Can Rudd Win The Economic Debate?


Kevin Rudd spoke at the National Press Club today. The appearance was supposed to include Tony Abbott, after the Prime Minister issued a challenge to the Opposition Leader for a debate about the economy. Perhaps mindful of the shellacking he received the last time they debated at the National Press Club, Abbott declined.

Rudd took the opportunity to present his own views on the economy and Labor's economic policy, with an emphasis on productivity. For a range of reasons that mostly boil down to the name “Wayne Swan”, Labor has struggled to present a consistent narrative on the economy. The result has not just been harmful to the government, but damaging for the future health of the Australian economy. 

Voters are still very cautious about the future of the economy, despite record low interest rates and unemployment hovering below 6 per cent. The RBA's measure of consumer sentiment is bang on the average since 1980. The Westpac Melbourne Institute measure of consumer confidence is at 102.2, only just above parity, indicating significant consumer uncertainty about the future of the economy. Roy Morgan's index is a little more positive, at 114, which is still well below its recent peak of 128 in January 2010. Australia's consumer confidence has been bouncing around at roughly neutral levels for some time now. 

Given strong economic performance and neutral confidence levels, you'd think Labor would be in a good position to play to its management of the economy. You'd be wrong. For almost the lifetime of this Labor government, polls have shown huge polarisation in the views held by voters on which party is the better economic manager. Most voters consider the Coalition to be a better economic manager than Labor.

The chart shown here tracks Newspoll ratings for their semi-regular survey of which party is better to handle the economy. After a period of rough parity during Kevin Rudd's first term, the ALP's ratings on the economy collapsed during Julia Gillard's prime ministership. This happened at a time of robust economic growth, low inflation, steady unemployment and falling interest rates. To say Labor has struggled to communicate the strength of the economy is an understatement.

That's a real problem for Labor, because the economy is consistently one of the most important issues that voters say they weight up when making a decision on election day. In June, for instance, an Essential poll put “management of the economy” top of the list, followed by health. “Australian jobs and protecting local industries”, which is plainly another way of describing economic management, placed third. Asylum seekers, climate change and national security polled well down the list.

One of the reasons Labor constantly gets marked down on its economic management is because of the deficit, and the associated government debt that Labor has had to borrow. Voters don't seem to believe that the government's textbook management of the global financial crisis was instrumental in keeping Australia out of recession. Instead they have followed the Opposition in claiming the economy was saved by the mining industry and China, rather than domestic economic stimulus.

And voters hate deficits. In Newspolls following each of the last six budgets by Wayne Swan, more voters have said they would be personally worse off as a result of the budget than better off. After this May's budget, only 11 per cent of voters surveyed thought they'd be better off. 44 per cent thought they'd be worse off. This is despite the fact that most of those budgets delivered middle lass tax cuts.

As poll blogger Peter Brent writes today, “one thing [voters]won’t do is re-elect a government they believe has wasted phenomenal amounts of money, tens or even hundreds of billions of dollars, who recklessly turned the Howard government’s surpluses into deficits.”

“That’s what most Australians believe the Labor government has done, under Rudd and then Julia Gillard.”

This underlines the scale of the government's problems on economic management and Rudd's challenge in communicating economic policy. It also explains why Tony Abbott doesn't want to debate the Prime Minister on the issues of debt and deficits. Abbott and Joe Hockey are streets ahead on this issue, so there is little incentive to engage with Rudd, who has little to lose. If he can chip away at the negative perceptions, so much the better for Labor.

In fact, Australia does need a better and more informed economic policy debate. The intellectual case for austerity and balanced budgets has largely collapsed internationally, even while the Coalition has successfully trotted out the debt-and-deficits talking points here in Australia. In Europe and the United States, here is a growing realisation that cutting government spending has hurt economic growth, particularly in countries which were struggling to exit a crippling downturn, such Greece, Spain, Ireland and the UK. Even in the US, which is recovering, jobs growth in the private sector has been offset by employment contraction in the public sector, as municipal, state and the federal government have laid off millions of workers since the GFC began.

Despite the overwhelming evidence piling up to demonstrate the bankruptcy of slash-and-burn economics, the Coalition's economic policies still include a promise to cut 12,000 public service jobs in Canberra and nebulous promises to deliver a federal surplus on the back of lower government spending. Nor has nearly enough attention been focussed on Joe Hockey's numbers. The Coalition's attempts to cost their policies in 2010 were a debacle, with the auditors used by the Coalition for the costings later disciplined by their own professional body. 

If Rudd can shine a light on some of these manifest shortcomings, and do even slightly better than Swan's appalling efforts to convince voters of Labor's economic achievements, he could make further progress on the vital issue of economic management. No wonder Abbott won't debate him.

UPDATE 2.15pm:

Kevin Rudd's address to the National Press Club aimed to build on Tony Abbott's discomfort, with a substantial and detailed presentation of the government's economic policy.

Rudd put forward a seven-part program of economic policy. The top item detailed a new-found desire to engage with both business and trade unions, in an echo of the Accord reforms of the 1980s. Rudd has apparently been meeting regularly with top lobby group, the Business Council of Australia, on ways to improve Australia's productivity performance. Productivity, he argued, was not simply a matter of tinkering with workplace laws, but must also include better business productivity and smarter management from executives; he chided top businesses for their lack of engagement with Asia. Rudd also stressed the need to improve workforce participation and our educational attainments, boasting of Labor's decision to uncap university places, which has led to 190,000 new university students entering the system.

Rudd also reiterated his commitment to industry policy (although he couched it in the more business-friendly terminology of "competition"), stressing that Australia must find new growth industries as the mining boom slacks off.

"Because the China resources boom is coming off, Australia’s core economic strategy for the future must be one which diversifies our economy, by creating more jobs in manufacturing, food production, infrastructure, construction, and our many other services industries, rather than having all our eggs in just one basket – the resources and energy sector," the Prime Minister said. "Relying on the lower dollar alone to boost competitiveness is insufficient for the great economic task that lies ahead."

There was also a promise on electricity markets reform in an attempt to get power bills down. Attentive readers will remember a similar promise made by Julia Gillard last year; Rudd will have his work cut out for him navigating the difficult shoals of electricity regulation — an area where the states maintain the whip hand.

Rudd's core argument about the strength of Labor's economic management through the GFC was not particularly novel, presenting the bare facts of Australia's economic fortune with a series of graphs familiar to those who've sat through any number of Wayne Swan media conferences. What was different was the confidence of his presentation, and that reassuringly nerdy demeanour so reminiscent of the halcyon days of 2007.

Rudd was clearly aiming to contrast his command of the details with Tony Abbott's negativity. For his part, Abbott chose to give a media conference in Melbourne, where he mainly blustered.

Ben Eltham is New Matilda's National Affairs Correspondent.