Minority Rules

26-Aug-2010 Conventional wisdom says the inconclusive outcome of Saturday’s federal election is bad for business.

That most conventional of conventional voices, Australian Industry Group chief executive Heather Ridout, says: “The prospect of a hung parliament and a Senate where a minor party holds the balance of power in its own right, is a worrying outcome for business.

“It will potentially lead to instability, uncertainty and short-termism in policy development, all of which poses risks and challenges for the economy,” Ridout says.

“Instability, uncertainty and short-termism in policy development”? Hmm... sounds like a fairly accurate description of the final eight months of majority rule by the Australian Labor Party.

This saw the political assassination of Kevin Rudd (instability), the mining tax debacle (uncertainty) and Julia Gillard’s repudiation of Rudd’s “big Australia” (short-termism).

After this spectacle, it is hard to imagine things getting any worse for businesses under a minority ALP or Coalition government.
In fact, there are several reasons why the owners of small businesses in particular should welcome the prospect of independent MPs holding the balance of power in the federal parliament.

First, policy “gridlock” can be preferable to the alternative: an avalanche of new laws and regulations.

Ridout assumes that with governments which control the parliament in their own right will make business- friendly decisions.
Yet this assumption is undermined by her own experience on the panel, led by Treasury boss Ken Henry, which recently reviewed the taxation system.

Of the Henry review’s 138 recommendations, the government ruled out 25 without any public debate, ran with only a handful - including, famously, the mining tax - and kicked the rest into the longest of long grass.

Recall what happened the last time a federal government had a majority in not only the House of Representatives, where governments are formed, but also in the Senate, through which legislation must also pass.

John Howard used his majority in both houses of parliament after the 2004 election to over-ride state-based workplace laws with a national system of individual contracts.

Ridout, the Business Council of Australia and other business groups cheered him on, blind to the danger that, having centralised workplace laws in Canberra, Howard had handed a future ALP government the power to stop individual contracts and give trade unions a bigger say over pay and conditions

Which, of course, is exactly what happened when, inevitably, the Coalition lost power at the 2007 election.

A second reason why small businesses should welcome respite from majority rule is that it might also provide some respite from Canberra rule.

As the recent history of workplace laws shows, there is a worrying trend for federal governments to leech power away from state and local governments.

This is rarely in the interests of small businesses. National laws tend to reflect the views of national organisations, such as big businesses, big unions and big charities.

The hope is that if the independent MPs succeed if transferring power from the executive (that is, the Prime Minister and his or her ministers and departments) to the parliament, it might also encourage power to flow from Canberra out to cities and regions.

And, by this, I don’t mean just out to state and local governments, though these should be handed revenue- raising power commensurate with their policy responsibilities for health, education, local amenities, and so on.

There is also a desparate to need to encourage the formation of groups that are neither creatures of government nor the corporate sector.
For example, regulators should cease forcing “mutually” or member-owned credit unions to merge and get bigger in the name of “risk management”; surely, the global financial crisis has demolished the idea that big equals safer when it comes to banking.

Instead, a minority Gillard or Abbott government should encourage the formation of new regionally-based credit unions that will ensure the savings of residents support the development of small businesses in their communities.

Minority government might threaten the influence of Ridout and other lobbyists in Canberra, but it opens up the possibility of power and capital moving from the big end of town to the small businesses and entrepreneurs.

BRW

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