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Spending political capital

By Rowen Cross - posted Monday, 27 April 2009

Watching the behaviour of the Rudd Government since its election and the recent polls reminds me of the old children's fable about the hare and the tortoise.

The latest Newspoll has the ALP leading the Coalition by 58 per cent to 42 per cent, with Kevin Rudd preferred as Prime Minister by 67 per cent compared to Malcolm Turnbull's 19 per cent. These sorts of numbers don't look good for the Coalition, who must be frustrated that the Rudd Government's "honeymoon" doesn't ever seem to end. But once you look at the Rudd Government's policies to date and you think about what the political landscape may look like at the next election, the race is a lot closer than the polls are suggesting. The Rudd Government has spent much of its political capital in the first half of its term, and it's questionable what sort of returns this will bring come election time.

The Rudd Government has tried to please everybody - from pensioners to first home buyers and, of course, "working families" - and has been using the considerable financial war chest from the boom years to do so. So eager has the government been to shower riches on the masses that, in February, the Rudd Government gave up finding particular constituencies to target and decided to give basically the whole country $900.


I did not get a $900 handout but many of my friends did. They all agree that it is a stupid policy, and that it won't do a thing for the economy (other than increase the demand for flat screen TVs and overseas holidays), but they also think it's pretty cool to get free money.

It's hard not to like Father Christmas, even if you think he's a crazy old man flying around in a sleigh.

People love handouts. People don't like higher taxes, government spending cuts, higher interest rates and higher unemployment. They particularly don't like these things when they have grown accustomed to middle class welfare (pioneered by the Howard government but dutifully maintained under Kevin Rudd). Sooner or later when the money runs out, the Rudd Government will have to stop spending easy money and making easy decisions, and will be faced with some tough choices. At that point in the political cycle, the $900 handout will be a distant memory and the people will call the government to account.

The first term of the Rudd Government has been filled with grand gestures. Things like the Apology to the Stolen Generations, signing the Kyoto Protocol, the 2020 Summit and the "Education Revolution". Occasionally, these things were valuable in themselves (like the Apology) but mostly they have no substance. The government has been left wanting when it comes to results, and will find it more difficult to deliver on these gestures as the economy continues to falter.

By the next election, the Rudd Government will have governed us into the first recession in 17 years and the first recession since Labour was last in power. Rudd won't be able to blame Howard for the recession - Rudd and Swan spent the first 10 months of their term saying Howard was responsible for "letting the inflation genie out of the bottle". Neither is Rudd to blame for the current recession, but the billions in cash handouts and profligate spending will be seen as short sighted and a waste of money. Rudd's grand gestures will look hollow and the election promises he can no longer afford to keep, but repeatedly and solemnly swore he would, will come back to haunt him.
Howard's statement that "Working families in Australia have never been better off", a statement that Kevin07 used to show Howard as being out of touch, may have a ring of truth about it come the next election.

These are just the conditions required for a Coalition revival. With rising unemployment and a massive budget deficit, people will look on the Howard-Costello years with nostalgia and yearn for a leader that can put the nation back on the right track. These political times may see the return of Peter Costello from the wilderness, to lead the nation back to its glory days (that's my prediction … I don't care what Peter says publicly).


The Coalition can capitalise on these conditions, but they must take a long view now. The Coalition will be able to push home their advantage at the next election by standing up for sound policies during these uncertain times, even if they are unpopular. The polls will punish them now for taking a sensible but unpopular stance, but they will reward them as the economy and the country deteriorates, and the rewards will be greater if they can show that they held true to their beliefs all along. (For a US example, Obama gained considerable political leverage during the Democratic primaries and the Presidential election through his opposition to the Iraq invasion in 2003 - an unpopular stance at the time.)

This may not be enough to get the Coalition back into government, but the alternative has been tried and the results are worse. Brendan Nelson tried pandering to the Rudd Government and got zero traction. Sure, Brendan was a nice guy, but why would people vote for an opposition leader that is trying to be like Rudd, when they could just vote for the straw-man himself?

A tortoise will never outrun a hare by acting like one. The Coalition must run its own race.

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About the Author

Rowen Cross is a lawyer practising in the private equity, hedge funds and banking industries.

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