The Coalition’s attacks on spending have goaded the ALP into a blunder, writes Ben Eltham.
The Monthly’s Sean Kelly wrote a perceptive commentary yesterday about the sudden craze for “10-year plans” that has gripped both major parties.
“Who would have thought the humble number 10 could be so influential in this campaign, or cause our politicians so much trouble?” Kelly asked.
Who indeed? Somewhat mysteriously, the decade is suddenly the timespan of choice for our political leaders. Labor has been announcing 10-year costings for some time now. The Coalition’s corporate tax cuts are also going to be phased in over 10 years.
The cascade of decades has culminated in the ALP’s most recent announcement on fiscal policy: “Labor’s 10-year plan for Australia’s economy.” The policy itself is reasonably uncontroversial. Labor will invest in education, in infrastructure, in renewable energy, foster innovation, and help small business.
None of this is exactly earth-shattering; indeed, much of it is better than the Coalition’s purported growth strategy of giving big companies $48 billion of tax cuts. Investing in education and training is far more likely to deliver productivity growth and eventually a stronger economy than a speculative give-away to foreign multinationals.
But Labor ran into trouble with its pledge to return the budget to surplus. The ALP even put a timeline on this promise: 2021. And the ALP was forced to admit that it will return the surplus somewhat more slowly than the Coalition has promised to.
Such admissions were manna from heaven for a Coalition hungry top feast on a Labor gaffe. Scot Morrison, predictably, had a field day, staging a series of media appearances to lambast Labor’s tax as “Zoolander economics.”
Of course, no-one will pay much attention to another Morrison presser. But there is no doubt Labor remains vulnerable on spending. The Coalition continues to enjoy a lead over the ALP in opinion polls that ask voters to rate the major parties on the issue of the economy.
And there is substance to the Coalition’s attack: Labor has indeed committed to a number of big-spending policies. If a hypothetical Shorten government really wants to balance the federal budget, it will have to raise taxes and remove tax concessions. The same is of course true for the Turnbull government. Neither major party has been honest with voters about Australia’s revenue problem.
Talk of budget deficits is always tough terrain for Labor.
In government, Wayne Swan and Labor promised a return to surplus hundreds of times. Notoriously, they never got there. Macro-economically, this was entirely reasonable. But voters marked the ALP down for the deficit.
The Rudd and Gillard government ran into trouble on fiscal policy for a range of reasons, not least of them of course being the global financial crisis. But the resonance of fiscal policy was not just because the Coalition hammered the message of “debt and deficit disasters.” Labor too had embraced the theory that a balanced budget is a key measure of economic management, and had made some risky budget predictions in an effort to convince voters that it was as tough on the deficit as the conservatives.
The problem for Labor is that the release of an “economic plan” returns the election discussion to fiscal policy. Right on cue, ratings agencies and economists warned that Australia’s cherished “AAA” credit rating was at risk.
This shouldn’t really worry anyone, as there is little chance of Australia being downgraded, and in any case a ratings downgrade is hardly the end of the world. But issues like credit ratings are dangerous politically, because they represent a proxy of economic management. Election days spent talking about deficits and credit ratings are days Labor isn’t spending talking about child care policy, or health, or education. And Labor needs as much time and focus on its favourable issues as possible.
In the past couple of days, for instance, we’ve seen Labor’s economic team of Chris Bowen, Tony Burke and Andrew Leigh sent out to hose down the speculation about the 2021 surplus promise, and the supposed AAA credit rating risk. That’s not where Labor needs to be at this point of the campaign.
The irony, of course, is the Coalition has performed worse in office on fiscal policy than Labor did. Both public debt and the budget deficit have blown out under the Coalition in the past three years. But politics is not just about the cold hard facts of budget bottom lines. It’s also about voter perceptions, and here Labor has a credibility deficit of its own.
For these reasons, the ALP’s “10-year economic plan” has been the first major misstep by Labor during this campaign.
Perhaps the ALP was always going to release a “10-year economic plan” at this stage of the campaign. Or perhaps it released it now because it felt this was the right window for a difficult but necessary announcement. But the fact that it came out after weeks of attacks against the ALP by the government makes it look like the Coalition has goaded Labor into releasing a policy.
One advantage of a long campaign is that a few tricky days aren’t enough to sink the Opposition’s election prospects. But Labor will need to refocus on social issues – including the social dimensions of economic policy – if it is to regain the initiative after a difficult week.
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