A new paradigm for economic reform

There is no doubt the federal election result — and destination of the ballots of significant numbers of voters, particularly in the Senate — is a major setback for the causes of budget repair and smaller government.

There will be endless speculation regarding the factors that explain the Turnbull government’s failure to secure re-election in its own right and win a mandate for its economic plan.

The internal divisions within the Liberal Party, in the wake of the change of Prime Minister last year between the moderate faction and the social conservative base, clearly played a role in the outcome.

But there is also no doubt that large numbers of voters — similar to the situation in the United States and parts of Europe — are attracted to populist politicians opposed to ‘economic rationalist’ policies.

This is part of the increasing divide between the cosmopolitan political class comfortable with large-scale immigration and free trade, and a growing block of ordinary voters concerned about globalisation and worried about terrorism.

Dealing with this division is the great challenge the political establishment faces, if mainstream parties are to regain their legitimacy and stop the leakage of support away to populist figures (such as Donald Trump and Bernie Sanders) and assorted minor and independent parties.

Perhaps these challenges are not as acute in Australia as elsewhere.

Some may interpret Bill Shorten’s successful ‘Medi-Scare’ campaign as a blatant pitch for the populist vote.

Yet we should remember that no party in Australian political history has ever run on an economic rationalist platform — with one exception. John Hewson did in 1993, and lost the ‘unloseable’ election, in large part because of a similar and equally successful Labor scare campaign about Medicare.

This is cold comfort, overall. What it highlights is that advocates of small government in Australia –no less than in other part of the world — have yet to find a politically feasible way to reform the largest and growing areas of government – public health, education, and welfare systems.

We will continue to lose if economic reform is simply about spending cuts and balancing the books. This is a political dead-end — as the last three years of failure to deal with deficit and debt, capped by the election result, have comprehensively proven.

We need to find a new paradigm to sell our ideas — an approach that instead emphasises the benefits of doing things differently in areas such health, and the benefits that will thereby flow to the individual. This is the political logic behind the CIS’s Medicare Opt-Out Health Savings Account reform plan.