The New Sensitivity

Wednesday, 14 May 2008 

Those who think the government has an economic policy will struggle to find one in this Budget.

Indeed anyone who thinks there was an economic problem to apply it to will have trouble finding that too. Despite all the talk of the ‘cancer’ of inflation, Swan’s expectation that inflation will fall back to 3% next year is even more benign than the RBA which expects it to happen a year later. That is why the RBA held back on the latest hike and probably why Swan’s Budget was much more anodyne than he was talking it up. Both have now finally acknowledged what was evident all along, the international economy will take a bit of the heat out of Australia’s. Swan was much more sanguine about inflation prospects on Lateline last night, despite there being little in his Budget that would make him so.

So what was all that about? Turnbull was dead right on Sunday that the government has a political strategy, not an economic one. Unfortunately, Turnbull doesn’t seem to know what it is. If there is anyone in the Liberal Party who had illusions that Turnbull would turn the Liberals around if he led them, they would have had trouble holding on to them after his performance over the last week. It is easy to imagine that his meandering and aimless performance on Sunday’s Insiders and the post-Budget chat last night would neatly sum up a party he could be one day leading.

Turnbull’s problem is that while he knows Labor doesn’t have an economic policy, he thinks the last government did. Costello was right that there has not been a government in living memory that has taken power in as favourable economic conditions as this one. But that is because the last government lost as a result of a political crisis, not an economic one. With the unions being wrapped up, business had no need for the Liberal party and it became exposed as soon as the War on Terror faded, and boy, is it exposed around the nation now!

As Keating said last year, there is little for government to do but balance the books and it is hard to call that a policy. Swan made a bit of an attempt last night by tucking surplus away in a fund like Costello did, but giving it names like Health, Education and Infrastructure rather than Costello’s ‘Future Fund’. But this is just re-packaging funds that would have been spent on these projects anyway, without having the need to specify what they are. In the past political parties would have pursued their programmes through government spending, now not spending is being re-presented as a political programme.

The only other attempt to create an agenda is to try and link fiscal measures into personal behaviour. Costello tried with the baby bonus, a crass exhortation to grow your own (rather than rely on immigration) that still pops up occasionally in Australian post-colonial politics. Labor’s version is the tax on alcopops aimed at discouraging binge drinking. Interestingly Treasury clearly doesn’t seem to think that it will work. Revenue from the tax is expected to climb, pulling in $3.1 billion (!) into the Infrastructure fund and making Australia one of the few developed countries to restructure itself on the back of drunken teenagers. Basically, the alcopops tax, like making a big deal over the nation building funds, is just moralising book-keeping.

If Swan’s attempt at a political agenda is unconvincing, what Labor has succeeded in doing is putting to rest anyone else’s. This was the strategy of Labor’s inflation scare that Turnbull did not get. They thought what Labor was doing was making an economic critique of the last government. If that was true then they would have failed. There are few who seriously think the last government was economically incompetent. The coalition still holds its worthless polling lead in economic management.

It was not its economic competence that was being questioned but its economic sensitivity, i.e. it was out of touch with the economic reality on the ground. This is why Labor keeps talking about ‘working families’ (who keep having all those household budget meetings around the kitchen table). Labor’s inflation ‘crisis’ was saying that any political programmes (whether Liberal ones to keep Howard in power or Labor big-ticket projects) were irresponsible and harmful to working families, especially if they were not in the strict confines of that demanded by the RBA and the international markets.

However, Labor’s new sensitivity is not just a political tactic. It also reflects the political reality of a party that, even as we speak, is going through the act of cutting of its last remnants of a social base. The Rudd government’s central role is to adapt the state to the end of the political parties and the Mandarin has so far done an admirable job. What he has not done, however, is replaced what Keating wound up 20 years, its lost social base. We are not talking here about how many people vote for them or even identify with them, but rather directly see their interests represented in the political parties. They don’t have to be the majority, in fact they rarely are, the Liberals’ base was the big end of town and, usually, small businesses. Labor’s was the union bureaucracy (if not their members). The lack of a social base to rely on at the last resort and ultimately, to set its priorities, is the flaw at the heart of this government.

In the run-up to the Budget we had a little glimpse of this with the momentary panic and paralysis over a modest proposal to cut the carers’ bonus. We saw it again with the unprecedented constant leaking of any controversial proposal, as though the government was testing each one before committing it to paper. The Budget itself was a non-event, unsurprising given that even moderately controversial proposals seem to worry what looks on paper to be a hugely popular government. But it was mainly because, despite what Swan was saying, there was little the government needed to do because everything is running pretty smoothly. But what will happen if it’s not?

Posted by The Piping Shrike on Wednesday, 14 May 2008.

Filed under Key posts, Tactics

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