The lurch – Part 2

Thursday, 5 February 2009 

But somebody has to stand up for the taxpayer. Somebody has to stand up for good financial management. And above all, someone has to stand up for the children of Australia.

M Turnbull The 7.30 Report

Forget the kids, someone had to stand up for the Liberal Party. Media description of Turnbull’s decision to block Rudd’s stimulus package has ranged from political suicide to brave. But the general surprise at Turnbull’s move is probably because it is being seen in purely electoral terms. They largely miss the more pressing need to assert what the Liberals stand for, which Turnbull knows is necessary for his survival. This internal angle has been understood as a need to respond to the re-emergence of Costello, who gave a brassy (if a little oblivious) performance on Lateline the night before. But the only reason the party would even be cheered by the return of one of its least popular figures, would be because he reminded the party of happier times when it thought it knew what it was about.

There are political risks, and there are comparisons to Beazley’s opposition to Howard’s cash hand-outs in 2005. Then Beazley was attempting an ill thought attempt to keep the Left on his side. His position may have made sense internally, given his faltering grip on power, but not enough to anyone else to stop the Liberals tearing it apart. Turnbull’s opposition is also driven by the weakness of his position in the party and the need, like Nelson, to please the old guard determined to defend the ‘brand’.

However, there are differences. For a start it is possible to see an economic point and a political danger for the government in what Turnbull is saying. It is not the one the media keep talking about, namely that there is a recession hanging about when Rudd goes to the polls in 2010. Labor has very much succeeded in making it clear that it is an international phenomenon and not a fault of theirs. If the stimulus did not prevent a recession, it will at least be seen to have staved it off for a while.

The problem comes with the context in which that deficit will be paid. As Keating pointed out on Monday night, the US is in the process of running up an unprecedented debt for which there is no longer the global arrangements to finance. This may not lead to the possibility of a US default, as Keating speculated, but it does open the real scenario of a massive attempt to raise debt on the global markets, especially if lenders like China are unwilling to finance it as much as they have done. With everyone else doing the same, Australia is going to have to find finance on very unattractive terms. In other words, there is the real possibility of interest rates and inflation doing a very smart U-turn and heading right back up. Whatever happens, unless some new arrangements are made, chances are Australia is going to find it tough to finance the future.

Of course, any such scenario is some way off and in the meantime, Rudd has plenty of ammunition against the Liberals. The most important fact he has on his side is that although there may be flaws with what the government has done, the Liberals have no counter-crisis strategy. Normally from the right it would be putting the squeeze on and cutting back services. They long ago lost the authority to do that (if they ever had it in this country) and so they have no alternative. Turnbull held his ground quite well at the start of his second attempt in a week to sound convincing on The 7.30 Report. But by the end he seemed to demand for little more than being consulted. If he can’t think of something else, Rudd and Gillard will tear him apart, school by school.

Posted by The Piping Shrike on Thursday, 5 February 2009.

Filed under Tactics

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Comments

8 responses to “The lurch – Part 2”

  1. Nick on 5th February 2009 9:14 am

    On financing the future, the Comm govt has no net debt at the moment so I hardly think this will be a major issue in the short term.

    Sure we are likely to have a bit of debt if the projected deficits occur but its not exactly going to be hard to finance coming off such a low base.

    We’ll have to see where the economy heads as the crisis plays out and also how the next few budgets play out.

    Private citizens and corporates are the ones that are carrying serious debt and they are the ones that are and will continue to have to reign it in and delevarage.

  2. mickhs on 5th February 2009 7:49 pm

    I watched the 7:30 Report last night, and I thought Malcolm was eating a very large shit sandwich that he hadn’t actually prepared for himself.

    He seemed distracted and his eyes had no enthusiasm for what he was expounding.
    I’ve heard that Minchin and Pyne’s tactics were to support the package, so, perhaps, the blocking wasn’t imposed by them.

    And, over the last couple of days, Costello seems to be stirring from his hammock.

    So who has the power in the party room to support the blocking of the package as well as promoting Costello, if not Minchin? A reverse ferret?

  3. Vee on 5th February 2009 8:37 pm

    Congratulations on finally opening up comments, Shrike.

  4. The Piping Shrike on 5th February 2009 8:41 pm

    mickhs, I agree that Turnbull looked as though he was doing something imposed on him and I’m not surprised that Pyne was against blocking it. That Minchin was too is more interesting.

    Minchin’s attitude to Costello, though, has been equivocal at best.

    Nick, I think with the financing of the debt it is hard to tell given we don’t know where the economy is going and the conditions under which borrowing will happen. What I do think is that there is two sides to what is going on, not just the downturn, but what Keating was alluding to, the impact of the US struggling to finance its debt.

    It’s the wash-through from this second phase to Australia that the Liberals would be hoping to use to discredit Rudd’s actions here.

    Just on that, I’m not convinced that this will be quite as disastrous for public support as some think. There is usually a tendency to exaggerate how much the electorate wants the money, it depends how it is posed. The Liberals could tap in to a fear that all this money is too easy and must come at a cost. But the Liberals would need to be coherent and clear to do so. Without an alternative counter-crisis strategy, it will be hard.

  5. Ricc on 5th February 2009 9:20 pm

    And no one has picked up on the hypocrisy of NSW Labor carrying on about Moodys AAA credit rating, as if Moodys hadn’t been giving out AAAs to every johnnie and his junk mortgages!

    No doubt Rudd will spend $42B and Roozendaal will try to offset that by saving the same amount. Nothing hates success more than failure.

  6. mickhs on 6th February 2009 6:03 pm

    Thanks, PS, and thanks also for your very thoughtful articles. Keep them coming.

  7. charles on 6th February 2009 9:06 pm

    I believe we will get out of this because no one is trying to support a gold standard. Why does it matter? Money can be created by changing bit in RBA database. There is only one important issue; to get out of this in a reasonable state, the money has to be put in with strings that allows it to be taken out again. Shares and infrastructure can be sold back to capitalists when they get over themselves, loans called back in. The tax cuts in the form a of a $950 dollar rebate for every tax payer doesn’t pass the test, but in the end, 15 billion is going to be a drop in the ocean and like it or not, it is a tax cut.

  8. Thomas Paine on 9th February 2009 1:41 am

    I think Malcolm Turnbull is that pint of milk just on the turn. His latest stance and approach was just a bit too much at the wrong time. Times of crisis are not good for Oppositions, they should shut up follow quietly.

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