Another honeymoon ends

The Liberals' euphoria is understandable. They are so self-absorbed that they seriously believe a leaked cabinet submission and the normal sort of jostling from departmental bureaucrats is a mirror of their own divisions. Anyone comparing Ferguson's apologetic self-flagellation with Turnbull's egotistical manoeuvrings at the press club will see which is a result of a bureaucracy yet to be disciplined (and a party that already appears to be) and which is a sign of political decay.

The media's mis-reading is a little harder to understand. Leaving aside Shanahan's rather hysterical enthusiasm, even the normally more sanguine Grattan seems to believe the government has suffered a serious embarrassment.

Over what? Disagreements over a glorified consumer campaign? That the government didn't think of handing tax cuts through the pump? There is no serious political point at stake other than that the political class is not yet ready to accept that Rudd wants to make their impotence public knowledge (the backflip over carers' bonus was much more revealing of government weakness).

If Rudd is making one mistake at the moment (besides perhaps being too indulgent with the bureaucracy) it is that he is being too defensive over not guaranteeing to bring the cost of living down. Instead of constantly clarifying what they said before the election (so long ago!), they should revive the attack they were making then, namely that Australians are tired of the old politics when it can no longer deliver. Rudd's problem is that he has stopped acting like an opposition leader. He may have won the election but he still has a political class to put in its place (although Chris Bowen is a rising star in this task).

Then again, if Rudd did go for the kill, he might spare the Liberals from the mistake they look as though could soon be making as a result of their new buoyancy. Seeing Hockey transform from loveable Shrek to bully boy, one senses that the old leadership is again starting to be more confident that November really was an aberration, that the government is vulnerable and the Nelsonian age of the wimp is over.

A small moment of truth – wrap up

There are times when what seems like a negative development turns out to be a blessing in disguise because it takes the debate away from the more difficult path it was on. The leak about Ferguson's opposition to FuelWatch was similar to Hefferman's 'barren' comment on Gillard last year which detracted attention from Howard's dodgy IR tactics at the time. The Ferguson leak has shifted the debate firmly on petrol pricing and away from the more uncomfortable one; namely that Rudd had stated the limitations of government before he had laid the political conditions for doing so.

The Liberals attack on rising petrol prices never had any real content to it because there is nothing government can really do to stop it – and everyone knows it. The Liberals might kid themselves that people thought the government did promise that, but if that was true, then they would been under pressure to explain how, and they never were.

Proposing a 5c excise cut was a good tactic at the beginning to highlight that Rudd's Budget tough anti-inflation message was getting mixed up with the need for a New Sensitivity to deal with exaggerated economic hardships. Unfortunately Nelson is now taking it it too far. The reason why is pretty clear, Nelson has a greater need to respond to the lack of unity behind him than his opponent on the other side of the dispatch box. As his own side wavered at a measure that undermined their sham economic credentials, Nelson is forced to further up the ante and ruin a good ploy. His shrieking yesterday in Parliament over Commodores queueing at the bowser must have made even his own supporters wince. Excitables like Shanahan are 100% wrong that this is the start of the Nelson opposition, yesterday showed why it is ultimately doomed.

When this fake petrol row has died down, however, the task still remains; Rudd must make it politically acceptable for a government to lower expectations about what it can do. The Opposition made another tactical mistake yesterday in Question Time by focussing almost wholly on Rudd because it gave him an opportunity to have a go at selling the message to those in his own parliamentary side like Ferguson who still don't get it. Rudd spelt it out:

Australian people are sick and tired of irresponsible guarantees by politicians, like the one which said 'let's keep interest rates at record lows'. That's an irresponsible guarantee from central casting, a guarantee which you were incapable of delivering.

Let's be clear on the implications of this. By irresponsible guarantees Rudd means irresponsible promises (it is why Labor has made such a deal of sticking to theirs). If there is little that a government can do, then practically all promises will be 'irresponsible' and it will make it highly difficult for an opposition to make a case for an alternative. It is why making this acceptable is the key to the Rudd government consolidating its power.

A small moment of truth - a further update

Question Time was a mess yesterday for the government but Rudd has no choice here but to plough on. The promise to put petrol GST in the tax review should buy it some time until it is due to be handed down next year. However, this is not really about petrol excise but the PM’s assertion that there is nothing much more he can do.

Rudd cannot give up on making this accepted across the political landscape because the government has no economic policy. This is not because it can’t think of one but because its relationship with the unions, which historically formed the basis of it, is now irrelevant.

