Tag: ABC The Drum

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.

Politicians Are Powerless Over Australia’s Economy

Australia is a very small country with a very open economy. These facts are sometimes easy to forget.

No matter what they say during the upcoming election campaign, neither Kevin Rudd nor Tony Abbott will have much control over Australia’s economic fortunes in the next term of government.

Wrapping up his National Press Club address earlier this month, Kevin Rudd said Labor governments “manage transitions … sketch the future … harness the energy and ambition of our people” and “put the changes in place that best secures our future.”

Tony Abbott has used the same sort of hyperbole. A Coalition victory would immediately trigger prosperity.

Such boldness is par for the course at election time. But it is a confidence trick.

The fate of the Australian economy – the big ups and downs of the economic cycle – will be determined by global conditions, not domestic ones.

No-one knows this better than the workers at Holden and Ford, for whom global exchange rates are more important than any subsidy or tariff our elected representatives can devise.

This has always been so.

A sudden increase in the cost of bank lending in London caused our first true depression – the largely forgotten Depression of the 1840s. We suffered along with the rest of the British Empire.

Our better-remembered second depression occurred in the 1890s. What little modern Australians know of the Depression of the 1890s is perhaps the housing boom in Melbourne which preceded bank failures and unemployment.

But the Australian episode is only part of a story that encompasses the near collapse of the London-based Barings Bank, sovereign debt crises in Latin America and the Mediterranean, a gold panic in New York, and a mining market collapse in South Africa. Our trouble – as traumatic as it was – was just one crisis among many.

The Great Depression was even more clearly imported. No way were we going to avoid suffering from the stock market crash of October 1929 or the collapse of world trade.

Historically our good times correspond with good times in the global economy too.

We boomed in the 1950s and 1960s along with everyone else. We suffered stagflation in the 1970s along with everyone else.

And the recession we had to have?

Well, that recession had to be had by the United States, Canada, New Zealand, the United Kingdom, and Japan as well.

This all makes sense. Australia is tiny. Overseas there are cities with more people than our entire country. We’re almost entirely dependent on imports for consumption and exports for economic growth. And we need foreign capital for investment. A small country highly integrated into the global economy is going to be very sensitive to international crises.

Yet for each of these historical episodes there exists a cottage industry trying to explain the unique Australian factors that caused them. The 1840s Depression is blamed on problems in the Australian wool industry. The 1890s Depression is blamed on reckless Australian banks. The depth of the Great Depression in Australia is blamed on our obsession with balanced budgets.

It goes on. We’ve all heard Paul Keating blamed for the recession of the early 1990s and John Howard credited for the subsequent growth.

If there is growth or recession in the next term Abbott or Rudd will take the blame or credit. They probably won’t deserve either.

In the past I’ve mentioned research that suggests political success is more about dumb luck than virtue or competence. In truth Rudd or Abbott will win government then cross their fingers.

But political debate struggles with powerlessness. Voters like to assign blame and give credit for things that are actually outside any domestic politicians’ control.

Kevin Rudd rightly points out the global financial crisis dumped a bucket on Labor’s first term. The policy agenda of any party would have been drowned out by the global consequences of America’s subprime collapse.

But then he claims his decision to artificially stimulate the economy was responsible for Australia’s relative endurance.

Not, for instance, Chinese demand for West Australian minerals.

In other words, Rudd believes the disease was entirely foreign, but the cure was entirely domestic.

Yet even if you are a card-carrying Keynesian – that is, you believe the government can and should spend more to boost the economy in a downturn – it is just as plausible that China’s enormous stimulus package in 2008 is responsible for our prosperity, rather than Labor’s smattering of insulation and community projects.

Australia spent around $90 billion to stimulate its economy. Sounds like a lot? Well, China spent over half a trillion dollars. And nearly three quarters of that spending went towards the infrastructure whose raw materials we supply.

Our politicians pretend they can steer the economy like a ship. But we have a very small ship and it’s a very big ocean. During an election, it pays to remember our economic future is determined by the wind, not the sails.

