LABOR was well positioned for an overwhelming victory at last Saturday's South Australian election. They began the campaign in ideal economic and political conditions. Standard and Poors had given South Australia the coveted AAA credit rating, leaving no room for accusations by the Liberals that Labor was a poor financial manager. The South Australian economy was buoyant and unemployment at its lowest level for decades. This new-found prosperity laid the foundations for a comfortable victory but not the landslide that occurred. Other factors made the swing to Labor as substantial as it was.
Widespread anger in the community about the Howard government's industrial relations changes and lingering resentment about the privatisation of ETSA are likely to have played a key role, generating a significant protest vote against the Liberals. Premier Rann's prominent pre-election role in opposing the federal IR changes and his strong opposition to privatisation would have resonated with many. The recent widespread electricity blackouts that severely disrupted thousands of households and businesses in metropolitan Adelaide were a damaging reminder of the failed electricity privatisation policy of the former Liberal government. To underscore this, just days after Labor was re-elected the premier and the treasurer, Kevin Foley, signed a decree committing the state government to no privatisations or road tolls. They obviously took note of the political fall out from the Sydney tunnel fiasco and are now more than a little wary of public private partnerships.
Strong recent employment growth, particularly in full-time jobs, was a key to Labor's electoral success. It boosted the confidence of struggling regions throughout the state and must have translated into thousands of additional votes for Labor, particularly in southern and northern Adelaide where, despite recent jobs losses in the passenger motor vehicle industry, unemployment rates have fallen sharply since 2003.
Labor has enjoyed a period of economic sunshine buoyed by significant new investment projects. The awarding of the $6 billion Air Warfare Destroyer contract to South Australia could not have come at a better time, helping to offset the jobs losses flowing from the closure of Port Stanvac Oil Refinery, the downsizing of Mitsubishi and the loss of a third shift at GMH. The shipbuilding contract has been eclipsed by the proposed expansion of mining operations at Roxby Downs which is expected to generate more than 20,000 new jobs.
All of this was enough to ensure a solid victory for Labor. A lacklustre performance by the Liberals and nervous leadership by Rob Kerin ensured a landslide. It was always going to be difficult for the Liberals to find political traction but Kerin's failure to inspire confidence contrasted starkly with Mike Rann's polished style.
Given the scale of the loss suffered by the Liberals, Labor appears set to retain government for some time to come. Economic and political conditions can change quickly, however. Continued strong economic and employment growth is not assured and great social, economic and environmental challenges lay ahead for Labor.
The economy is likely to remain stable over the short term but wise politicians know that booms inevitably come to an end. Fortunately for Labor, large scale investment projects like the Air Warfare Destroyer contract and proposed expansion of Roxby Downs will help to counter some of the adverse effects of economic shocks. One potential shock to watch out for is excessive property market speculation fuelling record personal and corporate debt levels. In this context, relatively small increases in interest rates will push debt laden South Australian households and businesses to the financial brink. Just how this shakes out over the next few years will have a profound influence on the sustainability of economic and employment growth.
Any downturn in the national economy is bad news for state governments. When the national economy sneezes, state economies catch a cold. The problem for state governments is that they have a very limited ability to counteract the damaging effects of a generalised economic downturn and rely heavily on federal assistance to combat the effects of a slowing economy and rising unemployment.
South Australia's ageing workforce is a major challenge for the Rann and his team. They will need to implement strategies that boost workforce participation over the next five years to help counter the impact of accelerating rates of retirement. Increased investment in programs that provide workforce transitions for the under-employed and the unemployed and incentives to mature age workers to remain in the workforce for longer will be necessary ingredients of an enhanced Workforce Development Strategy.
The challenges of managing the socioeconomic impact of ageing are not restricted to the workforce. An ageing population will require increased investment in health and community services. The populist preoccupation with cutting taxes to attract the swinging vote will need to be re-examined in this context. Sensible tax policies rather than tax cutting will need to be pursued to ensure that elderly Australians have access to the services and support that they need.
There is perhaps no greater challenge facing policy makers than responding meaningfully to global warming. The next decade may prove to be the most politically volatile in modern history as policymakers face increasing pressure to implement radical policy shifts in response to global warming. The dangers of not doing so are studiously outlined by the premier's sustainability advisor, Dr Tim Flannery in his new book, The Weather Makers. If Labor listens to Flannery, South Australia will become an international leader in tackling global warming, replacing our carbon based economy with one based on renewable sources of energy. The challenge for the state government is to ensure the widespread use of renewable, safe and clean forms of energy like solar and wind. By 2015 every house in South Australia should be powered by solar or wind energy and every business buying energy generated from a range of clean and renewable fuels.
The Rann government is already backing solar and wind energy generation but it needs to develop strategies that dramatically accelerate the take up of these options and measures to increase household and industry energy efficiency. It is hard to see how we will achieve this without regaining public control of the electricity industry in South Australia. South Australian policy makers have done it once before. They may do it again if the circumstances and the citizens demand it.
The rise of low cost manufacturing in India and China threatens the future of the South Australian passenger motor vehicle industry unless an alternative strategy to secure the industry's future can be put in place over the next few years. The government needs to get an assurance from the federal government that car tariffs will not be lowered further till a strategy to help secure the car industry in South Australia is developed. One `green' option is to re-position the industry in anticipation of growing demand for hybrid electric/petrol and clean fuel vehicles. The state government could lead the charge by committing itself to a green fleet.
As rising sea levels, species extinction and crop failures signal our disruption of the earth's climate, politics in South Australia and Australia is likely to become much greener than it is. The next state election might be fought less on the health of the economy and more on the health of our environment. Look out for the political re-positioning.
Currently posted on Australian Policy Online www.apo.org.au