Not The Time To Convince Us Of Economic Prowess

What a terrible time to call an election.

Kevin Rudd went to the Governor-General just 48 hours after his government released the appalling Economic Statement on Friday.

The media cycle moves along quickly in an election, so let’s recap. Turns out, since the May Budget, this year’s deficit has leapt from $18 billion to $30 billion. And projected unemployment has gone from 5.75 per cent to 6.25 per cent.

Those are major revisions. May wasn’t very long ago. (You can read the Economic Statement for yourself here.)

Some of the budget shortfall will be bridged by new taxes. If the revised projections are accurate, unemployment will be higher than it was during the Global Financial Crisis, which peaked at 6.1 per cent in March 2009.

Rudd didn’t deliver the bad news himself. His Treasurer Chris Bowen and his Finance Minister Penny Wong were left to carry the can.

Every election is about the economy. Even the 2001 election – after both Tampa and September 11 – Howard spent the most time in his official policy speech talking about economic issues. (This wasn’t as strange as it seems in retrospect: recall a great worry around the world about the economic consequences of the terrorist attack.)

Rudd knows this. A focus on the economy is his master plan. He wants to make Tony Abbott look like an economic lightweight. He’d like to be known as the smartest, most serious person in the room. In his National Press Club address, he joked about wanting to show more graphs. He probably planned the jokes well in advance. Where Julia Gillard talked about moving forward, he talks about Chinese demand for resources.

So why did he leave the dire Economic Statement hanging? After all, it’s not the only bad news. Economic data released yesterday means there could be as many as two interest rate cuts during the election campaign.

I argued in the Drum last month that while Rudd enjoys talking about future challenges, he hasn’t come up with any policy solutions.

All we have heard from Rudd is a half-hearted imitation of some of the themes of 2007 – he wants Australia to be a country that makes things, and the car industry can look forward to a few hundred million more in subsidies.

It’s hard not to conclude that the Prime Minister’s economic seriousness is purely for show – it is a marketing pitch rather than a strategic plan.

Rudd is no cleanskin. It was his spending decisions in late 2008 and early 2009 that made the budget as grim as it is in 2013. Those decisions are why he is introducing an “efficiency dividend” on the public service. They are why he’s introducing a tax for the bank deposit guarantee – a guarantee he himself introduced.

With the surplus further out of reach, and the national economy looking more stagnant by the day, Rudd has started to rely on some of the old talking points of the previous leadership team.

We even heard that hackneyed Gillard catchphrase “cuts to the bone” in his election announcement speech on Sunday.

Easily the most inept regurgitated talking point is the boast is that Australia has a triple-A credit ratings from all three major credit agencies. We hear it all the time. The triple-A rating is presented as the definitive proof of the government’s economic prowess.

Of course, a triple-A rating is better than the opposite. But if you find the ratings agency argument compelling, well, I’ve got some subprime mortgages I’d like to sell you.

This legally protected trio of ratings agencies must take a big part of the responsibility for the Global Financial Crisis.

Happily for Australia, most of the academic evidence suggests the agencies are better at rating countries than they were at rating mortgage backed securities. Yet few industries have had their reputation as battered in the last few years as the ratings agencies. Labor couldn’t have found a less convincing talking point if they tried. No surprise it was originally Wayne Swan’s.

This is odd because in many ways Rudd wants to be less the anti-Gillard as the anti-Swan. The new prime minister is determined to level with voters about the economic challenges Australia faces, rather than rely on the sort of hands-over-the-ears optimism that characterised the former Treasurer’s tenure.

But the Prime Minister has spent so much time rushing from issue to issue – boats, Eddie Obeid, carbon tax – that he hasn’t put enough work into his basic economic credibility.

One National Press Club speech and a few graphs won’t do it. And an election campaign is not a great time to try to prove you can control the nation’s finances.