Australia opts for changeless change

I've led a government that has taken this country from deep debt to strong prosperity.... I've led a government that has reformed the Australian economy and left it the envy of the world....We bequeath to Labor a nation that is stronger and prouder and more prosperous than it was 11 and a half years ago. John Howard, concession speech, November 24, 2007.

The political cliché, "it's the economy, stupid", has forever lost empirical relevance in Australia. John Howard's conservative government oversaw unrivalled economic success in its 11½ years in office, yet was roundly defeated on Saturday.

Australian unemployment, at 4.2 per cent, is the lowest since the first oil shock of 1973, and lower than in all G8 and major European countries. Since 1996 Australian private sector wages have risen by 48 per cent, faster than those in the United Kingdom, United States, Europe and the OECD average. Inflation has remained steady around 2.5 per cent, and interest rates relatively low.

Meanwhile, the Howard government effectively reduced public debt to zero. Indeed, it has run consistent budget surpluses and set up a massive investment fund to save for the demographic rainy day on the horizon. Perceptions have reflected reality. Alan Greenspan's memoirs praise outgoing Australian Treasurer Peter Costello's fiscal foresight, and the IMF describes Australia's recent macroeconomic management as "exemplary".

Yet, despite good economic times, the Australian electorate resoundingly removed the incumbent government. Howard's Liberal-National coalition lost over a quarter of its seats in the 150-seat House of Representatives, where governments are formed. Not only did the electorate remove the government, it personally removed the Prime Minister from his Sydney seat of Bennelong, which he had held continuously since 1974.

John Howard, 68, has become the only incumbent Australian Prime Minister since 1929 to lose his own seat, to a prominent left-wing journalist and former employee of the state-owned Australian Broadcasting Corporation. Moreover, Howard's coalition lost its majority in the crucial 76-seat Senate, which, modelled on the US, system, contains equal numbers of representatives from the six Australian states, and wields almost equal legislative power.

The leader of the Australian Labor Party, and Prime Minister, is the comparatively little-known Kevin Rudd, 50. He entered parliament in 1998, following a career as a diplomat in China and then a senior bureaucrat in the Queensland state government.

He impressed the electorate by addressing Chinese President Hu Jintao in fluent Mandarin during the recent APEC summit in Sydney. Elected Labor party leader in December 2006, Rudd's reserved demeanour and anodyne intonation contrast markedly with previous Labor prime ministers. Paul Keating, Bob Hawke and Gough Whitlam, Australia's only other Labor prime ministers since 1949, all great orators, evinced a swashbuckling, larrikin style.

Rudd can seem a bureaucrat elevated beyond his station. In his victory speech, Rudd characteristically recommended that his supporters' celebratory solace extend only to a "strong cup of tea" and an "iced Vovo" (a traditional Australian biscuit).

Howard's loss stems from poorly argued and implemented labour reforms, and a very effective Labor campaign that characterised them as extreme, and Howard as out of touch and drunk with power. No Labor politician would open his mouth without referring to John Howard's "extreme industrial relations laws." Rudd, however, would "get the balance right". Who wants to the get the balance wrong?

Labor's campaign was very effective, and the government looked like it was attacking the "Aussie battlers", those working-class, supposedly downtrodden Australians whose cultural conservatism had kept Howard in government for so long. Working class suburban seats fell to Labor in droves. Howard's loss had nothing to do with Australia's involvement in Iraq or its "failure" to sign Kyoto.

Howard's now-infamous WorkChoices laws were in fact extremely reasonable. They tried to simplify perhaps the most complicated labour market in the Western world, where 20 different minimum conditions - from "cultural leave" to the exact length of afternoon tea breaks - existed for different jobs, and were set arbitrarily by courts. They released businesses with fewer than 100 employees from potentially having to prove a termination was not "harsh, unjust or unreasonable". They made it easier for people to negotiate employment contracts directly with their employers.