Fortunately for the government, the opposition does not now have one either. Nelson has done his damage to the government not by posing a new economic policy but by eroding the pretence that the Liberals had one. This is something that the old Liberal leadership had been very sensitive on maintaining and so would suggest that while they may be going along for the ride for now, they will not forgive Nelson if his tactic goes wrong.

The old leadership’s sensitivity over its illusory economic credentials is what Rudd is poking at with his retort that Nelson’s excise cut is “raiding the surplus”. Testing the patience of the old Liberal leadership and undermining their backing of Nelson is Labor’s best tactic in the short term.

Although Rudd can rely on senior Liberals’ clinging to their pretence of having an economic policy, he apparently still needs to end the pretence on his own side as well. The leak reported by The Australian of Martin Ferguson’s opposition to Fuel Watch (which interestingly Turnbull seemed to allude to in Question Time yesterday before it was released) is not just interesting for the fact that someone leaked it in the first place but that it shows Ferguson’s touching belief that Fuel Watch was supposed to actually be effective rather than the largely token consumer action it is. What makes Rudd’s task of bringing his own side into touch with reality especially fascinating, is that it appears to be the left (judging also by Tanner’s unconvincing defence of Rudd’s comments) that are having most trouble getting to grips with this key element of Rudd’s leadership. This is a shame, since it’s their support that helped create it.

Footnote: When a Tasmanian Labor Premier has trouble pushing through a logging mill against environmental opposition then you truly know the old politics has come to an end. The speed and decisiveness with which the Tasmanian ALP has transferred power from an old union/business operator like Lennon to a technocrat political nobody like Bartlett must make the NSW ALP, the last on the mainland to carry out the transformation, green with envy.

A small moment of truth – an update

This has been a highly revealing couple of days. A mistake being made by the media on Rudd's “nothing more we can do” statement is to say that it was just a slip. It is not, it goes to the core of what Rudd's government is about. However, the lack of support from his Ministers and the partial climbdown by Swan to put petrol GST up for review shows that he has not yet laid the grounds for it.

On Insiders, comparisons were made with other slip ups by recent PMs, but probably the closest was Fraser's “life was not meant to be easy”. He made it early in his government and summed up the clamp down on wages and government spending Fraser tried to impose but, to the frustration of conservatives like Howard, did not have the political authority to do.

Rudd's comment sums up his agenda, the lowering of expectations about what governments can do, an up-front admission that formed the basis of his anti-politics attack on Howard last year and a necessity with the end of the old politics. Now Rudd himself has got caught by an anti-politics attack from the other side over petrol excise and, judging by the reluctance of those close to him like Tanner to take it further, Rudd does not yet have the authority to push the message through to its conclusion.

However, setting down new limits to government is unlikely to be something that Rudd can easily give up on. It certainly doesn't mean, for example, that pushing for higher petrol prices to meet the demands of the climate change agenda will now be abandoned as The Australian suggests. In fact, the climate agenda will give Rudd the political authority to counter such populism that he so far lacks.

For Nelson, this looks like a gamble that has paid off and it should ease the immediate pressure on his leadership. Again the media is wrong to claim, as Paul Kelly did yesterday, that the key leadership tension is between Nelson and Turnbull. The real issue is between the old Liberal leadership and Turnbull. Nelson's leadership is a sign that it couldn't get resolved straight after the election when Abbott had to back off to stop Turnbull getting up. But the old leadership clearly remains concerned that Nelson is doing almost as much damage as Turnbull possibly could to their core base, what has become the primary concern of the Liberal leadership since the Rudd ascendency. In fact the more the threat of Turnbull wanes (as it has been since the Budget) the less reason the leadership has for Nelson. Hence, we have now, after Abbott and Bishop, Hockey elbowing his way into a rare Nelson success.

A small moment of truth

We are having one of those moments when we discover exactly what has happened to Australian politics over the last year. Rudd’s assertion that there is little the government can do to cut petrol prices than ease pressure at the margins is now stating what the previous government could not bring itself to, that a modest-sized government like Australia’s is relatively powerless in the face of global pressures.

This may be stating the obvious, but has rarely ever been done in Australian politics - for a good reason. It is hard for a political class to have any authority if it admits it has limited influence. As long as governments had a political programme with a social base, there was a basis out in the electorate for arguing it could make a difference. The growing irrelevance of political parties for their respective traditional bases of support in the unions and employers brought that to an end and last year Rudd exposed Howard’s attempt to carry the traditional political framework on past its sell-by date. Rudd’s job since has been to reorganise Australian political institutions accordingly.

