2011 - The Year Ahead

The 2011 political year is now beginning. Here are some of the issues that will influence how it pans out.

The upcoming NSW Drubbing

It will not be an issue of whether NSW Labor will lose government on 26 March.
Rather, given that that the ALP primary vote is as low as 24% the question will be by how far.

The Hunter and the Illawarra no longer have the industrial bases of times of yore, making it more receptive to the very small ‘c’ conservatism of the Coalition, whilst the inner city is turning Green.

The glue that bound the labour movement – a wish to express solidarity with the working class – has lost its power to bind.

This reality, together with the poor condition of ‘brand Labor’ means that this could be a ‘transformational election’ – where tribal voters irrevocably change allegiance.

This could have federal ramifications as the NSW model has been the model of governance has been the template for Federal Labor.

Massively reject NSW Labor, the question of ‘what does Labor mean in the 21st century mean?’ will more broadly resonate.

Then there is the next challenge:

The Greens

The new Senate is sworn in on 1 July. From that date the dynamics of the chamber changes. All it needs is for the Government and Greens to vote together to enable matters to pass.

How will Labor handle this? Will it be like Tasmania or the ACT in which the parties act more like a coalition presenting to the chamber pre-agreed outcomes, or will there be an attempt of product differentiation between them?

Following the Queensland floods, the Prime Minister has announced the abolition, deferral or capping of a number of carbon abatement schemes, including the Green Car Innovation Fund, Cleaner Car Rebate Scheme, the Carbon Capture and Storage Flagships and Solar Flagships, the Solar Hot Water Rebate, Green Start Program, Solar Homes and Communities Plan and the Global Carbon Capture and Storage Institute – policy outcomes that will clearly rile the Greens.

However, at the same time she proposes retaining a price on carbon, something to the Prime Minister apparently akin to the floating of the dollar (as she told the National Press Club) or a driver of ‘another technological revolution like Information Technology did in the 1980s and 90s’ (as she told a recent CEDA luncheon).

Two lessons flowed from the Victorian election.

The first was that in deciding not to provide the Greens any preferences, the Victorian Libs proved that you can take on the Greens without being seen as anti-environmentalist and suffer an electoral backlash.

The second lesson was that suburbia is feeling the pinch of high utility prices.

This will be an increasing factor to take into account when ‘putting a price on carbon’ is ultimately unambiguously translated as being ‘increasing electricity costs’ as the carbon debate comes to a climax during 2011.

The Government’s attempts to balance its environmental credentials will be interesting.

Then there is:

Dealing with the States

We have commented before about the need for the Government to fund the social democratic project.

And so the Commonwealth is seeking to claw back some GST payments to the states to pay for hospital reform, whilst the current minerals resource rent tax will be used to (ultimately) increase superannuation payments to employees and ‘build essential infrastructure’.

The Commonwealth also wants to impose ‘pre-commitment’ technology on poker machines, in an endeavour to reduce problem gambing – and to give effect to a major policy concern of Andrew Wilkie, one of those on whom the Government is relying to maintain government.

However, the states are most unhappy.

Queensland’s Anna Bligh was reported as saying that ‘we are very clear here in Queensland that constitutionally as a sovereign state in our own right, we reserve the right to set appropriate royalties which are returned to Queenslanders for the minerals that are taken out of our state’.

The Victorian Coalition government's Resources Minister, Michael O'Brien, said he would not allow his state's taxpayers to "fill the federal Labor government's budget black hole", insisting royalties had always been a state right.

Finally, WA Premier Colin Barnett said his state would not hand over GST revenues.

Then there is the gambling issue, with some states concerned of (amongst other things) impact on gambling revenues – one of the few own source revenue streams left to the states,

Given that it appears the ‘tax summit’ to discuss the proposals contained in the Henry review is intended to be not much more than a talkfest, COAG will be a forum where the issue of dealing with vertical fiscal imbalance and the role of the states in the 21st century Australia will be a major issue – particularly as there are two (and very shortly, probably three) states with non-Labor governments this year.

This is before dealing with policy changes necessary to bring the budget back to surplus by 2013.

2011 will be one of the more interesting political years.