Labor’s enduring and tragic delusion, encouraged by admirers such as those who put together the ABC’s recent Killing Season series, is its utter faith that it managed the economy with aplomb, did not overspend and navigated the GFC with a sure and steady hand
The broadcast of The Killing Season on the ABC in June offered viewers another chance to relive the carnage in the Rudd–Gillard–Rudd kitchen cabinets. Tellingly, more people tuned in to watch MasterChef. Ordinary Australians are practical people, preferring competitive cookery to reheated politics, however cutthroat.
The Killing Season might seem like just another attempt at rewriting history but the debate it has generated suggests that Labor still doesn’t understand why it lost the last election. The received wisdom on the Left claims in-fighting and serial regicide spoilt an otherwise responsible government. There seems to be little or no recognition that Labor’s policies, particularly its mishandling of the economy, were also to blame.
Indeed, the documentary, which was popular among insiders, helped reinforce a dangerous false narrative. It holds that Labor saved Australia from recession, ignoring the rocketing terms of trade the nation enjoyed as Chinese demand for iron ore soared in a global market with limited supply. While Europe and the USA were plunged into recession by the Global Financial Crisis, Australia experienced the biggest mining boom in its history. Sending Australia into recession in such circumstances would have been difficult, even for the Rudd government, although, to use a phrase that was popular with Rudd’s Treasurer, Wayne Swan, they gave it a red-hot go when they tried to nationalise 40 per cent of the mining industry.
Armed with this revisionist account of its past, Labor gives every indication that it is preparing to fight the next election on exactly the same grounds that it fought, and lost, the last. Labor is committed to giving voters a second chance to vote for a price on carbon; it refuses to give unequivocal support for the government’s policy of turning back asylum-seeker boats and it has made no commitment to cut spending, only to increase taxes on superannuation and on multinationals. All these policies have powerful ideological and symbolic significance for the party’s dominant progressive wing but risk alienating ordinary voters on whom they will impose high costs.
This essay appears in the latest edition of Quadrant.
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A carbon price would significantly push up the cost of power because it would be more or less impossible for Labor to put up a minimalist position, like the New Zealanders for example, who have an emissions trading scheme with a price of around $6.50 per tonne of carbon dioxide abatement. Progressives imagine that it is the government that will be put under pressure at the Paris Climate Change Conference in December. In fact it is Labor that will almost certainly be wedged by activists into adopting the recommendations of the IPCC, which has said a carbon price should start at $30 per tonne in 2015, rapidly rise to $60 a tonne by 2020 and then increase by 7 per cent every year thereafter. This, together with pressure to continue to legislate in favour of expensive renewable energy will force power prices up, particularly in states like Queensland where the Labor government will be trying to use state-owned generators to raise revenue for the cash-strapped, heavily indebted government. But the promise of escalating power bills will not be a vote-winner with ordinary Australians, or even with Greens, who will consider that Labor has not gone far enough.
Changes to asylum-seeker policy will be popular with progressives but for ordinary voters will raise the appalling prospect of thousands more drowning at sea and the spiralling cost of dealing with tens of thousands of unauthorised arrivals.
New taxes on superannuation and multinationals will raise trivial amounts of money and draw attention to Labor’s inability to raise enough revenue to cover its profligate spending. They will appeal to those fixated on fairness but as Labor academic Nick Dyrenfurth observed, fairness can’t fix the structural budget deficit or develop a consensual pro-worker, pro-business economy where people actually make things and hold down stable, well-paid jobs.
As if all this weren’t problematic enough for Shorten, the Royal Commission into Trade Unions has uncovered troubling evidence that his union, the AWU, was doing deals with the bosses at the expense of the members. This is something that his enemies within Labor may well try to use against him, even feeding further information to the Commission in the hope of undermining him to such an extent that they can replace him.
