Yesterday, Julia Gillard’s favourite commentator, Michael Pascoe, known to us as the Pascometer, wrote a column that highlights two very important points for the new Labor:
Crisis? What crisis? There’s no longer a leadership crisis for the Labor Party and, if you believe the headlines, the China liquidity crisis, the Fed tapering crisis and the diving Australian dollar crisis are all over too. Oh that it was all so easy.
None of the questions underlying all of the above alleged crises has gone away, but they are being seen with a little more perspective after the usual initial market over-reaction. One of the benefits of having been around a while is that you scare a little less easily after being told so many times that the world was about to end and finding that the sun kept rising.
It’s the nature of media – and particularly of those trying to sell fear – to publicise the more extreme views and possibilities in times of volatility. Thus those warning of China crashing receive wildly disproportionate coverage and those forecasting the lowest Australian dollar are most likely to be reported as the outlier forecasts are more newsworthy. Sometimes the extreme outlier forecast ends up being correct, but most of the time, it doesn’t.
There are two very important ‘do the opposite’ messages here for Labor. The first is that it must look beyond a time-frame of this afternoon if it is any chance of winning. Julia Gillard and Wayne Swan singularly failed to do so, preferring cheap and out-of step messages about being positive and aiming for public surpluses to any long-term narrative about how Australia must actively adapt its policy frameworks to the end of the China boom for the good of the nation.
Second, and more importantly, Labor must tear away the cloying blanket of complacency pursued by Gillard, Swan (Pascoe, Kouk, Gittins). A sense of crisis will favour the government. It need not be overdone but the economic platform must be set afire with enough ferocity to channel the persistent and ongoing risk-aversion in households into the need for serious change at the macro-economic (and micro) level.
If press reports this morning are any guide that is where the Rudd team is going:
Asylum seekers and the economy will top the agenda of Kevin Rudd’s revamped Labor team ahead of the federal election.
…The prime minister’s first priority is to get a briefing from Treasury officials over the weekend on the state of the budget and the Australian economy.
Mr Rudd has already raised concerns China’s demand for Australia’s resource commodities is waning and he will set out a plan to diversify the economy, help small business, invest in new infrastructure and bolster manufacturing.
Framing this new approach will be the job for the new Treasurer, Chris Bowen, who is the key appointment if Labor is any chance of victory. Peter Martin today offers some insights into the man:
”I like his style,” said Australian Chamber of Commerce and Industry chief executive Peter Anderson, whom Bowen made a point of phoning during a day packed with Treasury briefings, question time, an interview on the ABC’s 7.30 and being sworn in.
”He told me he was sincere about wanting to repair relations with the private sector. It felt like starting over.”
…At the small end of town, Peter Strong of the Council of Small Business said Bowen was the most impressive minister he had met.
”He gets business and he gets the fact that we vote. It might come from having grown up in Sydney’s western suburbs and having been mayor of Fairfield. There’s nothing negative about him.”
…He studied economics at Sydney University; his predecessors as Treasurer had arts or law degrees. And he has applied economic solutions to broader problems.
FuelWatch, promoted enthusiastically by a 34-year-old Bowen soon after his appointment as assistant treasurer in 2007, was a textbook response to concerns about imperfect competition.
If consumers felt they were being overcharged for petrol, why not let them know exactly what each supplier was charging so they could vote with their feet?
The so-called Malaysia solution for asylum seekers was another essentially economic solution. It made use of incentives. Asylum seekers who arrived by boat would be sent to the back of the queue.
Both schemes are regarded as failures but both were innovative attempts to deal with intractable problems.
He’ll need to be bold to give Labor any shot. This portfolio is the game changer. Pascoe is pointing north. Bowen should proceed immediately South and to begin to describe in detail the challenges facing the nation as China shifts its growth model. This narrative should include:
- an acknowledgement of the fall ahead in mining and business investment as well as the impacts on jobs of falling national income and lost competitiveness and the increased recession risks
- an acknowledgement of high private debt, the desire to deleverage and the good job that households are doing of it (this might include an attack on Hockey’s plan for a “Son of Wallis” inquiry as ‘destabilising’, bringing the banks on side)
- a nation building infrastrucutre fund of 1% of GDP for the next four years, run independently by Infrastructure Australia on the advice of the Productivity Commission and confirmed as not threatening the sovereign rating
- a plan to bring down the dollar
- a plan to control inflation as it arrives via tradables, including reigning in union wage demands
- pull the Kouk, Pascoe and Gittins off their Anthony Robbins crusade
I’m not kidding. Either Bowen delivers Rudd’s “end of China boom” notions with gusto and drives an entirely new approach to Australia’s macro (and micro) economic settings, slamming a wedge into the LNP’s vulnerability around public austerity, or Labor will get smashed. This ‘feel good’ crap about Australian exceptionalism, rising house prices and falling public debt is the LNP’s core territory. Move the debate to where they are weak.
If pursued with vigour, the ‘post China boom’ frame of reference can crash Abbott’s NBN, climate change and budget policies off the middle ground:
- on the NBN, why are we cutting our greatest single productivity infrastructure policy in half for a sub-standard result when we’re going to need sensible public investment to support demand and world class broadband to drive innovation, productivity and exports?
- on climate change, why are we going to abolish a carbon price to which we have already adapted in favour of a more expensive and productivity destroying alternative requiring an expensive double-dissolution election?
- on budget surpluses, why are we proposing to slash public sector spending with interest rates already at record lows and having limited effect?
- use an umbrella campaign slogan something along the lines of “building a productive Australia”. And an attack slogan for Abbott’s raft of policies along the lines of “budgeting for failure”.
It may seem a lot. But it’s not as challenging as it appears. Households know that the economy is not what it was. They know that Australia is not an exception to global economic forces. They know that they are vulnerable, and have been saving accordingly.
This is the Rudd government’s only chance of re-election. If it can’t be done before September 14 then push back the election date. It has until November 30. A honeymoon pop in the polls is not going to win this one. Moreover, the deeper we get into this year, the more obvious these issues will become, with China slowing further on its chronic credit crunch and the terms of trade very much under pressure.
That’s the plan’s real strength. It is based upon the national interest and reality.
