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                  Howard: enter stage dry, exit stage wet

Unlike many commentators, ranging from Alan Ramsey to Imre Saluszinsky, we don’t think Saturday’s election result is a foregone conclusion. Even though every poll since Kevin Rudd became Labor leader has strongly favoured the ALP, a substantial but not unprecedented last-minute swing to the conservatives, combined with their (grossly unfair) buffer of about two percentage points (which would get the Coalition over the line with barely 48 per cent of the two-party-preferred vote), may still be enough to save Howard’s bacon.

We also don’t subscribe to the view that should Howard lose, it will be down to voter ennui: that the Government’s economic record over their 11 years in office would somehow entitle them to feel electorally hard done by. As we argued in March and September, the Howard Government’s economic performance has been patchy and often downright irresponsible. It has enjoyed and capitalised on considerable good fortune on two fronts: inheriting an economy that previous Labor governments had reformed and modernised, and enjoying the fruits of an unprecedentedly long and strong resources boom.

John Howard came to power in 1996 on the back of voter disenchantment – much of it in Labor’s traditional heartland – with the Keating Government’s social and cultural agenda. Howard, like Ronald Reagan before him, presented himself successfully as the true friend of the battlers who had been deserted by their ‘natural’ party, and for a while he lived up to the image. In this he was helped in no small part by the reluctance of the party he had defeated to face up to the implications of their defeat (see our colleague Michael Thompson’s vain attempt to influence the findings of the Hawke-Wran review in 2002).

However, his last – and probably, though by no means certainly, his final – three terms have seen him revert to form: a big and reckless spender in pursuit of social and cultural ends that are in some ways as much at odds with the mainstream as were Keating’s.

This election campaign has become something of a reprise of 1983, with Howard as Prime Minister on the same frantic and desperate vote-buying spree in 2007 as he was as Malcolm Fraser’s Treasurer 25 years ago. In the past, when challenged privately about this previous chapter, Howard has responded that Fraser refused to listen to his advice – a claim that is given some credence in the 2002 memoirs of the tinder-dry former Federal Liberal MP John Hyde:

‘By the time of the [1982] budget, Howard had been placed in an extraordinarily difficult position. It had become apparent to the backbench that fiscal management had been taken out of his and Treasury’s hands by a Cabinet determined to “buy the election”. He could have resigned in protest, but if he had removed his voice from Cabinet, not only would he have been blamed for the forthcoming inevitable defeat; the budget would have been even worse. My opinion, which I voiced, was that he should not resign’ (p 206).

However, given Howard’s behaviour this time around, one is entitled to question the candour of his disavowals, to Hyde and others, of responsibility for Fraser’s profligacy.

Annabel Crabb quipped that Rudd’s honest answer to Rove McManus’s staple ‘Who would you turn gay for?’ question would be Reserve Bank Governor Glenn Stevens. It sounds right at several levels: (1) Kevin comes across as a bit of a nerd (not that there’s anything wrong with that); (2) Stevens did what Costello swore blind wouldn’t happen and raised interest rates in the middle of an election campaign; (3) Rudd says that he, unlike Howard and Costello, will take seriously Stevens’s blunt and repeated warnings to rein in fiscal policy or face the interest rate consequences.

On this last score, Labor’s modest election spending commitments relative to those of the Coalition (about $10 bn less if tax expenditures are included, as they should be) are an encouraging sign that he means it.

It is of course fair to ask, as Howard has done, just what should be done with the huge Commonwealth budget surpluses that have been racked up in recent years as a result of the booming economy. There are only three possibilities: save them, spend them or give them back as tax cuts. The first is less of an imperative now that Commonwealth debt has been pretty much retired, and the third – as Stevens and others warn – risks overheating an economy already operating at or beyond capacity. This pretty much leaves the second option.

So how to spend the surpluses responsibly and without overstimulating the economy? The answer lies in a dispassionate analysis of the medium and long-term challenges we know this country will face.

The immediate and medium-term challenge is persistent skill shortages. They constrain innovation and business development, and threaten our industries’ global competitiveness. When the resources boom starts to peter out, our exposure in world markets will be manifest. We will sink or swim on the quality of our products and services relative to those of our fierce competitors.

The Howard Government has neglected education and skills development. They talk about the additional skills investment they’ve made during their years in office, but other developed countries have mostly invested more strongly over the same period (and much of the Howard Government’s investment has calculatedly avoided the State and Territory TAFE systems), so we have slipped sharply relative to them. Labor has committed to tackling this issue responsibly, with an investment of $600 million over four years to allow employers to tender for the training they need through industry skills councils, resulting in an estimated 450,000 additional training places that will be concentrated heavily at the higher skill levels, including an extra 65,000 traditional apprenticeships.

Rudd has also shown himself willing to invest in modernising our school systems (a sharp contrast with Howard’s preoccupation with winning the history wars), although we do question the value of investing in laptops as the key technological driver of improved educational performance.

The longer team threats arise from our ageing population. Declining workforce participation and sharply rising social security and health care costs as the older aged share of the population increases will impose a huge burden on future wage earners. There are three things we should be, but under Howard mostly haven’t been, doing now in anticipation of this challenge:

1. modernising our health care system, with particular emphasis on preventative and community care (as distinct from hospitals)

2. building workforce skills to offset the dampening effect on growth of falling participation (and indeed to some extent slowing the decline in participation itself – the higher a person’s skill level, the more likely they are to join and remain in the workforce)

3. increasing the compulsory superannuation rate from the 9 per cent it has been throughout Howard’s term of office to something like the 15 per cent rate that is necessary to enable the typical worker to fund their own retirement.

The world is dismissively critical of other countries – notably some oil-rich states – that squander their windfall wealth on gross (and usually highly skewed) consumption without a thought for the future. Australia today is to some extent in this position – we should be investing much more responsibly.

Kevin Rudd, if he wins on Saturday, will command enormous authority in the Labor caucus. He has already flagged that he, not caucus and the factions, will have the final say over the composition of his ministry, and in this we applaud him. We have every confidence that, certainly in his first term, he will have little difficulty staring down the spendthrift and social engineering elements in caucus.

A defeated Coalition will confront major problems – at least as severe as Labor has faced in the post-1996 years. The senior conservative office holder in this country will be (at least for a time) the Lord Mayor of Brisbane. The party will have been rebuffed for failing its self-styled key criterion for holding office: its status as the better and more trusted economic managers. And its second-most electorally successful leader ever will be remembered as the man who didn’t know when to let go; whose legacy will be pored over and picked apart for a few months, then all but forgotten. Hubris often exacts a terrible cost, in life as in the ancient tragedies.

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 TNC  21 November 2007                Like to respond?                                  Top







































































































              November 2007