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Rolled gold vs tin foil

September 2013

  • Stephen Koukoulas

Reviewing the 2013 election

The old saying that opposition parties don’t win elections, but governments lose them, showed up yet again with the emphatic loss of the Labor Party and win of the Coalition in the September 7 election.

The Labor Party loss was based on an upside-down campaign where many of those formulating the strategy for re-election were blind-sided on a range of issues, especially in the area of economic management and the inconsistencies in the alternatives being offered by Mr Abbott and the Coalition.

The ‘cut, cut, cut’ and ‘cut to the bone’ mantra that Mr Rudd used when discussing the risks from the election of Mr Abbott’s Coalition was 180 degrees wrong.

The bulk of Mr Abbott’s policies were spend, spend, spend. Paid parental leave, Direct Action, defence and infrastructure are going to see the Coalition spend at a pace much like the Howard government did for the bulk of its time in office.

With the budget deficit and government debt being the high profile problems for the Labor Party in the eyes of the electorate, the electorate was probably pleased to see one side of politics ‘cut, cut, cutting’ because it was a sign that the budget deficit would be ‘fixed’ more effectively with a Coalition government.

Labor would have done much better with a campaign of highlighting big spending policies that were unfunded and that would push interest rates up from the current record low levels. The fact that the futures markets are pricing in rate hikes at the moment would have only added to their case.

Labor could have followed through with the fact that since at least 1970-71 (the full set of budget data available on a roughly consistent basis), Coalition government has never delivered a single year when government spending was cut in real terms. Never under the Fraser or Howard governments. For the record, Labor have delivered annual cuts in real government spending on five occasions over that time.

What if Labor had campaigned on the Coalition’s reckless spending, where each promise of an oval, PPL, a defence splurge, Direct Action on climate change, roads to nowhere or medical research were basically unfunded and in doing so, cited the fact that a Liberal government never had cut spending in real terms?

What if they had linked this to the current low interest rate environment, which is delivering annual savings of $70 billion for mortgage holders and $50 billion a year for businesses compared to where interest rates were around 5 years ago?

Do you want Mr Abbott’s policies to drive interest rates higher?  

This may have avoided the silliness during the campaign of trying to expose the $10 billion black hole and the other mis-steps on the ‘cutting to the bone’ rhetoric.

For Mr Rudd, there were also the distracting and unnecessary proposals on Northern Australia and moving the navy from Sydney to Queensland. Un-costed and pie in the sky stuff. These were off message and cost votes. 

On the positive side, the Labor Party could have also used demographics and articulated a target for the unemployment rate of, say 4 percent. Mr Abbott’s aspiration to create one million jobs in the first five years of a Coalition government is a corn-ball promise – it merely reflects population growth and no more. On not unrealistic assumptions about the participation rate, one million new jobs is likely to be consistent with an unemployment rate above 6.5 percent!

This is sloppy maths from Mr Abbott that could have been exploited by Labor for what it is, but also turned into a positive if Labor articulated a plan to cut the unemployment rate to 4 percent by 2018.

Then there was underplaying of the massive achievements with DisabilityCare, the transformation of the education system and the carbon price. Whilst a little quirky, most of Australia just had the warmest winter ever recorded which might resonate with the need for a carbon price and the sheer absurdity of the Coalition’s Direct Action carbon plan.

Of course, for a person like Kevin Rudd, any emphasis and magnification of the successes of DisabilityCare and education reform would have been an acknowledgement of the legacy of Julia Gillard as Prime Minister. Mr Rudd’s DNA meant that that was never going to happen.

Labor’s campaign strategy was like a mad woman’s breakfast. It highlighted many of the wrong things and assumed a level of ignorance in the electorate that Hawke, Keating and even Gillard would never have done.

Mr Abbott’s win was built on policy flotsam and jetsam that Labor failed to sift through and recycle. The messaging was the wrong way around, especially feeding into the electorate’s perception that Labor was a poor economic manager who had blown the budget.

Fixing the budget required cuts, cuts, cuts, which is actually what Labor generally managed to do since 2009-10 with spending to GDP down from 26.1 percent in that year to 24.3 percent in 2012-13.

The Australian economy did not need a ‘new way’, it needed to stay on the path to steady low inflationary growth that was sending the budget on a trajectory to a budget surplus and debt reduction. Economic growth needs to lift a little to get the unemployment lower. Treasury should have been taken to task, by the Treasurer, prior to the Government’s economic statement, for not having at least one year with a GDP growth forecast of 3.5 percent. This is inevitable after an extended period where growth has been below trend. This would have delivered a couple of billions dollars of revenue in the forward estimates and held the small surplus in 2015-16.

There was so much rolled-gold material that Labor could have used, but it chose the tin-foil when trying to win the 2013 election. 

Stephen Koukoulas is Managing Director of Market Economics.




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