What the Turnbull government must do now

The Coalition won the election. Labor lost.

Politics, like sporting events, are pretty simple – you are a winner whether the margin is a point or 50, whether you win by a nose or 20 lengths.

The prize is the same regardless of the margin. The Melbourne Cup, Olympic gold or government.

Prime Minister Turnbull and his team will set the agenda on economic and budget policy for the next three years.

Whatever policies it took to the election, the economic change unfolding domestically and around the world means that the issues confronting the government are different today than even a few months ago and future risks, both positive and negative, cannot be fully anticipated.

All that should matter for the Turnbull government is having the nous, pragmatism and common sense to adjust policy as these unforecastable events unfold.

The Coalition government must do all that it can to promote economic growth, repair the budget and lower the unemployment rate.

The Abbott and Turnbull governments failed on all these three fronts in its prior term, so it is to be hoped it has learned from these shortcomings and over the next three years delivers on its commitments on these vital benchmarks.

It needs to stop spending money in low priority areas and look to the tax base to restore the budget balance.

The ridiculously expensive and largely unproductive company tax cuts should go. They threaten to cripple the return to surplus for little if any benefit to the economy.

It needs to revisit its silly and arbitrary target to cap the tax to GDP ratio at 23.9 per cent. This is a recipe for never getting the budget to surplus without draconian and unfair cuts to spending.

The electorate has shouted loud and clear it likes Medicare and affordable education.

What is also important for the government is doing something meaningful on Australia’s problematic level of unemployment.

There are around 750,000 people unemployed, which is around 5.7 per cent of the workforce.

The government currently has no plans to get it any lower than 5.5 per cent, a point outlined in the government’s recent budget papers.

This is not good enough.

Turnbull and his team will be judged by the electorate in the 2019 election on its economic achievements.

While Labor got closer to government than most assumed, thanks in large part to its economic policy agenda, it will have three long years to reframe its policy settings in order to fight the 2019 election as it watches and judges how it can do a better job in economic management than the Turnbull government.

Labor, like the government, will be reactive to economic events and the trials and tribulations of the government as it manages the economy and budget.

These events will determine what policies it will run with at the next election and in Opposition, it will have almost three years to come up with something that will give it a chance to win.

 

Stephen Koukoulas is a Yahoo7 Finance expert with 

more than 25 years experience as an economist in government, as Global Head of economic and market research, as Chief Economist for two major banks, and as economic advisor to the Prime Minister of Australia.