However, Rudd’s government rests on a gamble – that is possible to be more upfront about the limited role of government while still retain some credibility. This is the basis for the New Sensitivity, which says that even if a government cannot do much, it can at least empathise. The picking at the Budget by interest groups shows the limit of this approach as Rudd had no real political and economic message to put them in their place.

Nelson has now increased the pressure with his call to cut petrol excise. He has lobbed a little anti-politics hand grenade at the Rudd government that has forced Rudd to clarify what had been confused through talking up the ‘inflation crisis’ over the last few months, i.e. it is not really possible to have an economic policy, or do much of anything.

At this stage Rudd would seem to have two things that should help him. The first is the broad acceptance of the threat of global warming that places a straight-jacket of constraint over the political scene. Its effectiveness is shown by how easily Rudd can propose pushing petrol prices even higher as part of the programme to deal with climate change. This is the importance of the climate change agenda; it makes the constraints of government a global issue.

His second advantage is the opposition and its inability to deal with the anti-politics consequence of what Nelson is arguing. Nelson is effectively calling for the government to simply hand back money to the electorate. This has a logic of its own. After all, if 5 cents a litre helps, then the full 55c a litre the government takes in excise and GST certainly will. This would effectively be rolling back the state both fiscally and politically. This is supposed to be something conservatives are for but in reality are not. Tax cuts are only really to support business and cohere their middle class support base. It is why income tax cuts are always preferred over cutting revenue through direct taxes as well. After all, a large government is essential for an Australian business community heavily reliant on government subsidy. The tragedy for modern conservatives is that they can never be as radical as they say.

Winding up the function of government may be OK for a political nobody like Fielding but not for someone who is looking to lead the alternative government. This was why there was unease around Nelson with his proposal. Rudd has at least re-posed the government as a buffer against the cruel world. Shanahan may be right that the unease has gone quiet, but senior Liberals are more likely just to be waiting to see how the damage plays out rather than getting in behind Nelson (in fact Abbott's comments in favour of Turnbull may be a sign of edginess). At a guess, if it goes wrong and Rudd regains control of the debate, it will be one mistake too many for Nelson.

Petrol politics

I don't like it. I'm sorry about it. I mean, I would love the price of petrol to fall tomorrow [but] the Federal Government cannot, given the other decision we've taken, afford to cut the price of fuel excise. And people who call for that cut to take place, like Mr Beattie and Mr Crean ... let them say what other programs of the federal and state governments are going to be cut to fund that reduction in excise. There comes a time with these sorts of things when the cheap point scoring and the grandstanding and the fear mongering has got to stop.
J Howard 22 August 2000

While international oil prices are the dominant factor in price fluctuations, motorists need to know that prices are being set fairly.
K Rudd 10 June 2007

When something like Nelson's petrol excise cut is being attacked as 'populist', it is necessary to be on guard. It is supposed to suggest that a politician is proposing something just because it is popular. But isn't that what a democratic politician is supposed to do? What is the alternative? It is, of course, what we have been hearing a lot about, being 'responsible'. It is the irresponsibility of Nelson's proposal to cut excise that is what is making both sides of the political class feel uncomfortable.

On the surface there is little to distinguish Nelson's call for a cut to petrol excise in 2008 and a similar call from Crean in 2000. Rudd's and Howard's responses were the same, both expressed sympathy, both blamed higher prices on world factors and both asked “where's the money coming from to pay for it”?

However, as with anything, the difference is the context. Howard came to power on a faux Thatcherite agenda which included cutting taxes. This gave a certain sensitivity to the fact that the government takes around a third of the petrol price in tax and had raised it further through the GST. Howard eventually responded by cutting excise a year after rejecting it. The hidden tax in petrol, however, continued to make it a useful way to fund other tax cuts and keep up the pretence that the Howard government still had a coherent agenda.

Rudd instead came to power on the basis that political agendas were over and that governments had little to but feel the pain and ease it when they can. This is the basis for a political realignment that the media still fails to grasp. They fail to grasp it when they follow the Liberals' line that Rudd 'promised' to lower petrol prices. Of course, he did no such thing and we know that this was widely understood in the electorate because Rudd was never under pressure to explain how he would do such a thing. The issue was not about a practical means of lowering petrol prices but to make clear to everyone that Rudd was sensitive to the fact it was going up, just as he was sensitive to the rise in interest rates and grocery prices. It contrasted Rudd to a government that was so caught up in its own political games that it had lost touch with the economic reality of the electorate.