At the ALP national conference this month, Shorten will have to deal with all of these issues as he engages with the progressives in his party who have set an agenda full of dangerous symbolism. The progressives will cheer on debates on same-sex marriage, party reform and recognition of Palestine, hot-button issues for the party faithful but irrelevant in the suburban mortgage belt where elections are won and lost. Indeed, conference votes in favour of gay marriage will lose votes for Labor among staunch Catholics without winning any votes elsewhere.
But The Killing Season crystallises an even greater problem for the Labor Party: how to deal with its economic record. Part of the trouble is that they don’t think they have a problem. There was great praise in the documentary for Rudd’s economic management from people such as Rudd’s Treasury Secretary, Ken Henry, the architect of the $42 billion stimulus package. One tweeted: “Ken Henry says Rudd was better prepared for GFC than any other leader in the world.” This did not seem self-serving to sympathisers even though it was self-evidently praise for Henry himself.
But Labor’s reputation for sound economic management has been damaged. Wayne Swan promised in his May 2010 budget to deliver a surplus in 2013, telling Australians he had “a strategy that will see the Budget return to surplus in three years’ time, three years ahead of schedule”. Delivering the 2012-13 budget, Swan said that “despite significant revenue losses” he was “returning the budget to surplus”. Not only that, he would increase Family Tax benefits, create a new Supplementary Allowance for the unemployed, students, and parents with young children, create a new school-kids bonus, triple the tax-free threshold so that a million Australians would pay no tax, and increase spending on health, education, aged care and disability.
Not surprisingly, with all the additional spending, the tax cuts and the fall in the price of iron ore from a peak of $187 a tonne in February 2011 to $134 a tonne by the time of the September 2013 election, the surplus never materialised. In fact, when Labor lost office it had turned the $20 billion surplus and net worth of $70 billion it had inherited from the previous Coalition government into an estimated underlying cash deficit of $30 billion and net debt of $184 billion.
And that wasn’t the end of it. The price of iron ore continued its downward trajectory. The fall in investment in resources was now expected to be more rapid and the recovery in the rest of the economy to be more gradual. Real GDP growth was revised down to 2.5 per cent instead of 3 per cent as assumed in the pre-election fiscal outlook and tax receipts were forecast to deliver $37 billion less over the four-year forward estimates.
In the end the actual deficit for the last year Labor was in power was almost $44 billion but the Labor Party was in complete denial. It refused to accept any responsibility for the parlous state of the national accounts. It refused to accept that it had locked in current and future spending that far exceeded revenue. It claimed there was no crisis of debt and deficit and it refused to support any cuts proposed by the Coalition government, even those that it had proposed itself before it lost office.
Yet for eighteen months of the Coalition government Labor had a dream run. It capitalised on the painful cuts the government tried to make to close the gap between revenue and expenditure and claimed that all the pain was unnecessary, that there was no need to rein in the rampant spending it had legislated. Support for Labor reached 57 per cent on a two-party-preferred basis in early February when the Prime Minister faced a possible leadership challenge, and Labor still leads. But satisfaction with Shorten has fallen 32 per cent since he became leader and the Prime Minister now leads him in the approval rating, lifting his rating by fourteen points since February.
The turnaround has been built on economic management and national security, the issues on which the government will seek to fight the next election. The Coalition’s second budget has been favourably received and the Prime Minister is seen to be in touch with ordinary Australians on proposals such as stripping the citizenship of jihadists.
Importantly, the dramatic decline in the terms of trade for iron ore, which fell to $51 a tonne in April, has undercut Labor’s claim that there is no need for cuts to government expenditure. National debate over what to do about the plunging price of iron ore has hammered home the message that every $10 fall in its price wipes around $3.6 billion off tax revenue.
Yet the wake-up call for Labor was the shock loss of the British Labour Party in the UK elections on May 8. Until 10 p.m. on election night, Labour leader Ed Miliband was preparing to claim power. A victory would have given great confidence to the ALP and been seen as proof that, as in the state elections in Victoria and Queensland, conservative governments could be turned into one-term wonders and turfed out of office, even with Labor leaders who lack charisma or a clear agenda.
