Why Swan is nervous

Friday, 22 February 2008 

In nearly all the commentary of Swan’s rocky start in Parliament, the blame is being put on his nerves and lack of training, etc. No-one seems to think it comes from a problem with what he is saying.

They should. It is not just that he keeps going on about an inflation crisis that doesn’t exist. His solutions for it don’t make much sense either.

Inflation used to be a highly loaded issue in Australian politics. The measures to tackle it, cutting government spending and restraining wages, went to the heart of the old ALP project. Fraser used it against Whitlam in the 1970s and pursuing the ‘fight against inflation’ helped Howard rise to become Treasurer in the late 1970s. Howard liked to style himself as a Thatcherite ‘dry’ and tried to emulate his heroine’s attack on the unions with a wage-price freeze in 1982. Unfortunately it flopped. It needed everyone’s mate, Hawke, to come in and do the trick with the ACTU’s acquiescence.

When Howard returned in 1996 he carried on with a faux Thatcherite agenda as though the old ALP and union movement still existed with IR irrelevancies like Workchoices and AWAs. Inflation was not an issue because global inflation was low and a weakened union movement meant wage inflexibilities were no longer an issue. But the Liberals and especially Costello, could delude themselves (and some in the media) it was all up to them.

That was until the 2007 election. The return of Keating to remind everyone that it was his government that dealt with the unions exposed the illusion of the Liberals’ economic credentials and that Costello was no more an economic reformer than he was a challenger for the leadership. It was why the rise in interest rates started to be a problem for Howard as it showed that he had been making promises he had no power of keeping. It seemed it was only some sections of the media that did not get the message as they still kept waiting for the former government’s lead in economic management to turn into a victory.

It was this hollowing out of the economic debate that left it open for Rudd to make an anti-politics attack on Howard’s spending promises as being nothing more than manoeuvres by a ‘clever’ politician (helped by Costello giving the game away in Howard’s biography). However, saying your opponent’s spending plans are just a political ruse is one thing, saying the same for those of your own party is something else. It was why when Rudd turned from the Liberals’ agenda to the ALP’s, he needed to talk up the inflation crisis as something that was forcing Tanner to start swinging the axe.

The trouble is that no-one thinks spending is really an inflation problem. The government has been running a surplus for a decade which suits the RBA fine. Swan let the cat out of the bag in Parliament on Wednesday when, replying to a question on the deficit spending of the States, he quoted the RBA Governor’s view that the balance sheets of all of the governments were in good shape. If the states’ deficit spending is not a problem then it is hard to argue that the federal’s surplus spending is. It is also a problem that having picked up this inflation ruse near the end of the campaign they are stuck with a tactic deployed at the beginning of the campaign, namely me-tooing Howard’s $34bn tax cuts. Making it $31bn instead does not really solve it.

Swan is having a similar problem with wages. Having met Howard’s faux Thatcherite attack on unions with a faux Laborist defence of them around the issue of Workchoices, Swan is now left with reconciling Labor’s charge that Workchoices attacked wages with their line that wages now need to be contained. It is why Liberals keep having fun asking Swan how he will keep wages down now that AWAs are history.

Swan has no real answer because the main instrument Labor governments like the Hawke/Keating one used to keep wages down, the unions, has gone. Labor’s problem now is that just as Howard pretended to be an economic reformer with no unions to attack, Labor is pretending to have an economic policy with no unions to use. It is why Rudd made MPs lead by example in forgoing a wage rise, a nice example of how Rudd turns the impotence of the political class against itself.

This sham of an economic debate cannot go on. Some in the media are seeing this as doubts over how long Swan will last in the role. But in fact the whole economic debate may not last like it is. It owes more to the political delusions of both sides of the House over the last 15 years that reached a culmination in the campaign over Workchoices. In Canberra, an academic is busy preparing the basis of a new framework for discussing economic growth that has nothing to do with unions, wages or government spending but with the global agenda of climate change. His interim report out yesterday shows just how far he is prepared to go. This may be another reason why Swan is lacking confidence. It is not just that he is giving a demoralised opposition their few moments of joy, it is that, after a while, no-one will care.

Posted by The Piping Shrike on Friday, 22 February 2008.

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