However the media (and the Liberals) also failed to grasp what that economic reality was. What perplexed them in 2007 was why the government was so vulnerable to hip-pocket nerve issues when generally the electorate generally felt well off and were ready to credit the government for being so.

But the issue was not how well off individuals felt, nor how good the economy was, but how much control the government had over it. It was the government's lack of control over the economy (exposed by its inability to keep interest rates low) and the fact that economic management was a devalued commodity that was the change that the Howard government could not grasp and Rudd so well did in 2007. Rudd understood that it meant a change in the role of government. To give an analogy, government has now become less a driver than an air bag in a car that doesn't have one. Rudd's role is to buffer as much as possible the effects of an international economy (like oil prices, inflation) over which it has no control.

The Australian government has no more control over the economy now than it did thirty years ago. What is new is the absence of any political agenda that would have given it a sense it could. This is the link between the exhaustion of Howard's political agenda and the effectiveness of Rudd's anti-politics attack. The 'government as buffer' was already implicit in Costello's 'Future Fund' but made explicit in Rudd's ear-marked spending funds. It is what Rudd means by the responsibility of the Budget and the importance of looking to the future.

However, a changed perception of the government's role inevitably means a changed perception of the electorate. Creating a buffer comes at a cost. It is the sensitive point that Nelson stumbled on with his excise cut and why we are getting that strange criticism of it that knocking 5 cents off will knock $2bn off revenue for little impact at the pump. Well is $2bn a lot or not? It is surely the same amount in the hands of the government or in the electorate. Well in fact it is not, according to the political climate. $2bn in the government's hand is security, $2bn in the electorate's hands could be just spent frivolously. Indeed the government is getting prepared to take it even further by raising the cost of petrol higher to protect us against climate change by including petrol in a carbon emissions trading scheme, something Nelson warns is Rudd's “train coming down the track”. For now, the Liberals are posing themselves as the party that prefers to party on, something which understandably has some appeal. But they can not follow it through, because unless they find a new agenda, being an air bag is the only game in Canberra.

Gently falling apart – a further update

A strangely unsettled mood seems to have settled over national politics in the last week. Debate over the Budget is still rattling around but with no coherent theme having emerged from either side while the media keep worrying over it like a dog with a bone.

It started with the government, which even on what is supposed to be their central economic theme, fighting inflation, couldn’t decide whether the Budget was “a modest tightening” (Swan) or “a significant contraction” (Tanner). Some left-wing commentators seem to want to make it a meaningful sign of policy courage to introduce means-testing for the baby bonus while ignoring how high earners were being more than compensated by a rise in child rebate. In fact the unwillingness to upset anyone seems to be the one overriding theme of the Budget and Rudd was a bit cheeky chiding Howard for doing the same.

That Rudd can now make the Budget seem like it was intended to upset interest groups is more a testament to their poor management of the message than the Budget itself. If this was truly the intentional purpose of the Budget then surely they would have been better prepared to respond to the criticisms of the health insurers, the pensioners, the solar industry and all the other lobby groups that have picked at this Budget since it was released. With little over-riding political programme behind it, the Budget has become an open invitation to every interest group to push their agenda.

Thank goodness for the opposition. The Liberals’ political instincts have gone as they worry more about their internal needs than taking down the government. A classic case was their response to the Alcopops tax. The government had been caught out with the contradictions of trying to turn book-keeping into a moralistic crusade. Either it works as a revenue generator and therefore usage will go up, or it is a moral issue and revenue should go down. Saying it will go up but not as much as it could have done, does not work for a moral issue.

Unfortunately, having exposed the measure as a sham, Nelson’s need to up the ante to make him look tough and cohere the party by reminding them of their core opposition to tax rises, with a threat to block it in the Senate, is a political error. They too have mixed up the fiscal and moral message, opposing it as a tax rise but ending up on the wrong side of a moral panic (Brown’s moralistic reasons for opposing it were politically savvier).

