A rocky start

The Abbott government has had the rockiest start of any newly-elected government I can recall[1]. Opinion polls are already showing the government trailing Labor, even before the election of a new opposition leader.
The failure has two main elements. The first is the consequence of gaining office on the basis of slogans and personality politics rather than any coherent set of policy proposals. ‘Stop the boats’ was a great vote-winner for the LNP in opposition, but in office it’s a hostage given to fortune. Maybe the boats will stop and maybe not, but bombastic rhetoric will have no effect one way or the other.
The implication for Labor is not to respond in kind with wrecking and cheap slogans. Rather, it’s to make the point that, however dysfunctional the previous government may have been terms of leadership, and whatever the problems of implementation, it was in the right (or at least better than the LNP) on all the major policy issues[2].
The implied political strategy is to defend and extend the key policies of the Rudd-Gillard government, with the exception of the mistakes driven by short-run political exigencies (the archetypal example being the withdrawal of benefits from single parents, and the associated failure to do anything to improve the treatment of unemployed people in general).
That means treating the Abbott government as a temporary interruption a program of reform that includes carbon pricing, the NBN, NDIS and Gonski reforms. The only big gap in Labor’s program is the absence of a credible plan to finance these policies in the long run, while allowing state governments sufficient revenue to do their work. Labor needs to use the time in opposition to break with the low-tax rhetoric of the past, and work out a coherent plan to increase revenue. In practice, there’s no real chance of increasing the rate or coverage of GST, so the options will have to come on the income tax side. More on this soon, I hope.
The second factor in Abbott’s poor start is the ‘born to rule’ mentality that we’ve already seen in Queensland. Newman and his ministers have been shameless in grabbing more and better perks, giving jobs to their mates and so on. Abbott has started in the same vein, with examples such as the sacking of Steve Bracks, and his rumored replacement with a mate such as Nick Minchin. The contrast with Rudd, who left Liberal appointees in place, and gave plum appointments to well qualified Libs, is striking. Although the travel expense scandals now coming to light date from the past, they fit into a pattern that is already evident.
Of course, Labor is hardly innocent in this. But the isolated examples that have come to light, and the near-total absence of ministerial scandals in the Rudd-Gillard government suggest that this is not a case of ‘everybody does it’. Labor should join the Greens in pushing reform of the entire system.

fn1. The arguable exception is the Labor minority government that emerged from the 2010 election. But this wasn’t a new government or a new PM: Labor had a couple of years on top after 2007 and Gillard had already had her honeymoon period in the immediate aftermath of the deposition of Rudd.

fn2. ‘Better than Abbott’ was a pretty low bar when it came to refugee policies. But Labor did at least increase the refugee intake, while Abbott has cut it.

Victori spolia

We haven’t yet seen much indication yet of the policy line the Abbott government will take. On the one hand, their election commitments suggest that, with a handful of exceptions such as climate policy, Abbott will carry on the policies of the Labor government, including DisabilityCare, the Gonski reforms, and the NBN (in a cut-down version). On the other hand, historical precedent, recently reaffirmed at the state level by Campbell Newman, and the urgings of people like Bob Officer, who ran the Howard-Costello government’s Audit Commission, suggests the government will discover a spurious budget crisis, dump its promises and introduce big cuts to health and education. Even if they do this, it’s clear that they have no real ideas beyond scraping the barrel of the 1980s microeconomic reform agenda. The worthwhile parts of this agenda were pushed through long ago, and the failures in areas like financial deregulation, Workchoices, Public Private Partnerships and so on are now obvious. The only positive initiative associated with Abbott’s win, the Paid Parental Leave scheme, is directly opposed to the microeconomic reform agenda, and hated by Abbott’s big business agenda. So, beyond it’s three word slogans, I doubt that the government has much more idea about its plans for office, than I do.

