In knots over nothing

Sunday, 11 November 2007 

The campaign has become focused on exactly the issue that media commentators have said it needed to for the coalition to win, the economy, and it is a mess.

The ostensible problem was the interest rate rise on Wednesday. Although this was viewed as a broken promise from 2004 to keep rates at a record low, Howard’s bigger problem is why the rate rise is being seen that way. It was not because that promise was central to the campaign in 2004. It is worth recalling just what Howard campaigned on in 2004, as like so much of that election, it has been rewritten. This is how he launched the campaign back then:

This election, ladies and gentlemen, will be about trust. Who you trust to keep the economy strong, and protect family living standards? Who do you trust to keep interest rates low? Who do you trust to lead the fight on Australia’s behalf against international terrorism?

This followed six months of hammering Latham on the US alliance and his proposal to pull out troops by Christmas. It was trust over national security rather than a straightforward economic debate that underpinned Howard’s attack on interest rates. That third question keeps being left off nowadays but it was only in February and March of this year that Howard again tried to make Iraq an issue for the government with the tour of Iraq and his comments on Obama. However, the reaction to the latter showed that for Howard his ability to use national security had come to an end.

Without national security, interest rates are just an economic issue, but there is no economic debate to be had (nor actually was there in 2004, certainly not one that economists noted who thought it would make no difference who got in). The reason there is nothing to discuss is that it is out of government’s hands. Howard is clearly struggling with this lack of control over something that was supposed to be central to the government’s re-election, which is why the record low rate promise is now coming back to haunt him and why he got caught up in the semantics over sorry and apology and the issue of responsibility.

Howard does have one thing going for him, however. Current Labor party tactics are making Howard to be the great IR reformer (and the Treasurer even more of an earth shaker) and Howard can use this to give the impression he can have some influence on the economy. Unfortunately despite Labor’s help, even this is going wrong.

The confusion for the government, and Labor, comes over wages. As journalists have picked up, both parties are contradicting themselves. On one hand Howard is saying his IR reforms have not been detrimental for wages, but then threatens they will go up when Labor gets rid of them. Labor, on the other hand, says Howard’s IR laws are hurting wages but then saying wages won’t go up when they are repealed.

The reality is that wages have gone up under Howard, while they stagnated under Labor. The problem for both parties is the reason. The most important factor for restraining wages under Labor’s time was, as Keating and Gillard have both recently pointed out, the role of the unions. Unfortunately that noble service for the economy the unions performed under Labor spelt their demise and that agent for restraint is no longer a force in the industrial landscape.

Howard’s IR laws have had little impact on wages for the simple reason that employers generally don’t use them or need them. Individual negotiations are a personnel hassle, and since Howard backtracked with the fairness test, a bureaucratic one as well. Besides, they can pay less under awards (by the way, observe the double act between Rudd and Gillard where Rudd will compare wages under AWAs with collective agreements, whereas Gillard reassures that Labor are not for going back to collective agreements but rather enterprise bargaining under an awards system where pay has been lower than AWAs). If Howard’s reforms have had little impact, their repeal will also not make much difference to industrial relations or wages. By pretending it is Howard’s reforms rather than Labor’s that kept wages down, both parties are turning reality on its head.

The mess of the last week comes from both parties pretending that there is a debate about something over which they have no control (interest rates) or barely exists (Howard’s IR reforms). In the days of global markets and RBA independence, neither party has any policy that can make much difference to interest rates. Labor is at least being more upfront about it in the latest round of ads. However, while Labor can expose the debate over interest rates as a sham it is finding it harder to admit the IR debate is one as well. By the looks of Rudd’s latest demonising of that future Genghis Khan of the right waiting in the wings, it looks as though Labor is going to keep this tactic going right up to the 24th. Oh well, if it makes them feel good.

Posted by The Piping Shrike on Sunday, 11 November 2007.

Filed under Tactics

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