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Bipolar nation: how to win the 2007 election

By Peter Hartcher - posted Friday, 23 March 2007


This idea that there’s a once-for-all magical fix - done that. I did the biggest tax reform in Australian history in 2000, but they’re all back on it again! Now, you could do the next biggest now and they’d all be on it again in four years’ time.

It was the voice of a man pleased with his record, happy with his creation. It lent some credence to Paul Keating’s assessment of Costello as “a complacent, business-as-usual treasurer”.

Complacency was a terrible provocation to Donald Horne (author of The Lucky Country). It seemed to him that the minerals boom of the last few years risked reinstating the national complacency: “It’s quite appalling to discover people saying today that Australia is still the lucky country because we have all these minerals,” Horne said in his final interview. “There’s still a bloody lucky country mentality!”

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Contrary to general belief, the big take-off in commodities prices is a tailwind assisting Australia only slightly, and only in the last four years. It is certainly having a powerful effect in the areas that directly service the mining industry. House prices in Perth are bounding ahead with rises of 30 per cent a year, for instance. But its overall effect on the national economy is marginal. The up-tick in mining output in 2005 contributed a mere 0.1 of a percentage point to the national economic growth of 2.7 per cent.

But no matter how much, or how little, credit Howard can take for Australia’s long boom, Labor has allowed itself to be put into a position where it can take none at all. This is the most profound mistake of political strategy that the Labor Party has made in its 11 years on the Opposition benches.

Neither Paul Keating nor Bob Hawke has ever received the credit they deserve for saving Australia from its long, slow slide into economic hopelessness. Partly it’s because of the long lag between the pain of the reforms and the gain of the prosperity they generated - it was almost a decade between the advent of the first Hawke-Keating government in 1983 and the dawning of the great boom in 1991.

And partly it’s because the remarkable nation-changing accomplishment of economic turnaround was obscured by everything else that intruded - Keating’s messy political assassination of Hawke to seize the throne, the 1990 “recession we had to have”, and the personal unpopularity of Keating with the electorate.

It was because of this - Keating’s unpopularity - that the party was so reluctant to have anything to do with him. This continued even into the last federal election. Amid the razzle-dazzle of the Labor campaign launch in Brisbane, former leaders were feted, and Mark Latham ostentatiously hugged Gough Whitlam. Paul Keating, though, was treated like a disgraced relative one was obliged to invite but was ashamed to embrace. He was brought in through a side door and edited out of Labor’s broadcast TV footage. It was the nadir of his exile.

This repudiation, Labor realised after the devastating result at the polls, was a mistake. The party lost the last election in large part because voters decided Latham and Labor could not be trusted to run the economy. The party had done so much of the work of rebuilding the economy, yet had no credibility on economic policy.

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Keating did not enjoy his exile, but he thinks Labor suffered more than he did. “Fundamentally, the Labor Party never believed in the model,” he said to me in 2005. By “the model”, he meant an open, modern, market-based economy, the economy that John Howard and Peter Costello inherited from Labor, but a concept that Labor itself, post-Hawke and post-Keating, let slip. Keating continued:

The whole Hawke-Keating model for Australia didn’t have to happen. The unlikely thing is it came from a Labor government. Labor governments and Labor parties mostly believed in big budget deficits, they believed in higher tariffs and managed exchange rates and controlled financial markets. The Labor Party never believed in the model that Hawke and I gave the country, but it happened. The country got a very great break from it.

But Labor failed to get the break. Hawke and Keating had been concerned with how to create wealth, but after 1996 Labor returned to its historical preoccupation, not with how to create wealth, but with how to redistribute it. By discarding the economic model, by rejecting the builders and their handiwork, Labor also threw away the voter base it brought with it, according to Keating:

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This is an edited extract from Quarterly Essay 25 - Bipolar Nation: How to Win the 2007 Election by Peter Hartcher, $14.95.



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About the Author

Peter Hartcher is one of Australia’s leading journalists.
He is the political and international editor for the Sydney Morning Herald and was until 2004 the Washington bureau chief of the Australian Financial Review. In 1996, he received the Gold Walkley Award. He is the author of The Ministry and Bubble Man: Alan Greenspan and the Missing 7 Trillion Dollars, which has been published around the world and translated into several languages.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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