Secrets And Fears Of A Paranoid Government

You’re either with us or against us. “Hammer this fact home,” an internal Department of Defense document instructs its readers, “leaking is tantamount to aiding the enemies of the United States.”

That document was itself leaked last week.

It’s part of the Insider Threat Program – a crackdown within the US federal bureaucracy to stop bureaucrats and private contractors sharing secrets with the press. It is the banal bureaucratic background to the espionage charges laid on Edward Snowden and Bradley Manning.

But in a way the Insider Threat Program is as revealing as the secrets the two men have revealed.

America’s national security state is unmanageably big. It is a Leviathan of dysfunction.

More than 4.9 million American government employees and private contractors have security clearances. There are at least 1,200 bureaucracies and 1,900 private companies working on the government’s security and intelligence programs.

Booz Allen Hamilton (the company that employed Edward Snowden) earned $3.8 billion in federal government contracts in 2012. That’s 99 per cent of its total revenue.

During the Cold War the US government was rightly concerned public servants might sell secrets to the Soviet Union.

There actually were spies at the very top of the bureaucracy. If you passed information to Soviet agents, it was reasonable to assume you did so for Soviet benefit.

But now, a decade into the War on Terror, the American government is more concerned secrets might be passed to American newspapers.

There’s a subtle difference. Citizens in a democracy have a right to know what their government is doing. Edward Snowden revealed a massive surveillance program that was, until recently, dismissed as the fantasy of conspiracy theorists. We are better for knowing that program exists.

Yet the US government thinks leaking to journalists is the moral and legal equivalent of spying for foreign governments or terrorists.

Nobody believes the disclosure of classified information should be legal. Any organisation, private or public, needs some degree of confidentiality to function. As the Guardian writer Glenn Greenwald points out, Snowden “made his choice based on basic theories of civil disobedience”. He will bear the consequences.

But an Espionage Act charge goes well beyond that. Disclosing information about the actions of a democratically elected government to the media is not the same as secretly undermining national security for the benefit of the hostile foreign powers – not on any practical, ethical, or philosophical grounds.

The US Espionage Act dates back to 1917. Section 793 of the Act makes it illegal to communicate information to others “with intent or reason to believe that the information is to be used to the injury of the United States, or to the advantage of any foreign nation”.

In its first 90 years the Espionage Act was only used three times against people accused of leaking government secrets to the press.

But the Obama administration has charged eight different whistleblowers under the Espionage Act.

As well as Bradley Manning and Edward Snowden, they’ve also charged a former CIA officer for revealing the names of colleagues involved in torture, a State Department advisor for leaking information about North Korea, and a senior executive at the National Security Agency for exposing the surveillance program. (You can see a full list here.)

One of the few prosecutions for leaking under the Espionage Act before Barack Obama was Daniel Ellsberg. He released the Pentagon Papers to the New York Times and Washington Post in 1971.

The Nixon administration went hard against Ellsberg. So hard, in fact, that they illegally tapped his phones. The case was ultimately thrown out for misconduct.

Yet in retrospect the release of the Pentagon Papers wasn’t that big a deal. They were merely a classified Defence Department history of the Vietnam War. That history stopped in 1967, and the juicy stuff – mostly how the Johnson administration lied about the Gulf of Tonkin incident – damned Richard Nixon’s Democratic opponents.

Ellsberg was prosecuted for espionage not because he had damaged American national security but because he had embarrassed the state. For Nixon – and for Obama – embarrassment is as good as aiding the enemy.

It was embarrassing, but not damaging, when the world read America’s diplomatic cables in 2011. It is embarrassing that the world knows the US government is listening to its phone calls. But have these embarrassments materially hurt American security interests? Not likely. Were they done in the service of a foreign power? Quite the opposite.

Earlier this year, Barack Obama bragged his was the “most transparent administration” in history.

Compare those fine words to a brochure published by the US Defense Security Service, Insider Threats: Combating the ENEMY within your organization. It urges private contractors to report any suspicious behaviour of their colleagues. “It is better to have reported overzealously than never to have reported at all.”

Such is the paranoia of the impotent.