We didn’t have to wait long, however, to see how the government would work in process terms. Julie Bishop’s sacking of Steve Bracks as consul-general in New York (rumored replacement, Nick Minchin) is the most notable example of a vindictive tribalism that is evident throughout the right. We’re already hearing talk of cuts aimed at right wing betes noires like the arts, and there is bound to be more of this. The contrast with the last change of government, when Rudd left LNP appointees in place, and even gave jobs to retired opponents, as well as playing down the culture wars, is striking. For the LNP, long accustomed to see itself as our natural rulers, it’s all about getting into office, and sharing out the spoils.

An undeserving alternative PM

Unless there’s a sudden turnaround in the polls, Tony Abbott will become Prime Minister of Australia. This will be the third time in my life that a Federal Labor government has been defeated, the other two occasions being 1975 and 1996. On both those occasions, despite substantial and enduring accomplishments, the government had made a mess of macroeconomic management, and the electorate, unsurprisingly, wanted to punish them. And, despite my strong disagreements with them (and with the way Fraser came to office), the incoming Prime Ministers had serious views on how best Australia’s future could be managed. Fraser has only improved since leaving office, making valuable contributions on the national and global stage. My evaluation of Howard, following his defeat, starts with the observation that he was ‘the most substantial figure produced by the Liberal party since the party itself was created by Menzies’.

Nothing of the sort can be said this time. The case put forward by the LNP is based entirely on lies and myths. These include the claims that
* Labor has mismanaged the economy and piled up unnecessary debt and deficits
* Australian families are ‘doing it tough’ because of a soaring cost of living
* The carbon tax/price is a ‘wrecking ball’, destroying economic activity
* The arrival of refugees represents a ‘national emergency’

None of these claims stands up to even momentary scrutiny.

Then there’s Abbott himself. After 20 years in politics, I can’t point to any substantial accomplishments on his part, or even any coherent political philosophy. For example, I’m not as critical of his parental leave scheme as some, but it’s totally inconsistent with his general political line, a fact that his supporters in business have been keen to point out. On climate change, he’s held every position possible and is now promising, in effect, to do nothing. His refusal to reveal policy costings until the second-last day of the campaign debases an already appalling process. He treated budget surplus as a holy grail until it became inconvenient, and has now become carefully vague on the topic.

Obviously, the fact that such a party and such a leader can be on the verge of victory implies that the Labor side has done something dreadfully wrong. It’s the oldest cliche in politics for the losing side to claim that the problem is not the policies but inability to get the message across. In this case, however, I think it’s true. Gillard lost the voters early on with stunts like the consultative assembly, and never managed to get them to listen to her for any length of time. Rudd was doing well in communicating his vision from his return to the leadership until he called the election. He then wasted three weeks on small-bore stuff apparently aimed at Katter party preferences. He seems finally to have rediscovered his voice, with the launch speech and his Q&A appearance, but I fear it’s too late.

Still, in the unlikely event that any undecided voters are reading this, I urge you to take a serious look at the alternative government, and place the LNP last on your ballot in both houses of Parliament.

Launch delayed

After a disappointing campaign, Kevin Rudd’s “launch” speech was excellent, both as a defence of Labor’s record and in setting out an agenda for the next term, notably with a long-overdue focus on the TAFE sector. Unfortunately, this announcement wasn’t the only thing that was overdue. What possible sense is there in “launching” the campaign with a week to go, when most voters have already made up their minds or turned off? This isn’t one of the quirks for which Rudd has been criticised – Gillard did the same thing in 2010, and the Liberals were only a few days earlier. I have no idea how the supposed experts who run campaigns cna think this is a good way to do things – it’s obviously not a good way of presenting voters with a reasoned argument[1]

If Rudd had given this speech three weeks ago, and campaigned around it, Labor would be in with a good chance. As it is, their best hope is that the corresponding piece of trickiness on the other side will backfire. This is Abbott’s decision to release his allegedly independent costings on Thursday, with the advertising blackout in place, and only a couple of days to go. It’s hard to see any creditable explanation of this, and it ought to be reason enough not to elect him as PM. But that seems unlikely.

fn1. In fact, I have no idea why these “experts” are given any credence. As the debate between pundits and psephbloggers has shown, here and in the US, the alleged experts don’t even have the basic (first-year uni) statistics needed to interpret an opinion poll, which means that they can not have, and never have had, the slightest idea whether their strategies were working. It’s just that one side always wins, and victory has a thousand parents, at least until failure the next time around shows them up. The classic example is Karl Rove, acclaimed or dreaded as an electoral genius, who humiliated himself by refusing to believe the 2012 election results, even when they were beyond doubt. Then there’s Dick Morris, the famed inventor of “triangulation” who also predicted that Romney would win in a landslide.

