Welcome to February, and to a new political year.
Sometime after Australia Day, ordinary Australians get interested in the news again. Most of the Australian political media begins to file back from their long summer break. Parliamentarians get ready to sit. The partisan combat of our wearily adversarial political system resumes, and then it intensifies.
Actually, for our nation’s leaders, politics really never stops. This was certainly the case in January 2011. Julia Gillard spent much of January in Queensland, where at one stage an area of land the size of Texas was submerged by floodwaters.
It goes without saying that natural disasters offer severe tests of a politician’s mettle. Along with the responsibility for overseeing the disaster relief effort, a leader must also be seen to be responding to the disaster, which means arranging media opportunities in the worst-hit towns and suburbs.
In the very best responses, such as Queensland Premier Anna Bligh’s unstinting efforts during the flood crisis, capable leadership can instill a sense of calm determination, unity and pride. In the worst cases, such as George W. Bush’s response to Hurricane Katrina ("heckuva job, Brownie"), a leader’s authority can be permanently undermined.
Julia Gillard has emerged from the crisis of January largely unscathed, though not exactly enhanced in stature. While occasionally wooden and still annoyingly scripted at times, she has performed much better than most in the media are giving her credit for. On the ground, dealing with real people in trouble, she showed humility and sensitivity. She has also kept her cool despite repeated provocation from an increasingly disrespectful press gallery. Indeed, the level of media antipathy for Gillard and her flood response is an index of the difficulties this Prime Minister faces.
The major policy response to the disaster has of course been the flood levy. It is, as many have observed, a profoundly political impost. And the shape of that response reflects the political realities for the Government at the beginning of 2011. Having comprehensively lost the argument over the worth of the stimulus programs, Labor now faces an uphill battle to convince anyone that it can spend taxpayers’ money wisely.
This is despite the fact that Australia’s fiscal position is very strong. Even though it will take a hit from the reconstruction efforts and the effects of lower growth in Queensland and regional Victoria, the federal budget is quickly returning to rude health. Some economists can always be found to say that the budget should be in surplus, but compared to our major trading partners, Australia simply doesn’t have a debt or deficit problem.
This means that, if it really wanted to, the Government could simply borrow a little bit more money to pay for the reconstruction effort. Historically, this is what nearly every government faced with a big infrastructure rebuild (for instance, after World War II) has always done. As Ian McAuley explains today in New Matilda, Australia’s government actually has a lazy balance sheet. We can and should be taking advantage of today’s ultra-low bond rates to borrow more to invest in assets that will make our whole country more productive.
But, as it has with regard to so many other political questions, the Government has conceded the debt and deficits argument to the Opposition, and has made returning the budget to surplus its over-riding economic goal. So new taxes or spending cuts became Gillard’s only palatable options. In the end, she opted for a bit of both, cutting some of her government’s more wasteful greenhouse gas reduction programs, as well as proposing a one-off flood levy. The package was designed with an eye to getting the various cuts as well as the levy through a fractious Parliament, where Labor remains in the minority. And negotiating it through will certainly keep Labor busy in the next fortnight.
I think the levy is better politics than it has been portrayed. The Government has carefully tailored it to raise nearly $2 billion in a way that will be essentially invisible to those who pay it. Someone earning $95,000 a year will pay less than $5 a week. My only criticism is that the government didn’t attempt to raise even more tax from higher-income earners: there are many good reasons for a new wealth tax on very high income earners (say, those earning more than $200,000 a year), and a flood levy is an ideal way to require those doing well to help their fellow citizens rebuild.
But that hasn’t stopped a savage backlash from sections of the media determined to paint nearly everything this government does as wasteful and incompetent. A case in point is Neil Mitchell’s absurd interview with the Prime Minister on Friday. Memo to Mitchell: when a journalist asks a question in an interview, he or she is generally interested in the answer. But perhaps Mitchell has gone down the John Laws route, and now wants to be considered an "entertainer."
One way of explaining the reaction to the flood levy is to examine who is reacting. Ask yourself: how many radio shock jocks, TV economists or high-profile political commentators make less than $50,000 a year? Answer: probably none. Yet these are the people who routinely deign to tell us about "the public’s reaction" to a particular government tax measure. We shouldn’t be surprised when they attack such a measure.
It is true that, if she wanted to, the Prime Minister could find the billions required for rebuilding from cuts to other spending programs. The Opposition has unsurprisingly nominated the National Broadband Network, but there are no shortage of other candidates for the chop: the private health insurance rebate, family tax benefits, various superannuation loopholes, defence — the list goes on. Ultimately, this might have been a smarter strategy. But spending cuts entail their own political risks. The irony of cutting greenhouse programs to pay to rebuild railways that export coal has not been lost on the environment movement.
The real problem for the government remains the ground it conceded on critical issues in 2010. Allowing the school halls program to be relentlessly derided as wasteful will have profound consequences for the rest of this term. Step back and think about it for a second: the Opposition has successfully framed spending on primary school education as a political negative for a Labor government. That was a breathtaking capitulation that will continue to cost Gillard and her government dearly.
But then, 2010 was a terrible year for Labor generally. The party deposed a serving Prime Minister, lost its majority in parliament and went within a few votes of becoming a single-term government.
That this government has survived at all is almost entirely due to the nous and tenacity of its leader. Julia Gillard will need all of that tenacity to turn Labor’s fortunes around. So far, she’s made a good fist of it in 2011. More — much more — will be required.
Labor desperately needs to start turning the blowtorch back onto the Opposition. The government has spent most of its three years on the defensive, and far too little attention has been paid to attacking the Opposition’s strengths. It’s not too late to start. As a politician, Tony Abbott is far from invulnerable.
But to do so, Labor will need discipline, focus and clever political communication. It’s a formula this government has struggled to find.
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