Can Peter Dutton deliver a small government?

This article is part of a new series, Where Are Real Liberals Going?, about the future of the Liberal Party under Peter Dutton.

The Liberals have never achieved small government in Australia, and it is unlikely that they will do so because of our political culture and contemporary ideas about the role of government in society. Small government is an ideal that stands out most in contrast to 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 falls somewhere between the coordinated capitalism of Sweden and the competitive capitalism of the United States. The Australian system focuses on equal opportunity in education and health care. If a person has access to universal education and health care, then through hard work they can improve their lot in life. Or so the story goes.

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

The Hawke government ushered Australia into an era of market liberalization. Hawke’s careful consultation with business and unions, known as corporatism, made possible numerous reforms that had been impossible a decade earlier.

The Howard government transformed the Australian economy with the introduction of the GST. Commonwealth tax revenues rose significantly. Further reforms liberalised the labour market, but this proved a bridge too far for the electorate.

Later, the climate wars saw more 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 has challenged the Morrison government’s policy intentions. Howard told then-Finance Minister Josh Frydenberg that pragmatism, not ideology, was needed to protect Australian society.

When the Albanian government came to power, it returned to “Old Labor” with major interventions in the energy sector and an attempt to reinvent a centralized bargaining system. This means that Peter Dutton cannot implement an energy policy that ignores the legacies of the Albanian government — and the Liberals’ nuclear policy cannot be separated from AUKUS.

People who favor small government and market economies tend to prioritize national security. Again, this is an ideal rather than a reality, as the current state of our defense capabilities demonstrates. But operating nuclear submarines without a civilian nuclear industry will be difficult.

Despite Labor’s claims, the Chifley government was instrumental in enabling British nuclear testing in Australia and, with bipartisan support, wanted to become nuclear-capable. Britain’s absence from Australia’s defence during World War II was at the forefront of defence thinking at the time.

AUKUS represents the realization of a defense capability that both Labor and the Liberals had been pursuing from the end of the war until the Whitlam Labor government ratified the Non-Proliferation Treaty that the Gorton Coalition government had signed. Once again, pragmatism and continuity trumped party policy preferences.

Dutton has little choice but to pursue a government-run civil nuclear industry. There are two main reasons. First, investors will not be able to compete with Labor’s heavily subsidized renewables industry. Second, the national security implications are the same ones that led Chifley to set up ASIO.

Small government and an Australian nuclear power industry are incompatible in the current political climate. Once again, pragmatism trumps policy preferences.

Future Liberals, particularly those who would identify themselves as “dries” (those who favour market liberalisation), cannot decouple policy from the legacies of previous governments. Dutton’s energy policy embraces nuclear power. Labor has ignored it for ideological reasons.

This could give future “dry” liberals a chance to practice pragmatism. After all, the Australian government has never been small.

What is the future of the Liberal Party? Let us know what you think 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.