I’m underwhelmed …

… to put it mildly, by Kevin Rudd’s endorsement of the Coalition/IPA proposals for a variety of tax and policy distortions to subsidise economic activity in Northern Australia.

I get that a certain amount of this kind of thing is to be expected in an election campaign, but I hope we don’t see too much more of it.

Labor, hiding its light under a bushel

A bit belatedly, a piece I posted on Crikey a couple of days ago, bemoaning Wayne Swan’s failure to tell the story of the government’s success in managing the GFC. His obsessive pursuit of a return to surplus with a fixed target date suggests to me that he never really saw Keynesian fiscal policy as anything other than a once-off emergency measure, and that the credit for the government’s courage in 2009 must go to Ken Henry and Kevin Rudd. Regardless, the government should be winning the economic debate hands down, instead of being on the defensive.

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Oz, NZ and the election

Following my earlier discussion of relative economic performance in Australia and NZ, I’ve been chatting with people in the NZ Treasury, and also with some of the macroeconomists in my own department. Its given me a number of research ideas I hope to pursue in the future, both with respect to possible ways the NZ-Oz gap might be bridged and more general implications about macroeconomic theory.

In the circumstances of the election what matters is the suggestion by Tony Abbott and others on the political right that New Zealand is a model for Australia to follow as regards macroeconomic policy. The key point is that NZ had a smaller stimulus than we did, and looks set to return to surplus a little earlier, though of course we know how unreliable such projections can be.

If, like Abbott, Hockey and (on even-numbered days) Robb[1], you regard budget surpluses as the paramount measure of good economic performance, there’s a case to be made here. But if you think that employment and economic growth are more important, Australia looks a whole lot better, as you can see from the graphs below.

Standard economic theory suggests that, when two countries have access to the same technology, comparable education systems, free labour and capital movements and so on, any initial differences in income levels should gradually be evened out. Instead, the Oz-NZ gap has widened since the GFC. Anyone who could seriously suggest NZ as an economic model should not be entrusted with the management of our economy.

OzNZ002
NZandothers

fn1. Not to mention Peter Costello and Wayne Swan, who seemed to view the stimulus that saved us from recession as an embarrassing departure from normality.

Election on 7 September

At least that’s what I’m reading. As I’ve argued before, I think this is a mistake for a number of reasons. In fact, I spent a fair bit of yesterday working up a piece arguing the case for allowing Parliament to sit again, and holding an election in October. [Irony on] If only I had run it on Friday, the course of history would doubtless have been changed [Irony off]. It’s now only of academic interest, in the pejorative sense of the term, so I’ll turn my attention to issues that actually matter.

My views on the election are simple. Whatever the weaknesses of the Rudd government, it’s far preferable to the disaster that Abbott would give us. So, I’ll certainly be putting Labor ahead of the Coalition in the House of Representatives. I’ll probably give my first preference to the Greens, though if my vote matters in Ryan, Labor will have swept Queensland. Both Labor and Greens have good local candidates, so I’d happily support either, and I’ll equally happily give my last preference to the LNP incumbent, unless someone truly awful runs.

The big issue is the Senate. Regardless of the Lower House outcome, it’s critical that a Labor-Green majority should be returned, and therefore that Labor and the Greens work together. This was one of Rudd’s big weaknesses last time round, and hasn’t been helped by some statements from his frontbench, or from perceptions on both sides of the way the last Labor-Green deal worked out.