The Parliamentary Budget Office warned this week that combined federal and state debt will hit $2trillion by the end of the decade, unless something dramatically changes.
It comes off the back of former Treasury secretary Martin Parkinson expressing his concerns about ballooning public debt and the burden it will put on younger generations.
Australia doesn’t fall apart easily. That is our great strength, but it has also become an excuse for complacency in politics. Governments can fail, prime ministers can be dumped, budgets can bleed and living standards can stagnate while daily life continues with just enough normality to obscure the decline.
It’s how a country loses a decade without quite noticing that it has.
The decade after Malcolm Turnbull‘s desperately tight 2016 election victory wasn’t devoid of government activity. Laws were passed, money was spent, targets were announced and crises were managed.
Same-sex marriage was legalised, the pandemic thereafter prompted extraordinary state intervention and AUKUS established a vast strategic commitment that’s gained bipartisan support, although it’s now marred in uncertainty.
The machinery of government never stopped, which is precisely the problem. Activity was repeatedly mistaken for real achievements.
The test of serious reform isn’t whether a policy survives a press conference or passes Parliament. It’s whether it permanently changes the architecture of national life. Medicare did that. Compulsory superannuation did it too, despite the current kerfuffle. The floating of the dollar and the GST certainly did.
Future governments had to live with the new reality these major reforms created, and that has been a good thing for our national culture and prosperity.
‘Turnbull’s pyrrhic 2016 election victory was the start of it,’ writes PVO. (Malcolm Turnbull is pictured)
By contrast, the defining political settlement of the past decade has been avoidance. Housing affordability was debated endlessly without confronting the tax settings, planning failures and supply constraints sustaining it.
Productivity became a slogan rather than a serious national project. Climate policy retreated into targets, subsidies and bureaucratic complexity because honest trade-offs became politically terrifying.
Tax reform was declared necessary and treated as electoral poison all at once. When it did happen it was piecemeal and more about grabbing extra revenue to pay for too much spending.
Permanent spending promises kept accumulating over the past 10 years while both major parties avoided the most basic truth of government: eventually, somebody has to pay for it all.
The rot began before 2016, before the lost decade began in earnest. Kevin Rudd’s emissions trading scheme failed. Julia Gillard achieved significant (albeit contested) reforms but struggled to secure public approval. Tony Abbott’s 2014 budget attempted fiscal repair but he broke pre-election promises in doing so. These were all failures of reform, but at least those governments were still trying to reshape the country in meaningful ways.
After 2016, for a full decade, governments didn’t even try. Politics absorbed brutal lessons from the previous decade. WorkChoices taught the Liberals to fear industrial relations reform. The carbon wars made serious climate mechanisms toxic, to say the least. The mining tax taught Labor the danger of taking on vested interests. Abbott’s budget made the Coalition fear serious fiscal repair. Bill Shorten’s 2019 defeat persuaded Labor that taking a large-scale tax agenda to an election was politically suicidal.
The correct lesson should have been that reform demands better design and salesmanship. The lesson politicians actually learned, unfortunately, was that ambition creates targets, so just do nothing instead.
Turnbull’s pyrrhic 2016 election victory was the start of it. He abandoned tax and federation white papers that just might have given him the bedrock needed for substantial reforms. He went on to win a slender one-seat majority, trapping him between a hostile party room and a sceptical electorate.
In the end, Turnbull’s prime ministership was a let-down, including to his closest supporters.
Scott Morrison (pictured) became so personally toxic in the electorate that he became a drag on the Coalition’s vote, says PVO
Scott Morrison embodied the new politics at its most transactional. Governing became an exercise in messaging, political manoeuvring and surviving the news cycle. The pandemic briefly broke that pattern. JobKeeper showed Australia could still act boldly when forced to do so in a crisis. But hotel quarantine, aged care blunders and vaccine procurement failures exposed the political institutions neglected during calmer times.
Albo restored normality after Morrison, in the sense that Morrison had become so personally toxic in the electorate that he became a drag on the Coalition’s vote. But Labor’s first term caution was forged in the trauma of the 2019 defeat, and that trauma hardened further after the Voice referendum failed. Labor’s first term therefore became three more wasted years.
The 2026 federal budget finally broke some of Labor’s own promises in the name of reform. But springing changes on voters without first securing a mandate isn’t a substitute for persuasion. It risks teaching Australians that reform means politicians concealing their plans until after an election. That doesn’t rebuild trust. It burns through what little remains of it. Besides, the 2026 budget reforms were all about raising more revenue to pay for government spending that really should be reined in as part of wider tax reform.
Debt and interest costs are now climbing as spending remains profligate. Housing has become an intergenerational betrayal. Productivity growth is anaemic at best. The costs of disability care, health, aged care and defence are rising faster than the revenue base supporting them. Responsibility remains blurred between Canberra and the states, allowing every government to take credit and shift blame, which is why the bipartisan failure to embrace federation reform is a national disgrace.
Meanwhile, the major party vote has fractured and One Nation’s support is surging. Populism isn’t an interruption to the story of the lost decade, it’s one of its consequences. The populist solution to our problems is often wrong, but the grievance it feeds off isn’t necessarily irrational. Concerns about too much immigration are an example.
Escaping this malaise doesn’t require a nostalgic attempt to recreate the Hawke, Keating or Howard eras. That political world is long gone now. It requires the same seriousness when tackling challenges, albeit adapted to a less deferential electorate, a fractured media landscape, political parties commanding a smaller share of the vote, and inevitably parliaments that reflect that.
Australia needs tax reform that rewards work and investment while funding the services voters demand. We need a serious national debate about where that line is and how much we are willing to pay for it with our taxes.
The major party vote has fractured and One Nation’s support is surging. (Anthony Albanese is pictured)
Housing reform must confront supply-side failures as well as tax-driven demand. Federation reform is a must, and the public service needs to lift its game. Parliament must seriously scrutinise executive power rather than act like a bunch of performing seals for the cameras.
Above all, politicians must rediscover the belief that voters can be persuaded by rational arguments. They need to take that risk, and they need to get better at the art of persuasion to make it successful.
Australia’s lost decade wasn’t a catastrophe; that’s the good news. But if we replicate it in the coming decade it will be. We didn’t lose the last decade because Australia lacked wealth, talent or luck. We lost it because our political system failed, and to some extent at least we all must share in the blame for that. We get the politicians we deserve.
The task now is to recover from it before Australia drifts into irreversible decline.
Peter van Onselen’s book (co-authored with Richard Holden) will be released by HarperCollins in the first half of next year
