Petrol politics

Friday, 23 May 2008 

I don’t like it. I’m sorry about it. I mean, I would love the price of petrol to fall tomorrow [but] the Federal Government cannot, given the other decision we’ve taken, afford to cut the price of fuel excise. And people who call for that cut to take place, like Mr Beattie and Mr Crean … let them say what other programs of the federal and state governments are going to be cut to fund that reduction in excise. There comes a time with these sorts of things when the cheap point scoring and the grandstanding and the fear mongering has got to stop.
J Howard 22 August 2000

While international oil prices are the dominant factor in price fluctuations, motorists need to know that prices are being set fairly.
K Rudd 10 June 2007

When something like Nelson’s petrol excise cut is being attacked as ‘populist’, it is necessary to be on guard. It is supposed to suggest that a politician is proposing something just because it is popular. But isn’t that what a democratic politician is supposed to do? What is the alternative? It is, of course, what we have been hearing a lot about, being ‘responsible’. It is the irresponsibility of Nelson’s proposal to cut excise that is what is making both sides of the political class feel uncomfortable.

On the surface there is little to distinguish Nelson’s call for a cut to petrol excise in 2008 and a similar call from Crean in 2000. Rudd’s and Howard’s responses were the same, both expressed sympathy, both blamed higher prices on world factors and both asked “where’s the money coming from to pay for it”?

However, as with anything, the difference is the context. Howard came to power on a faux Thatcherite agenda which included cutting taxes. This gave a certain sensitivity to the fact that the government takes around a third of the petrol price in tax and had raised it further through the GST. Howard eventually responded by cutting excise a year after rejecting it. The hidden tax in petrol, however, continued to make it a useful way to fund other tax cuts and keep up the pretence that the Howard government still had a coherent agenda.

Rudd instead came to power on the basis that political agendas were over and that governments had little to but feel the pain and ease it when they can. This is the basis for a political realignment that the media still fails to grasp. They fail to grasp it when they follow the Liberals’ line that Rudd ‘promised’ to lower petrol prices. Of course, he did no such thing and we know that this was widely understood in the electorate because Rudd was never under pressure to explain how he would do such a thing. The issue was not about a practical means of lowering petrol prices but to make clear to everyone that Rudd was sensitive to the fact it was going up, just as he was sensitive to the rise in interest rates and grocery prices. It contrasted Rudd to a government that was so caught up in its own political games that it had lost touch with the economic reality of the electorate.

However the media (and the Liberals) also failed to grasp what that economic reality was. What perplexed them in 2007 was why the government was so vulnerable to hip-pocket nerve issues when generally the electorate generally felt well off and were ready to credit the government for being so.

But the issue was not how well off individuals felt, nor how good the economy was, but how much control the government had over it. It was the government’s lack of control over the economy (exposed by its inability to keep interest rates low) and the fact that economic management was a devalued commodity that was the change that the Howard government could not grasp and Rudd so well did in 2007. Rudd understood that it meant a change in the role of government. To give an analogy, government has now become less a driver than an air bag in a car that doesn’t have one. Rudd’s role is to buffer as much as possible the effects of an international economy (like oil prices, inflation) over which it has no control.

The Australian government has no more control over the economy now than it did thirty years ago. What is new is the absence of any political agenda that would have given it a sense it could. This is the link between the exhaustion of Howard’s political agenda and the effectiveness of Rudd’s anti-politics attack. The ‘government as buffer’ was already implicit in Costello’s ‘Future Fund’ but made explicit in Rudd’s ear-marked spending funds. It is what Rudd means by the responsibility of the Budget and the importance of looking to the future.

However, a changed perception of the government’s role inevitably means a changed perception of the electorate. Creating a buffer comes at a cost. It is the sensitive point that Nelson stumbled on with his excise cut and why we are getting that strange criticism of it that knocking 5 cents off will knock $2bn off revenue for little impact at the pump. Well is $2bn a lot or not? It is surely the same amount in the hands of the government or in the electorate. Well in fact it is not, according to the political climate. $2bn in the government’s hand is security, $2bn in the electorate’s hands could be just spent frivolously. Indeed the government is getting prepared to take it even further by raising the cost of petrol higher to protect us against climate change by including petrol in a carbon emissions trading scheme, something Nelson warns is Rudd’s “train coming down the track”. For now, the Liberals are posing themselves as the party that prefers to party on, something which understandably has some appeal. But they can not follow it through, because unless they find a new agenda, being an air bag is the only game in Canberra.

Posted by The Piping Shrike on Friday, 23 May 2008.

Filed under Tactics

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