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Home> November 2007 editorial a web journal of urban and political
Howard: enter stage dry, exit stage wet
Unlike many commentators, ranging from
Alan Ramsey to Imre
Saluszinsky, we don’t think Saturday’s election result is a foregone
conclusion. Even though every poll since Kevin Rudd became Labor leader
has strongly favoured the ALP, a substantial but not unprecedented
last-minute swing to the conservatives, combined with their (grossly
unfair) buffer of about two percentage points (which would get the
Coalition over the line with barely 48 per cent of the
two-party-preferred vote), may still be enough to save Howard’s bacon.
We also don’t subscribe to the view that should Howard lose, it will be
down to voter ennui: that the Government’s economic record over
their 11 years in office would somehow entitle them to feel electorally
hard done by. As we argued in March and
September, the Howard
Government’s economic performance has been patchy and often downright
irresponsible. It has enjoyed and capitalised on considerable good
fortune on two fronts: inheriting an economy that previous Labor
governments had reformed and modernised, and enjoying the fruits of an
unprecedentedly long and strong resources boom.
John Howard came to power in 1996 on the back of voter disenchantment –
much of it in Labor’s traditional heartland – with the Keating
Government’s social and cultural agenda. Howard, like Ronald Reagan
before him, presented himself successfully as the true friend of the
battlers who had been deserted by their ‘natural’ party, and for a while
he lived up to the image. In this he was helped in no small part by the
reluctance of the party he had defeated to face up to the implications
of their defeat (see our colleague
Michael Thompson’s vain
attempt to influence the findings of the Hawke-Wran review in 2002).
However, his last – and probably, though by no means certainly, his
final – three terms have seen him revert to form: a big and reckless
spender in pursuit of social and cultural ends that are in some ways as
much at odds with the mainstream as were Keating’s.
This election campaign has become something of a reprise of 1983, with
Howard as Prime Minister on the same frantic and desperate vote-buying
spree in 2007 as he was as Malcolm Fraser’s Treasurer 25 years ago. In
the past, when challenged privately about this previous chapter, Howard
has responded that Fraser refused to listen to his advice – a claim that
is given some credence in the 2002
memoirs of the tinder-dry
former Federal Liberal MP John Hyde:
‘By the time of the  budget, Howard had
been placed in an extraordinarily difficult position. It had become
apparent to the backbench that fiscal management had been taken out of
his and Treasury’s hands by a Cabinet determined to “buy the election”.
He could have resigned in protest, but if he had removed his voice from
Cabinet, not only would he have been blamed for the forthcoming
inevitable defeat; the budget would have been even worse. My opinion,
which I voiced, was that he should not resign’ (p 206).
However, given Howard’s behaviour this time around, one is entitled to
question the candour of his disavowals, to Hyde and others, of
responsibility for Fraser’s profligacy.
Annabel Crabb quipped
that Rudd’s honest answer to Rove McManus’s staple ‘Who would you turn
gay for?’ question would be Reserve Bank Governor Glenn Stevens. It
sounds right at several levels: (1) Kevin comes across as a bit of a
nerd (not that there’s anything wrong with that); (2) Stevens did what
Costello swore blind wouldn’t happen and raised interest rates in the
middle of an election campaign; (3) Rudd says that he, unlike Howard and
Costello, will take seriously Stevens’s blunt and repeated warnings to
rein in fiscal policy or face the interest rate consequences.
On this last score, Labor’s modest election spending commitments
relative to those of the Coalition (about $10 bn less if tax
expenditures are included, as they should be) are an encouraging sign
that he means it.
It is of course fair to ask, as Howard has done, just what should be
done with the huge Commonwealth budget surpluses that have been racked
up in recent years as a result of the booming economy. There are only
three possibilities: save them, spend them or give them back as tax
cuts. The first is less of an imperative now that Commonwealth debt has
been pretty much retired, and the third – as Stevens and others warn –
risks overheating an economy already operating at or beyond capacity.
This pretty much leaves the second option.
So how to spend the surpluses responsibly and without overstimulating
the economy? The answer lies in a dispassionate analysis of the medium
and long-term challenges we know this country will face.
The immediate and medium-term challenge is persistent skill shortages.
They constrain innovation and business development, and threaten our
industries’ global competitiveness. When the resources boom starts to
peter out, our exposure in world markets will be manifest. We will sink
or swim on the quality of our products and services relative to those of
our fierce competitors.
The Howard Government has neglected education and skills development.
They talk about the additional skills investment they’ve made during
their years in office, but other developed countries have mostly
invested more strongly over the same period (and much of the Howard
Government’s investment has calculatedly avoided the State and Territory
TAFE systems), so we have slipped sharply relative to them. Labor has
tackling this issue
responsibly, with an investment of $600 million over four years to allow
employers to tender for the training they need through industry skills
councils, resulting in an estimated 450,000 additional training places
that will be concentrated heavily at the higher skill levels, including
an extra 65,000 traditional apprenticeships.
Rudd has also shown himself willing to invest in modernising our school
systems (a sharp contrast with Howard’s preoccupation with winning the
history wars), although we do question the value of
investing in laptops as the key technological driver of improved
The longer team threats arise from our ageing population. Declining
workforce participation and sharply rising social security and health
care costs as the older aged share of the population increases will
impose a huge burden on future wage earners. There are three things we
should be, but under Howard mostly haven’t been, doing now in
anticipation of this challenge:
1. modernising our health care system, with particular emphasis on
preventative and community care (as distinct from hospitals)
2. building workforce skills to offset the dampening effect on growth of
falling participation (and indeed to some extent slowing the decline in
participation itself – the higher a person’s skill level, the more
likely they are to join and remain in the workforce)
3. increasing the compulsory superannuation rate from the 9 per cent it
has been throughout Howard’s term of office to something like the 15 per
cent rate that is necessary to enable the typical worker to fund their
The world is dismissively critical of other countries – notably some
oil-rich states – that squander their windfall wealth on gross (and
usually highly skewed) consumption without a thought for the future.
Australia today is to some extent in this position – we should be
investing much more responsibly.
Kevin Rudd, if he wins on Saturday, will command enormous authority in
the Labor caucus. He has already flagged that he, not caucus and the
factions, will have the final say over the composition of his ministry,
and in this we applaud him. We have every confidence that, certainly in
his first term, he will have little difficulty staring down the
spendthrift and social engineering elements in caucus.
A defeated Coalition will confront major problems – at least as severe
as Labor has faced in the post-1996 years. The senior conservative
office holder in this country will be (at least for a time) the Lord
Mayor of Brisbane. The party will have been rebuffed for failing its
self-styled key criterion for holding office: its status as the better
and more trusted economic managers. And its second-most electorally
successful leader ever will be remembered as the man who didn’t know
when to let go; whose legacy will be pored over and picked apart for a
few months, then all but forgotten. Hubris often exacts a terrible cost,
in life as in the ancient tragedies.