From the ongoing budget deficit to the current economic troubles faced by Qantas, Labor's economic legacy continues to drag, writes Peter Reith.

As we look forward to Christmas and some time with family and friends, the economic reality is that Australia's prospects in the year ahead are not as good as they should be.

The latest GDP figures were lacklustre, the latest monthly unemployment figure was flat but the trend is for higher unemployment, and today the Government is going to spell out the state of the books. Treasurer Hockey's statement will sadly confirm that Australia is swimming in a sea of debt run up by Labor in its six years of disastrous mismanagement. Australia has never been left so vulnerable to the winds of economic change that could blow our way at any time.

The Government is faced with an extraordinary legacy. It appears the budget deficit has been deteriorating by $1 billion a week since the election due in part to lower than estimated revenue; meanwhile, on the expenditure side of the budget, Labor has been on a spending splurge for years.

The Labor shadow treasurer says that Labor will accept that about $370 billion of debt was their responsibility but anything above that is the Coalition's problem. Mr Bowen is being disingenuous. For example, Labor says the increase in the RBA's capital was a decision of the incoming government and so that is the Coalition's responsibility. But the RBA was left undercapitalised, so the extra $8.8 billion provided by the Coalition was made necessary by Labor's earlier raiding of the RBA's capital.

Labor must also take responsibility for revenue as well as its profligate spending. Revenues are down partly because of Labor's economic mismanagement including reregulation of the labour market and the imposition of all sorts of red and green tape that have undermined economic performance. Labor came into office with an economy performing better than it is now and with no debts. Labor's legacy is already a lot worse than $370 billion.

And Labor's intentions to oppose every major economic reform intended by the Coalition Government will only drag the economy backwards unnecessarily as demonstrated by the costs being still imposed on business by Labor's carbon tax.

Don't let anyone ever say that the opposition don't count in politics. A policy approach from the Labor Opposition that is constantly negative and opposed to a free market will impair Australia's economic future. The proof of that claim is the behaviour of the Howard/Peacock opposition in the 1980s. Their approach was to support Hawke's major reforms and encourage Hawke to go further. That approach was an indispensable element to Labor's reforms in the 1980s under Hawke.

Since Labor lost office in 1996, it has turned against the pro-reform mantra of the Hawke years. Now in opposition, Labor is even opposing recent policies that it proposed in government. For example, Labor in government wanted a freeze on the child care rebate but now, a few months later, it opposes the freeze.

Now Labor wants to partially fund Qantas out of the public purse. Labor has a long record of funding aviation in Australia and it seems they are genetically unable to finally leave aviation to the market.

The Qantas journey from government-owned business to a free-market enterprise listed on the Stock Exchange is not new by any standard.

I was appointed in 2003 to the European Bank for Reconstruction and Development. The purpose of the EBRD was to assist the promotion of democracy and free markets in those countries that had recently emerged from behind the Iron Curtain. In its early years, the Bank had some success especially in reengineering inefficient government monopoly banks and turning them into banks that provided a competitive service to the rapidly growing free market business communities.

The first stage of EBRD involvement was often to retrain bank staff, introduce modern banking methods and generally shift the culture of the former state owned banks from servicing the government to servicing the customers. In Australia, the same first steps were standard operating procedure for a number of government business agencies including when the Hawke government first sold shares in Qantas to British Airways. At the EBRD's second stage, the objective was to find a private sector operator to take a minority shareholding to acclimatise the public to the idea of privatisation. In essence it was a process of incremental reform so as to avoid a political argument over the necessary reforms needed to establish a vibrant private sector.

When Qantas was fully privatised by Labor, it followed the standard approach. There was concern that "selling off the family silver" may have sparked a political backlash so it was decided to soften the blow by imposing foreign ownership limits so that it would remain an Australian-owned business. That decision was entirely a political fix. It may have been justified at the time given the political pressures within the ALP. The experience in Eastern Europe in the 1990s was that many of those political fixes did not last. And the reason for that is obvious. In a free market, the competitors must be allowed to compete on the same playing field, otherwise they will be pushed out of the way by others who have more beneficial arrangements.

That is the threat that now faces Qantas. Labor's opposition to lifting the capital restraints under the Qantas Sale Act are entirely political. It's a pity that pure politics is more important to Labor than the future of a good business that only really asks to be treated the same as anyone else in the aviation business.

Without a more responsible Opposition, whether we are considering the future of Qantas or the economy more generally, 2014 is likely to be a harder year for Australia than it should be.

Author's note: This will be last comment piece on the Drum for 2013 and from early in 2014 I will be writing a regular column exclusively for the Sydney Morning Herald.

I started with the Drum back in mid-2011 when Jonathan Green rang and asked me to write for the Drum Online. I appreciated the opportunity to work for the ABC and I thank those with whom I worked closely. As a professional politician I have been on the receiving end of many commentators so it has been quite a change to be on the other side of the fence. I also thank those who read my thoughts on current issues and those who provided a comment.

Peter Reith was a senior cabinet minister in the Howard government from 1996 to 2001 and then a director of the European Bank for Reconstruction and Development from 2003 to 2009. View his full profile here.