However, it is the breakdown of basic functions of a political party which is more serious than bad tactics. As seen in WA, the inability to keep anything internal, such as Turnbull’s e-mail on petrol excise, is a sign of chronic political decay (that it is this than a calculated political move is shown by the fact that no-one can work out whose interests the leak serves). What is being missed is that Turnbull is doing himself damage by ‘handling’ the embarrassment caused by the leak. It might ease pressure on him in the party in the short term but it is undermining his political credibility to be seen in favour of something, of which he clearly is not. Turnbull should have taken lessons from his predecessor in the party that standing back from filling a vacuum and waiting for the perfect time to make a move, actually damages the contender’s prospects in the longer term.

The political opportunism of the excise tax would have been an ideal issue to move on. Given the way Howard supporters implied Howard would never have been so opportunistic (yeah, right!) it would have handed Turnbull a rare chance to win over at least some of his most hostile opponents in the party. As it is, Turnbull continues to say that the government wimped out in the Budget, thereby flatly contradicting the whole thrust of his leader’s charge that it is hurting working families. Downer's response to all of this, which seems to be a plea to the media to ignore the Liberals until closer to the election, is about right.

The New Sensitivity

Those who think the government has an economic policy will struggle to find one in this Budget. Indeed anyone who thinks there was an economic problem to apply it to will have trouble finding that too. Despite all the talk of the ‘cancer’ of inflation, Swan’s expectation that inflation will fall back to 3% next year is even more benign than the RBA which expects it to happen a year later. That is why the RBA held back on the latest hike and probably why Swan’s Budget was much more anodyne than he was talking it up. Both have now finally acknowledged what was evident all along, the international economy will take a bit of the heat out of Australia’s. Swan was much more sanguine about inflation prospects on Lateline last night, despite there being little in his Budget that would make him so.

So what was all that about? Turnbull was dead right on Sunday that the government has a political strategy, not an economic one. Unfortunately, Turnbull’s doesn’t seem to know what it is. If there is anyone in the Liberal Party who had illusions that Turnbull would turn the Liberals around if he led them, they would have had trouble holding on to them after his performance over the last week. It is easy to imagine that his meandering and aimless performance on Sunday’s Insiders and the post-Budget chat last night would neatly sum up a party he could be one day leading.

Turnbull’s problem is that while he knows Labor doesn’t have an economic policy, he thinks the last government did. Costello was right that there has not been a government in living memory that has taken power in as favourable economic conditions as this one. But that is because the last government lost as a result of a political crisis, not an economic one. With the unions being wrapped up, business had no need for the Liberal party and it became exposed as soon as the War on Terror faded, and boy, is it exposed around the nation now!

As Keating said last year, there is little for government to do but balance the books and it is hard to call that a policy. Swan made a bit of an attempt last night by tucking surplus away in a fund like Costello did, but giving it names like Health, Education and Infrastructure rather than Costello’s ‘Future Fund’. But this is just re-packaging funds that would have been spent on these projects anyway, without having the need to specify what they are. In the past political parties would have pursued their programmes through government spending, now not spending is being re-presented as a political programme.

The only other attempt to create an agenda is to try and link fiscal measures into personal behaviour. Costello tried with the baby bonus, a crass exhortation to grow your own (rather than rely on immigration) that still pops up occasionally in Australian post-colonial politics. Labor’s version is the tax on alcopops aimed at discouraging binge drinking. Interestingly Treasury clearly doesn’t seem to think that it will work. Revenue from the tax is expected to climb, pulling in $3.1 billion (!) into the Infrastructure fund and making Australia one of the few developed countries to restructure itself on the back of drunken teenagers. Basically, the alcopops tax, like making a big deal over the nation building funds, is just moralising book-keeping.

If Swan’s attempt at a political agenda is unconvincing, what Labor has succeeded in doing is putting to rest anyone else’s. This was the strategy of Labor’s inflation scare that Turnbull did not get. They thought what Labor was doing was making an economic critique of the last government. If that was true then they would have failed. There are few who seriously think the last government was economically incompetent. The coalition still holds its worthless polling lead in economic management.

It was not its economic competence that was being questioned but its economic sensitivity, i.e. it was out of touch with the economic reality on the ground. This is why Labor keeps talking about ‘working families’ (who keep having all those household budget meetings around the kitchen table). Labor’s inflation ‘crisis’ was saying that any political programmes (whether Liberal ones to keep Howard in power or Labor big-ticket projects) were irresponsible and harmful to working families, especially if they were not in the strict confines of that demanded by the RBA and the international markets.