As it turned out, the UK result was not even close. Far from cobbling together a coalition victory, Labour was smashed. The loss—Labour’s biggest since 1983—was not just attributable to the surge of nationalism in Labour’s erstwhile Scottish heartland but because of “profound doubts about Labour’s instincts on the economy” as Patrick Wintour, the Guardian’s political commentator put it.
Those doubts were crystallised in a question from a member of the public on the BBC’s Question Time, the British equivalent of the ABC’s Q&A. An audience member asked Miliband: “Do you accept that when Labour was last in power, it overspent?” When Miliband replied, “No, I don’t,” people in the audience laughed out loud in disbelief. Another audience member continued, “That is absolutely ludicrous, you’re frankly just lying,” to a round of applause. Miliband tried to blame the situation on the GFC but people weren’t buying it.
The trouble for the Australian Labor Party is that, like Miliband, they don’t accept that they overspent, indeed they think their economic management was outstanding and that the debt and deficit they ran up can all be blamed on the GFC. True, on Saturday June 6, shadow treasurer Chris Bowen quietly announced—in the middle of the long weekend—that Labor would no longer oppose the government’s dumping of a legislated tax cut that Labor had put in place as compensation for the long-since-abolished carbon tax. “Given the state of the budget deficit, the responsible thing for Labor to do is to give its support” to the government, he said.
It was belated recognition that Labor could not ride into government on a wave of popular anger at spending cuts. Bowen seemed to have had a Damascene conversion to fiscal responsibility. And yet, the announcement was deliberately low-key—blink and you would have missed it. There was no mea culpa, no commitment to tackle the deficit that Labor had created.
The message has yet to sink in for most Labor supporters. One of Gillard’s economic advisers recently tweeted: “Govt debt hit $367 billion today. Up $94 billion since election. Seems to be at odds with the commitments made pre-election.” The notion that the Opposition, having opposed every single cut to spending, will be able to capitalise on government debt is fanciful. An election fought on debt and deficit would, as things stand, be very difficult for Labor to win.
Shorten does not appear in The Killing Season, but that only highlights his problem. How does he establish himself as a credible economic manager when he was a senior member of the Rudd–Gillard–Rudd government? How does he reassure voters he is not just another spendthrift Labor leader without attacking a government in which he was the king-maker? Especially when Swan still sits in the parliament, determined to defend his economic record.
Unable to resolve that dilemma, Shorten still has no credible policies on the key issues that sank UK Labour—illegal immigration and economic management. Reflecting on this, Dyrenfurth wrote: “It is not alarmist to think that Labor is sleepwalking to electoral disaster.”
But out-of-touch symbolism is not just a problem for Labor. The government is also pursuing causes such as indigenous constitutional recognition which are far removed from the concerns of everyday Australians and which pose a conundrum: If they do not make fundamental changes, what is the point of them; and if they do make fundamental changes, what is the guarantee that the changes won’t usher in unintended consequences that actually make people worse off?
The claim is that Indigenous constitutional recognition will eliminate racism from the Constitution and right past wrongs, but at least some Australians will fear that the road to new forms of racism and discrimination might be paved with these good intentions. Many people will be sceptical of any proposed changes, having seen how the supposed protection of human rights has been used to silence columnists such as Andrew Bolt.
It seems a shame that a classically liberal and conservative government could not make more of symbols such as the 800th anniversary of the signing of Magna Carta to highlight the way in which our British heritage has guaranteed individual rights and liberty here and in so many places around the world. Tony Hancock might have been speaking to them: “Does Magna Carta mean nothing to you? Did she die in vain? Brave Hungarian peasant girl who forced King John to sign the pledge at Runnymede and close the boozers at half past ten! Is all this to be forgotten?” It would seem so.
Rebecca Weisser is a journalist and editor. She wrote “The Budget Bounce” in the June issue.