Can future Liberals achieve small government?

This article is an instalment in a new series, Where to for real Liberals?on the future of the Liberal Party under Peter Dutton.

The Liberals have never achieved small government in Australia, and they are unlikely to do so because of our political culture and contemporary ideas about the role of government in society. Small government is an ideal that is most obvious when contrasted with Labor’s interventionist approach to markets. But the parties’ ideals rarely get in the way of pragmatism when it comes to electoral politics.

Australia has a mixed economy that sits somewhere between the coordinated capitalism of Sweden and the competitive capitalism of the United States. The Australian system focuses on equality of opportunity in education and healthcare. If one has access to universal education and healthcare, then through hard work, one can improve one’s lot in life. Or so the story goes.

Keynesianism dominated postwar economics. It was not until the 1970s that competitive markets became the new orthodoxy.

The Hawke government dragged Australia into the era of market liberalisation. Hawke’s careful consultation with business and trade unions, known as corporatism, allowed numerous reforms that would have been impossible a decade earlier.

The Howard government changed the Australian economy with the introduction of the GST. The Commonwealth’s tax revenue increased substantially. Further reforms liberalised the labour market, but this proved a bridge too far for the electorate.

Later, the climate wars saw greater pragmatism with both Labor and the Liberals reversing their usual policy preferences. Labor introduced a form of carbon market while the Liberals under Tony Abbott opted for state intervention.

Recently, the pandemic challenged the Morrison government’s policy prescriptions, with Howard telling then treasurer Josh Frydenberg that pragmatism rather than ideology was necessary to protect Australian society.

On coming to power, the Albanese government returned to “Old Labor” with major interventions in the energy industry and an attempt to reimagine a centralised bargaining system. This means Peter Dutton cannot introduce an energy policy that ignores the legacies of the Albanese government — and the Liberal’s nuclear energy policy cannot be viewed in isolation from AUKUS.

People who prefer small government and market economics typically prioritise national security. Again, this is an ideal rather than a reality as the current state of our defence capabilities demonstrates. But operating nuclear-powered submarines without a civilian nuclear industry will be difficult.

Despite what Labor says, the Chifley government was instrumental in enabling British nuclear tests in Australia and, with bipartisan support, wanted to become nuclear capable. The absence of the British in Australia’s defence during World War II was at the forefront of defence thinking at the time.

AUKUS represents the realisation of a defence capability that both Labor and the Liberals pursued from the end of the war up until the Whitlam Labor government ratified the Non-Proliferation Treaty that the Gorton Coalition government had signed. Again, pragmatism and continuity trumped party policy preferences.

Dutton has little choice but to pursue a government-owned civilian nuclear industry. There are two main reasons. First, investors will not be able to compete with Labor’s highly subsidised renewables industry. Second, the national security implications are the same that led to Chifley establishing ASIO.

Small government and an Australian nuclear energy industry are incompatible in the current political environment. Again, pragmatism trumps policy preferences.

Future Liberals, especially those who would identify as “dries” (those who favour market liberalisation), cannot divorce policy from the legacies of governments past. Dutton’s energy policy embraces nuclear. Labor has ignored it on ideological grounds.

This might just give future “dry” Liberals the opportunity to practice pragmatism. After all, the Australian government has never been small.

What is the future of the Liberal Party? Let us know your thoughts by writing to [email protected]. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.