On The Positive Side, Thousands More May Find Refuge

It’s been four days since Kevin Rudd announced that every single asylum seeker arriving by boat would be sent to Papua New Guinea and either resettled there or returned home.

The political class is still shocked. They shouldn’t be.

It has become an item of faith that Australian politicians are personally responsible for the choices made freely by asylum seekers, and are to blame for the risks they choose to take.

So this was inevitably how the whole thing would end – completely and formally closing down any chance to seek asylum by boat in Australia. For as long as this policy lasts, no boat person will be settled in Australia again.

Our refugee politics are very cynical. And sometimes they are xenophobic. But not always. The defining moment was the December 2010 Christmas Island boat disaster, when 48 people died as their boat was smashed against the rocks.

The anguish that tragedy caused among policymakers and the public was real.

From then on, both sides of the debate became single-mindedly focused on how to stop boat drownings. This became the sine qua non of refugee policy. Even many refugee activists began framing their arguments on this ground.

On the conservative side, many of the Howard-era arguments about national sovereignty were quietly put to bed.

The PNG plan is unlike every other plan and policy adopted until now. It is not a deterrence scheme. To describe it as deterrence is a category error. It does not make it hard or uncomfortable to enter Australia by boat. It makes it impossible.

It’s the difference between a policy of deterrence on the one hand, and a policy of exclusion.

That difference is the key to understanding why John Howard’s Pacific Solution stopped the boats – for a time.

As Tim Hatton points out, the Howard policy didn’t just reduce the number of asylum claims from those arriving on boats. It reduced the number of asylum claims from everywhere. The Pacific Solution created a perception that Australia was completely closed to refugees. The policy’s success rested on this perception.

Yet the perception couldn’t last. When it became clear the vast majority of those detained on Nauru were eventually resettled in either Australia or New Zealand, the bluff was over. Potential refugees understood a stint in detention was the price of asylum. Boat arrivals started picking up from 2006 onwards, as this parliamentary document demonstrates.

With every iteration of asylum policy over the last few decades it has been a reasonable bet that if you hop on a boat you could end up – eventually, and not without taking some risk and suffering some hardship – receiving refugee status in Australia.

Kevin Rudd’s PNG plan puts an end to that. It replaces the asylum gamble with the certainty of a trip to Papua New Guinea.

Is the PNG plan cruel? Absolutely. But let’s not be revisionist. The status quo is extremely cruel as well. It is designed to be cruel.

The “no advantage” policy, introduced by Julia Gillard in 2012, has left thousands of people in limbo. This policy was never fully fleshed out. That was the point. Boat people were to be left in the Australian community for an unknown period. They weren’t allowed to work. Their miserable uncertainty was supposed to discourage others from coming. It didn’t.

No advantage was going to get worse. The Coalition immigration spokesperson floated sending no advantage asylum seekers to work camps. The Labor immigration minister thought that was a very interesting idea.

For nearly a decade Australia has had the worst policy combination possible: our border controls are both punitive and ineffectual.

For all the political anguish about drownings off the Australian coast, the PNG scheme does nothing to make global refugee trails any safer.

Asylum seeker deaths are heartbreakingly common. One estimate has 17,306 people dying trying to enter Europe between 1993 and 2012. Border patrol statistics record around 400 deaths on the US-Mexico border every year.

These figures are understated. In their book Globalization and Borders, the Australian criminologists Leanne Weber and Sharon Pickering point out that for every body that washes ashore in a first world country, two bodies are never recovered.

Unauthorised migrants drown while swimming rivers. They suffocate in cramped spaces. They dehydrate while crossing deserts. They are killed in vehicle accidents. Such tragedies can occur long before the migrants arrive at a first world border to be counted.

Kevin Rudd will not reduce the number of people willing to risk their lives for a better life. They will just risk their lives elsewhere, safely away from our guilt-ridden politicians.

That’s not important if you consider stopping the boats to be the sole fundamental goal of Australia’s asylum policy.

But there are alternative goals: finding a safe haven for people in need, increasing the migration intake, or lowering barriers to the free movement of people.

