Executive Summary

Less instability,
diminished union
Somewhat paradoxically, the COVID-19 pandemic appears to have moderated the political instability that characterized the preceding 12 years, and served to undermine sound policy development and implementation underpinned by a long-term vision. However, the pandemic has also somewhat weakened the federation. There are eight state and territory governments, and the state governments have been aggressively asserting their powers in respect to public health measures. The state governments have made little effort to coordinate between themselves or with the Commonwealth government. Western Australia and to a lesser extent Queensland have been particularly prone to policy exceptionalism. National unity has diminished, and it is unclear when or even whether coordination and cooperation will return to pre-pandemic levels.
Poverty reduction successful
A more positive development was that 2020 showed what income support policy could achieve in reducing poverty, although arguably at a cost the electorate is unwilling to bear. Nonetheless, it became clear to many that much better provision could be made for disadvantaged groups at relatively low cost and indeed a sustained increase in the unemployment benefit was implemented in 2021.
China relations deteriorating
Aside from the COVID-19 pandemic, the most significant development in the review period was the further deterioration in Australia’s relationship with China. China has placed selective import bans on Australian products and has closed down most communication channels. This has both economic and geopolitical implications, which was likely to be an important reason for Australia’s foreign policy pivot toward the United States and the United Kingdom in 2021 in the form of the AUKUS alliance. The most tangible manifestation of the AUKUS alliance to date has been the scrapping of a AUD 90 billion submarine contract with the French government in favor of an in-principle agreement to source nuclear-powered submarines from the United States and United Kingdom.
Falling political
The intransigence of the Senate – which no government has had control of since 2007 – continues to be a source of frustration for governments seeking to implement their policy agenda, but arguably it has become less of a factor in the review period. In part, this is because the May 2019 election saw the Morrison government need the support of only four instead of nine independent senators. Moreover, disunity within the major political parties has been less evident since the re-election of the Morrison government.
Difficult fiscal
decisions ahead
Since the end of the mining boom in 2012, Australia’s economic circumstances have fundamentally altered, with living standards stagnating. The government’s fiscal position has also deteriorated precipitously, particularly since the onset of the pandemic. Difficult fiscal policy decisions will be necessary over the coming years, yet there does not appear to be much appetite for these among the political leadership. That said, after an initial period of policy paralysis, the Turnbull government experienced some success in passing reform legislation over its final two years. To a significant extent, this reflected the government’s adoption of a more moderate or balanced agenda that proved more acceptable to independents and minor parties. This has broadly continued under new Prime Minister Scott Morrison.
Good social outcomes
Despite the pandemic, economic and social outcomes continue to be relatively good in absolute terms, and sustainable policy performance compares reasonably favorably with many other developed countries. Indeed, the unemployment rate is lower and employment participation is higher than before the onset of the pandemic due to strong domestic demand and an effective freeze on immigration. However, real wages and household incomes remain stagnant, notwithstanding a temporary boost in 2020 due to government income supports.
Governance improvements needed
Overall, policy performance remained relatively unchanged in the current review period compared with the previous one, despite the massive change in circumstances brought about by the pandemic. There was hope of an improvement in federal-state relations following the replacement of the Council of Australian Governments by the National Cabinet, but ultimately there was no improvement. There is consequently considerable scope for improvement in governance. In its early years, the coalition government cut public sector employment, reduced funding for several government agencies, and partially reneged on the healthcare and education funding agreements reached between the state and territorial governments prior to the 2013 election. More recent government actions have only slightly improved the situation. In particular, many persistent problems remain, including the vertical fiscal imbalances between the federal, state and territory governments; the lack of a coherent, effective and sustainable energy policy; the absence of legally protected human rights; the politicization of the public sector; and the degree of concentration in media ownership.
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