Former prime minister Paul Keating marked his 80th birthday with a wide-ranging interview in the Australian Financial Review last week, accompanied by a “Keating at 80” article series.
It was a typically breathless affair, recycling the hagiographic cliches about Australia’s long-lost Golden Era of Reform™, the virtuosity of Keating’s self-taught mastery of economics, something about the “big picture” etc. This was followed by the usual nostalgic lament that politicians have since lost the zeal and tenacity to prosecute major reforms.
Today’s pollies could certainly use a dose of Keating’s boldness — in his words, “the country is so timid”. And there was much substantive to celebrate about Hawke and Keating’s program, from the tough-but-necessary liberalising reforms like floating the dollar and reducing tariffs, to their egalitarian compliments in Medicare, welfare increases and Indigenous land rights.
But Keating was not then, and isn’t now, an all-knowing oracle, as he is sometimes deified by the press gallery. His boundless confidence empowered him not only to overcome the forces of complacency on much-needed changes but also to blow past legitimate reservations on less noble quests, such as privatisation, enterprise bargaining and an inadequate recession response, which his Labor descendants have since begun undoing. Nine’s Peter Hartcher worries Keating is only now souring his legacy, but his record was in fact always mixed.
This would be a matter for historians, if Keating did not bob up so frequently in public debate, and if his prescriptions had changed with the times. But they haven’t. He is still pushing the same barrows he was in the 1990s, for better and worse. He is not a prophet; he is a fossil.
But our media still reports his every utterance as wisdom from on high, as if taking notes from the headmaster. “Far too sensible for Canberra”, they scoff, when in actuality many of Keating’s bugbears go unheeded because the policy establishment — and his own party — are (slowly) moving on from the neoliberal orthodoxy that pervaded his era and hamstrung his better instincts.
Take the headline recommendation of his AFR interview: lower income taxes for the highest earners to no more than 39%, down from 45% plus the 2% Medicare levy.
It’s an extension of one of Keating’s most unnecessary and misguided excesses in government — cutting the top personal income tax rate from 60% to 47%. At the time, he dismissed objections from Labor’s left faction by defeatistly claiming 60% wouldn’t be complied with anyway.
Now he wants to go further. “There’s an issue that all societies should have of how much a person’s conscientious efforts and wealth should be delivered to the state,” he told the AFR. “Once you start getting the top rate over, in my opinion, 39[%], it becomes confiscatory and when they become confiscatory you just lose all that impetus to make a dollar and do clever things.”
This is a straightforwardly inegalitarian position — indeed, it would refund more to the very richest than Scott Morrison’s stage three tax cuts, let alone Anthony Albanese’s. It should come as no surprise that Sky News has repeatedly praised his intervention, as has 2GB. It’s also a highly convenient position — Keating is almost certainly in the top tax bracket himself, having recently earned $25,000 a month from consulting services to billionaire Anthony Pratt alone.
His proposal also isn’t backed by economic research. Economists Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva estimate that “a socially optimal top tax rate” could be as high as 83%. Piketty’s mentor Tony Atkinson’s estimate was 65%. Saez previously estimated 73%. Australia’s is nowhere near those. We aren’t at risk of disincentivising productive work. Researchers have also found cuts to top rates across the OECD have not driven higher economic growth or employment.
Yet Keating rarely backs such claims with evidence, and is never asked to — his economic wisdom is assumedly innate, intuitive, almost divine. In actuality, his priors have hardly been updated since the ’90s, during which time the discipline has moved on.
Cutting top tax rates is also out of step with today’s economic reality. Canberra is facing a pending revenue shortfall. It needs to be raising taxes, not cutting them. The alternative approach that Keating suggests — being more “disciplined” with public spending — is callous and unrealistic at a time of rising social needs (an ageing population and rising climate costs, to name two). Even the centre-right journalist Paul Kelly, himself a nostalgic veteran, accepts this reality.
There are other issues on which Keating intervenes productively, and on which he deservedly submits politicians to his lacerating tongue, including our lack of self-assured independence in foreign policy — whataboutism on China’s repression of the Uyghur minority aside.
But his willful blindspots remain — fealty to an outmoded vision of small government and a pigheaded dismissal of contrary evidence or reasonable objection. Such blindspots contributed to Labor’s 1996 election loss and alienation from segments of the working class, something he ironically now criticises Joe Biden for.
It’s not just those from Labor’s left or the Greens, who always had their misgivings about Keating, who find his stale spectre grating. Some less starry-eyed thinkers from Labor’s right also resent their own party’s straightjacket of genuflection, with Nick Dyrenfurth once writing, “Labor needs to jettison its uncritical nostalgia for that [Keating’s] era. It holds Labor back from developing new, relevant policies”.
He might have an amusing turn of phrase — a godsend for journalists needing a quote or TV producers needing an entertaining guest. But our media’s undue deference towards him only feeds his outsized ego. At 80, Keating remains a titan of a bygone era whose time has well and truly passed.
Correction: This article originally stated Paul Keating had consulted for Richard Pratt. It has been corrected to Anthony Pratt.
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