If those goals appeal then the most important thing about the PNG plan was contained in a virtual footnote to Kevin Rudd’s press conference last Friday. The government is looking at increasing the total refugee intake from 20,000 a year to 27,000 a year.

The intake was just 13,000 a few years ago.

For all that has been said about the PNG deal, that increase would be a very good thing. Seven thousand more people safe and free in a rich developed country.

Dumping The Carbon Tax Without Dumping Anything

When Julia Gillard promised in 2010 that there would be no carbon tax under a government she led – but that her government would pursue an emissions trading scheme – she probably thought it would defuse a toxic debate and help secure victory.

Like so many of Labor’s ploys in that election, it was far too clever by half. Tony Abbott dined off Gillard’s no-tax promise for three years.

Now it’s Kevin Rudd’s time to dine. On Sunday we learned that he wants to transition from a fixed-price carbon tax to a full-blown floating-price emissions trading scheme one year ahead of schedule.

Here’s the riddle: why?

It seems strange to bring this up now. Over the last year or so, anger about the carbon tax has dissipated. Australians like the status quo. The GST swung elections back in its day. It destroyed leaders. John Hewson was one victim. The Howard government almost lost in 1998 because of its proposed great big new tax on everything. But now the GST is completely settled.

Furthermore, Rudd’s fiddling with the carbon scheme isn’t costless. It creates a $4 billion hole in next year’s budget. It exposes the government to charges of policy disarray. The way it was announced (a bare leak to the Sunday papers) recalls one of the worst habits of Rudd’s first outing as prime minister – the obsession with impressive sounding but light on detail “announceables”.

But we forget how Gillard’s 2010 bungle completely realigned the debate over Australian climate change mitigation policy. Three years later, her broken promise allows Labor to market Rudd’s minor scheduling change as “dumping the carbon tax”. Even better, they don’t have to actually dump anything.

The distinction between “tax” and “trading scheme” has always been a triumph of semantics over clarity. An emissions trading scheme is a tax. It just happens to be a very complicated one. Just like a simple carbon tax, it prices an externality – pollution. The trick is that firms are allowed to trade their tax liabilities with each other. But that doesn’t make it any less a tax.

(Here’s the Oxford dictionary definition of “tax” if you’re sceptical: “a compulsory contribution to state revenue … added to the cost of some goods, services, and transactions”. Under a floating scheme, the added compulsory cost would be the European price of around $6 a tonne. The current fixed Australian price is about $25 a tonne.)

Gillard’s broken carbon tax promise has ruled the debate over climate change policy in these last three years. Before the promise, Tony Abbott was calling Kevin Rudd’s emissions trading scheme “a great big new tax on everything”. Afterwards he targeted Julia Gillard’s “bad tax based on a lie”.

There is a subtle but important difference in these talking points. The focus on the lie eases political pressure off the policy itself.

Thanks to the Coalition’s rhetorical realignment, it is the carbon tax that is remembered as Gillard’s folly, not the entirety of the climate change program.

Long forgotten is the protracted and contentious debate about mechanisms and international agreements and subsidies and targets and the assumptions of Treasury modelling and the Garnaut Report.

We haven’t heard much about all this in recent years. Australia’s climate mitigation programs include everything from industry subsidies to renewable energy targets to efficiency regulations. Thanks to the broken promise, the whole debate was anthropomorphised. Climate policy was given human form by Julia Gillard and her tax.

Now Gillard is gone and it has all become a bit confused.

Kevin Rudd plans to recoup the $4 billion in lost revenue by cutting climate-related industry assistance, tightening tax concessions for salary-sacrificed cars, and imposing a further efficiency dividend on the public service.

Take the efficiency dividend with a grain of salt – it’s the magic beans of public finance.

But cutting industry assistance is a great idea. Rudd should have taken the opportunity to go further. The Productivity Commission counted $5.1 billion in direct budget support for private industry in 2011-12. If you want to reduces expenditure, surely that’s the first place to look.

Unfortunately, the Opposition is lumbered with an absurdly expensive, ludicrously inefficient and gimmicky hodgepodge of climate change policies clumped under the banner of Direct Action.