However, Labor’s new sensitivity is not just a political tactic. It also reflects the political reality of a party that, even as we speak, is going through the act of cutting of its last remnants of a social base. The Rudd government’s central role is to adapt the state to the end of the political parties and the Mandarin has so far done an admirable job. What he has not done, however, is replaced what Keating wound up 20 years, its lost social base. We are not talking here about how many people vote for them or even identify with them, but rather directly see their interests represented in the political parties. They don’t have to be the majority, in fact they rarely are, the Liberals’ base was the big end of town and, usually, small businesses. Labor’s was the union bureaucracy (if not their members). The lack of a social base to rely on at the last resort and ultimately, to set its priorities, is the flaw at the heart of this government.

In the run-up to the Budget we had a little glimpse of this with the momentary panic and paralysis over a modest proposal to cut the carers’ bonus. We saw it again with the unprecedented constant leaking of any controversial proposal, as though the government was testing each one before committing it to paper. The Budget itself was a non-event, unsurprising given that even moderately controversial proposals seem to worry what looks on paper to be a hugely popular government. But it was mainly because, despite what Swan was saying, there was little the government needed to do because everything is running pretty smoothly. But what will happen if it’s not?

Rats can’t see nothing

BARRIE CASSIDY: Paul, good morning. Budgets these days, are they essentially housekeeping or are they more than that?
PAUL KELLY: This Budget, Barrie, is certainly an awful lot more than just housekeeping. I think in a sense, this is the early moments of truth for the Rudd Government, this Budget will tell us a lot about the character of the Government, so far, this Government's been brilliant in playing the politics in terms of gesture, in terms of spin. What it's got to demonstrate with this Budget is that it is prepared to take the tough decisions, that it's got a strategic view over the next three years, and at the end of the day, in terms of the way it spends money, that is the real shaper of its values and its priorities.
Insiders 4 May 2008

Paul Kelly neatly sums up the problem with the media’s discussion around the Budget. It is acting as though the government has an economic policy. Labor’s economic strategic view is supposed to be something we don’t know about, but will finally be revealed in the Budget.

However, the reason why we don’t know about it, even just after an election that was supposed to be all about it, is that Labor’s economic alternative never emerged. It wasn’t a tactic, but the political reality with the major questions like industrial relations and government spending resolved and monetary policy handed to the RBA.

The public’s understanding that the economic debate is over was something the media struggled to get to grips with last year as they watched disbelieving while the Howard government proudly carried its worthless poll lead in economic management all the way to its defeat. Some of them still don’t get it now. They see a government that seems to have occupied itself with flim-flam in the months since the election but now has to knuckle down to the serious stuff.

But what we see is what we are getting. Rudd has only one economic message: the government has no control over it and it is sheer politics to suggest otherwise. Government’s main role is to accommodate itself to the economic reality, whether dictated to by international markets or the RBA, and perhaps lighten the load a bit where it can. Political agendas like coalition pork-barrelling or, indeed, Labor spending plans, are economically irresponsible and threaten the well-being of working families.

Having over-egged the inflation crisis as an anti-political weapon against the spending plans of both parties, now that it is consolidated in power, the Rudd leadership is starting to look much more relaxed talking about the economy. Tanner had absolutely nothing to say on The 7.30 Report and was under little pressure to do so. Even the one issue the coalition (and The Australian) has been running on, Treasury advice over the inflationary impact of rolling back Workchoices, could be brushed aside. Interestingly Tanner’s response was to say that the last year’s warnings were before Labor’s IR plans had been ‘finalised’. Presumably, this was important as the final version of Labor’s IR plans had little impact on inflation, probably because it had little impact on the industrial relations scene.

The idea that government can have little influence over an issue like the economy, which fundamentally affects us all, takes a little getting used to. The Howard government managed to conceal this awful secret for most of its tenure although it got caught out as interest rates rose in the last year. Rudd has been more up-front about it since day one. However, the media (and some in the Liberal party) seem to be taking longer to get the message. It is why they keep asking Ministers those bizarre questions about whether they can “guarantee” that inflation/unemployment won’t rise when of course they can’t and say so. It is also why they keep mis-interpreting Labor’s promise to ‘keep watch’ on grocery and petrol prices as being a promise to keep them down. The public knows what they mean even if the media don’t. But then it is probably not that surprising political journalists would be among the last to catch on how little government Ministers can do these days, otherwise, what are they interviewing them for?

A whiff of political decay

There are a couple of features of Troy Buswell's farcical tribulations that highlight the state of decay of both major parties, but especially the Liberals.

