Over the weekend Prime Minister Kevin Rudd followed the MB script nicely:
Kevin Rudd has taken the fight to Tony Abbott, saying he is prepared to debate him more than once during the election campaign and claiming the Opposition Leader’s policies will provoke a conflict with Indonesia and drive the economy into recession.
In an interview with AFR Weekend, the Prime Minister said not only did he want two immediate debates with Mr Abbott – one on debt and deficit and one on asylum seekers – but that he was not averse to debating him more than once when the election campaign proper began.
…He also indicated he was in no rush to call a federal election, saying as the person who engineered Australia’s entry into the G20, he wanted to attend the summit in Russia on September 6 and 7, which was one week before the now-abandoned election date of September 14.
“It took me three years of work to get us into the G20. We are hosting it next year. To have this jammed up against a federal election date is a problem and if I can overcome that problem I will,” he said.
Debates are an excellent idea, the sooner the better for Rudd. He is reportedly considering moving to a floating carbon price and reversing the $700 million cut to single parent benefits:
…“I intend to demolish the debt and deficit mythology. Against any other OECD standard this country has amongst the best debt and deficits levels in the world,” he said. “His entire proposition rests on a lie which is that there is a debt and deficit crisis in this country.
“The election campaign rests on the veracity or the falsehood of this proposition. If it is false, which it is, then there is no reason for Mr Abbott to suggest there should be some slash and burn austerity drive which in my deep view would throw this economy into recession and significant unemployment.”
Joe Hockey replied:
“He’s going to try and buy their way back into government.”
It’s still early but it’s clear that Rudd intends to use the LNP’s six years of obsessive attacks on government spending against them. However, he needs to avoid getting into a silly budget deficit versus budget surplus slanging match. Labor will lose that every time.
In that sense Rudd is putting the cart before the horse. He should not push the line on the scope for public spending until he has established the economic need for ongoing and disciplined public deficits. The arguments that China is slowing and changing and that mining can not drive the economy in the future must be made first. Next is the desire for households to delevereage, not “deploy their balance sheets: as Joe Hcokey has suggested they should. These two points bring us inexorably to the need for public spending aimed at supporting jobs, incomes and productivity.
The same must said for any move to reverse spending cuts already announced. Establish the framework first. As Ross Garnaut has described, to restore competitiveness and prevent deep falls in our standard of living, all Australians will need to make sacrifices.
In short, Rudd must first establish the strategic framework for his policies before he moves to tactical shifts. This will be no mean feat in itself. The current strategic narrative is that “public deficits are bad and private deficits don’t exist”. Rudd must tackle that head-on first. The narrative should run like this:
- we have had over twenty years of prosperity based upon Australian ingenuity and good fortune
- however, we have built up a few imbalances in that time, including high household debt, supported by a strong public balance sheet
- now that China is slowing and changing, and households are wisely and diligently working to save and reduce their debts, we face a period of economic consolidation to restore our competitiveness
- in this environment, which is similar to, but much better than, those conditions faced by other Western nations, we have two choices. We can choose the European path, represented in the Coalition, of cutting spending hard, letting wages fall and unemployment rise. Or we can take the US path of responsible public deficits (within the constraints of a retained AAA rating) supporting growth as the private sector rebuilds its balance sheet
- either way we will restore our competitiveness but one way risks severe and unnecessary pain
- Labor is committed to fiscal discipline within a framework of supporting growth
From there you can deploy any number of tactical policy shifts that are about how to appropriately share the necessary sacrifices. In short, focus on the strategic, not the tactical. Folks will take the pain if they feel others are too and if they believe it is in the national interest that they do so.