The Coalition’s shadow climate minister, Greg Hunt, insists his plan is the true “market solution” to climate change, but has not been able to convince anybody of that.

We shouldn’t place too much faith in market mechanisms. Tony Abbott was mocked for his comments about invisibility yesterday but his basic point was right. An emissions trading scheme is not a real market. It is a highly regulated approximation of a market, where supply and demand are artificially created by the government to meet a political goal. (I detailed this argument in the Drum in 2011.) Of course, Abbott’s attack on artificially created markets should apply double to his Direct Action program.

In retrospect, it seems obvious the Coalition’s plan has been propped up by the unpopularity of Gillard’s no carbon tax promise.

As has the whole climate change policy debate. Not for the better.

Abbott Should Welcome A Debate On The Economy

Kevin Rudd wants to debate Tony Abbott on Thursday. Abbott should welcome it.

Obviously, the proposed debate, to be held at the National Press Club on the economy, is a political ruse. Obviously. And it’s easy to understand why the Coalition doesn’t want to play Rudd’s game.

But party tacticians spend too much time obsessing over the day-to-day pranks of the other side.

More important than saving face, or “winning the cycle”, is this simple fact: Labor cannot be allowed to control the high ground of Australian politics.

Kevin Rudd has changed Labor’s story about the Australian economy. But he hasn’t any policy to back it up.

Julia Gillard and Wayne Swan told us how wonderfully the economy is travelling, and how we ought to be grateful for their skilful economic management.

Lord knows why. This has been a famously bad political strategy ever since Harold Macmillan told the British people they’d “never had it so good” in 1957.

Nevertheless, just two days before she lost the leadership, Gillard doubled down. She attacked “irresponsible” commentators for their “unreasonable pessimism” about a potential downturn.

Business commentators have been going through a particularly glum stage, talking about recessions and other demonic things. Don’t stress. They do that every once in a while.

Rudd has reversed Gillard’s line. Rather than talking about how well the economy has done so far, he’s talking about how everything could fall apart in the future.

In his first press conference, the restored Prime Minister made much of the end of Chinese demand for resources. Rudd turned first to what this would do to the terms of trade, then what it would do to our living standards, then to – gasp! – unemployment.

It’s a big change from Gillard’s “don’t worry be happy”. Probably an effective one too. Fear is a better motivator than gratitude.

But we’re talking here about marketing, not policy. Kevin Rudd is good at looking serious and ruminating on future challenges. This is easy – it is always easy to find challenges.

Translating challenges into legislative solutions is harder.

The last time the Prime Minister tried to fulfil his promise of a diversified and resilient economy, he revived old-style industry policy.

Industry policy was a big part of Labor’s 2007 election platform. The industry spokesman, Kim Carr, spoke about thumping tables in foreign cities to bring manufacturing deals home to Australia.

In government, Labor pinned its industrial hopes on car subsidies. We all know the result. Ford plans to leave the country in 2016.

For all of Rudd’s solemn warnings, there is not much in the government’s policy armoury to deal with the challenges he’s talking about.

For instance, it would be a brave Labor hagiographer who claims the National Broadband Network will help us through the end of the mining boom. The disability scheme might be a good idea, but if so, it is not because it will boost aggregate productivity. And even the most optimistic analyst wouldn’t claim the benefits from secondary education policy wash through to the real economy in less than a decade or two.

The policies Rudd inherited from Julia Gillard are designed for the good times of stability, not the uncertain times of structural change.

So, yes, Kevin Rudd is good at sounding serious. He speaks with authority. He loves to dwell on specifics. But that seriousness is colour, not substance. Abbott needs to press Rudd on exactly how he plans to reform the economy out of the sort of disruption he foresees.

The Coalition is actually on strong ground here. On Monday, they relaunched their red tape and regulation policy. It has problems (I detailed some of those in the Drum in April). But its objective is admirable. An economy’s resilience depends on its flexibility. Over-regulation ossifies markets, restrains entrepreneurs, and ultimately makes an economy less adaptive to change.

Sure, the deregulation plan is inadequate. But inadequacy is better than nothing.