The first is that we are hearing about it. It could be just possible that political leaders are becoming sleazier. However, it is more likely that the party cohesion that would have recognised that publicising embarrassing details about leading individuals would do more harm to the party (and the standing of politicians in general) than any benefit it would give to any faction or ambitious individual, is starting to break down. Even if loyalty was not valued by all, there would at least be an internal disciplinary process that would make sure the lesson was learnt. That now seems to be missing.

It seems that even the most intimate party event is now not safe from having its details publicised such as the one Alan Carpenter was also being questioned about on The 7.30 Report. Remember that this is a state Labor party that managed to condone and keep quiet about systematic corruption at the highest level for years. Now its leader can't even keep the antics of an ALP Karaoke night under wraps.

This is not just a WA thing, of course. It seems to have been forgotten but even the Prime Minister came to power leading a party that was leaking politically embarrassing details about his wife's business and brother's political affiliations behind his back and with union leaders in his own state claiming they had a 'shit sheet' and threatening more to come. Despite all the mouthing off about a coalition dirt unit, it was his own side that caused more problems for Rudd last year on personal attacks.

The second striking thing is the Liberals' response. It is understandable that a party in crisis would prefer to see it as a problem of its leaders, than the party itself, and go through a merry-go-round of leaders as the WA Liberal party has done in the last three years. There was no electoral reason for the merry-go-round to have stopped yesterday. Even before the chair-sniffing episode broke, Buswell's polling performance was little better than his dumped predecessors and his handling of the story was pathetic. It was no wonder that were hardly any senior Liberals who were willing to unequivocally stand by him yesterday. They now have a leader who will be a liability all the way up to the next election.

So why did he survive? One reason seems to be a new factor that is creeping into the Liberals' leadership calculations that was first seen in Queensland at the end of last year over the farcical removal of Bruce Flegg. The party is reaching a point where the main consideration for replacing a leader is not who is best to win, nor even internal factional considerations but how to avoid appearing like a joke.

What is politely being discussed as the party's 'brand' is not really about whether the party is small-l liberal or conservative, despite Nelson's best attempts to make it so, it is about the party's viability as a party of government. It is a question that can be avoided while leaders are changed but sooner or later it must reach a point where they are damned if they do get rid of the leader and damned if they don't. It is unsurprising that the WA Liberals were in despair yesterday. They have now reached the point where they cannot avoid being reminded of their unfitness to govern every time their leader stands up to speak.

The federal Liberals are on their way down the same path. They started on it even before they lost government, on 12 September to be exact, when they crossed over the line to a point where internal considerations became more important than electoral ones and Howard announced his plans to retire. The election of Nelson, not for his own merits but for what he was not, represented another step down this path. Their fretting over whether they should do something about Nelson's standing in Newspoll's fairly meaningless poll on preferred PM, which slipped back into single digits yesterday, is a sign that they are worried the next stage in the descent is coming.

Doing it the Sydney way – an update

If there is one iron law of internal Labor politics it is that if you need to take it to Conference to win an argument, you have already lost it. That union leaders have needed to rely on delegates to embarrass Iemma over his privatisation plans shows less their resurgence than that they have already lost control over the party leadership.

If there is a whiff of the past about this dispute, it is understandable. NSW Labor is going through a process that has largely been completed elsewhere. One of the earliest and most successful of the 'modern' Labor state parties to marry the unions and business together is now going through the convulsions to resemble the technocrat parties that have installed themselves in the other state capitals and in Canberra. The difference for NSW is that the Liberal opposition is now so decrepit that this transformation is unlikely to have the discretion of opposition but be conducted in full public view.

However, while it is the bankruptcy of the Liberals that is forcing this row to be conducted in public, it is the bankruptcy of the ALP which is why Iemma wants it to be conducted in public. What those who think this is the end of Iemma forget is that this is a brawl of his choosing. The issue here is not the privatisation per se but the way Iemma is deliberately snubbing the unions and forcing them to take their opposition public. Former Minster Rodney Cavalier touched on the charade going on here:

The trade unions are left in nominal control of the party, just so long as they always acquiesce with what the Government wants to do, but there is a corresponding obligation on the part of the Government to explain itself to the trade union movement on what it intends to do and convince them of its merits. Labor leaders over 67 years have managed to do that, but not this time, and the envelope has been pushed too far.

It is hardly that the NSW ALP has a proud tradition of socialism to uphold that has caused the problems with the privatisation plans, than the fact that Iemma has rubbed the party's face in it by by-passing its union power brokers and so undermining their authority in the party. After the weekend's conference, he now looks set to defy the party as well by needing to, as Treasurer Costa put it, “weigh up the views of 700 people as opposed to seven million people”.

