preparing policy changes as it spends on their implementation. Welfare reform is the best example.

In Key’s first term, a welfare working group analysed the issues and made policy recommendations. The public were taken on this journey and asked to approve the reform agenda in Key’s first re-election. Only when the case for change was clearly established, did the government begin the actual introduction of the reforms. By then, they were not regarded as radical but as common sense.

Patience, preparation and pragmatism are the defining characteristics of Key’s government style. Nothing ever hits the electorate by surprise. Changes in direction are flagged well in advance, and legitimacy is sought through elections. It is a strategy that could be described as incremental radicalism.

In going about their reforms, the government operates under a highly decentralised model. The Prime Minister does not micromanage his cabinet allowing ministers to get on with their jobs. Underperforming ministers however are put on a much shorter leash and if they don’t improve they are removed before they can do any damage.

Key’s leadership style is ruthlessly efficient, more like a CEO of a large corporation than the prime minister of a small country but this is no surprise. Before entering politics, Key was a high-flying executive at Merrill Lynch.

Key and his government have communicated clearly what they are doing and why. For example, the government very effectively made the case for free-trade agreements. A free-trade deal with China (negotiated by the previous government) has increased bilateral trade from less than 1 per cent of GDP to about 5 per cent in just six years. A free-trade agreement with South Korea has just been negotiated. Key does not have to defend the deals he basks in their glory because the public understands how beneficial they are to New Zealand.

For Abbott to succeed as a reforming prime minister, he must solve what Paul Kelly calls “the Australian crisis”: the polarisation of politics, the evaporation of consensus and the deterioration of process. It is a task Abbott explicitly embraced when he launched Kelly’s Triumph and Demise in August: “Our challenge — the challenge of the current government — is to show that the age of reform has not ended, it was merely interrupted.”

Ultimately, Australia’s future prosperity depends on Abbott’s succeeding in just that. The adoption of the New Zealand method of quiet, incremental radicalism may be Australia’s best hope of rediscovering the art of reform.

Oliver Hartwich, executive director of The New Zealand Initiative, is the author of Quiet Achievers — The New Zealand Path to Reform, commissioned by the Menzies Research Centre and launched this week. For details go to http://www.menziesrc.org

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