Iemma has had to take this course because of the second part of this transformation that has been widely reported yet strangely, not been linked to Iemma's privatisation tactics, namely the corruption scandals that have been in the headlines over the last year. As Labor's links with unions become 'nominal', so its ties with business become less justifiable and any remaining links get tagged as 'corruption'.

Iemma would have always needed to proceed with this public row with unions and the party so as to signal that the government has adjusted to a period when political interests are no longer represented at the government level. The NSW ALP's slowness in doing so is what underpins the government's malaise compared to state and federal counterparts. What is forcing his hand is that the corrosive effect of this depoliticising of state government has now gone further following the impact of the scandals on the government's authority over the last year. There is no better way to do this than look the strong man against a party and union leadership whose influence on government is already a sham. This row is not his political death-wish but his only route to salvation.

The coming non-event

There is starting to be some fairly tortured analysis doing the rounds in the press in the run up to next Tuesday’s Budget. The basic argument seems to be the same: Swan faces some tough decisions in the Budget and will have to do some careful juggling if he is to balance the highly complex demands of Australia’s current economic position.

All of this is based on the same premise, namely that the Budget is a major political/economic event. It is not. Nor is the economic situation that complicated. As the Reserve Bank keeps saying, Australia does have mild inflationary pressures, mainly due to capacity constraints from strong growth, which is naturally enough most felt in the parts of the country where the economy is growing the strongest. In the long term this should be alleviated by ‘labour flexibility’ i.e. wages take the strain, something Labor is committed to preserving. In the shorter term, the slowing global economy will also help ease the pressure, causing the RBA to hold off from the latest rate hike.

However, political necessity has meant this fairly straightforward scenario has been turned into something else. The Rudd leadership banged on about an inflation crisis even as it was coming to office, partly to discredit the last party in power, but mainly to clamp down on the spending plans of the current one. The Tanner razor gang was the political axe used against those in the ALP, who might have thought the huge budget surplus they inherited was theirs to spend. Unfortunately, the US slowdown did the work for the government leadership and eased those inflationary pressures, as the RBA Governor keeps on blurting out. The government has tried to cover this up by making the US slowdown something that makes things even ‘more complicated’ but it is the political message that has become more the complication than the economy.

This doesn’t really matter for the government as things have now moved on. The speed with which the ALP has caved in, especially as Rudd’s (Howard’s) tax cuts remain untouched, show that the death of the factions has really symbolised the death of the ALP's political agenda and its funeral has now been held. With the passing of this brief period of political manoeuvring, we are now back on the more familiar grounds of Rudd’s style of economic policy that was rolled out last year.

The first step in Rudd’s economic policy is to accept, in contrast to the charade of the former government (and especially its hammy Treasurer), that there is little the government can do these days anyway. Rudd motivated his trip overseas as a response to the fact that it was the global economy that determined the Australian one. Swan dutifully parroted the same message a couple of weeks later talking about the upcoming Budget while standing on the pavement in front of the White House, with all the other tourists.

Having being absolved of any responsibility for the economy, the government now moves to the second stage – showing empathy. The government’s job is to apply band-aids to working families knocked about in the economic turbulence over which it has no control. This is something Rudd perfected to a fine art against Howard last year, and the Liberals are still struggling to get to grips with it. Even after their defeat, the Liberals can’t grasp the anti-politics content of Rudd’s attack, and why it worked so well at a time when the electorate was generally feeling very comfortable economically. Probably the one who has caught on best is Nelson, especially over his response to the carers’ bonus. The trouble is that, unlike Rudd against Howard and Costello last year, Nelson is not facing an opponent unaware of what game is being played and the government has not given Nelson another opportunity since.

The Budget then will not be about addressing any serious economic policy, but showing that the government cares. As Swan gets into his stride, who knows, it may even help his political standing. Until now he has had a difficult time handling a political message that became increasingly incoherent in the face of economic reality. Now that those manoeuvres are over and he needs to relate to people struggling with events out of their control, he might be on firmer ground. It would also suggest that Turnbull may not start to look so good (to the relief of the Liberal leadership). Up to now he has benefited from the government’s strategy but, as usual, has been blind to the politics behind it and regarded it all as a bit silly. Turnbull can do enthusiasm, self belief and obliviousness, but empathy? Unlikely.