More promising is the Coalition’s desire to revive National Competition Policy. This was originally a Keating-era initiative to make economic reform methodical and deliberative after the often hasty and opportunistic reforms of the 1980s.

If done right, National Competition Policy would tackle things like Part IIIA of the Competition and Consumer Act, which requires private companies to share “significant” infrastructure facilities with other companies.

Part IIIA slows investment and helps create those infamous infrastructure “bottlenecks” Kevin Rudd was so passionate about clearing in the 2007 election campaign.

Part IIIA isn’t sexy. Nor is it likely to displace boats from the front page of our newspapers.

Yet the obvious economic reforms have already been undertaken. The dollar can’t be floated again. We can’t re-privatise Qantas or Telecom.

Kevin Rudd wants to talk big picture. He wants to talk about structural change and China and the dollar.

But unless he has something to announce, it’s all just a superficial exercise in branding, not a deep engagement with economic reform.

A debate on Thursday would give Tony Abbott a chance to call Rudd’s bluster out.

The GFC Debate We Never Had

Almost as soon as the initial trauma was over, the Australian political class repressed its memories of the Global Financial Crisis.

It has been four and a half years since the Rudd government announced its flagship $42 billion Nation Building and Jobs Plan, in February 2009.

This was a big deal at the time. Kevin Rudd declared neoliberalism over. Keynesian stimulus spending was back.

But within 18 months, the two men that had fought the political contest over this extraordinary stimulus package, Kevin Rudd and Malcolm Turnbull, had been dumped by their respective parties.

Others followed. Lindsay Tanner, easily the most economically credible leader in the Labor government, left politics. Another key figure, Treasury secretary Ken Henry, retired the following March.

The survivors of Labor’s kitchen cabinet, Wayne Swan and Julia Gillard, stopped talking about the crisis. They made a few vague and defensive claims about having saved the country, but the Rudd years were apparently too painful to go into detail. Tony Abbott did not ask them to elaborate.

So little is remembered about the Australian response to the GFC other than a couple of iconic phrases. Pink Batts. School halls. Labor debt.

Flicking through the best book published on the episode – Shitstorm, by Lenore Taylor and David Uren – is like entering a lost world. Who now recalls the panicked ban on short selling, imposed just a few days after the collapse of Lehman Brothers? Or the sudden prominence of a usually obscure regulator, the Australian Prudential Regulatory Authority? Or Australia’s attempt to make the G20 the centre of international economic diplomacy?

The return of Kevin Rudd is the return of the spectre of the Global Financial Crisis.

In his first press conference on Friday, Rudd recounted the moment in September 2008 when it looked as if the American Insurance Group was about to collapse. He called George Bush to lobby for the firm to be bailed out.

It was conspicuous anecdote, and a deliberate one.

Then Rudd challenged Abbott to a debate on debt and deficits. That is, the debt and deficits incurred because of his government’s massive stimulus spend nearly five years ago.

His new team has suggested the election is likely to be delayed until after the G20 meeting Russia in early September. Not only is this very same G20 that Rudd extolled in 2008, but he cheekily asked Abbott to accompany him to Saint Petersburg.

On Thursday in Parliament, Pink Batts and school halls were the Coalition’s first lines of attack against the reinstalled prime minister. They were used as they have been over the last few years: placeholders for the ideas of waste and incompetence. But Pink Batts may not be as compelling in Saint Petersburg as they have been on Sunrise.

During the Gillard years, conservatives and free marketeers were lulled into a belief they won the debate over Keynesian stimulus. The insulation program was a small part of the total package, but, since it was implicated in the deaths of four people, has come to define it. And Swan’s inability to get the budget out of deficit has been a massive political liability.

Yet two facts remain. First, the government said it was spending a lot of money to stop the economy going into recession. Second, the economy didn’t go into recession.

Whether one led to the other is moot. Most people believe they did.

In late 2011 an Essential Poll asked who should lead Australia if there was another global financial crisis. Kevin Rudd topped the list at 24 per cent.

Another poll suggested half of respondents believed the way to protect jobs in a crisis was increased government spending. (Nearly a third said they didn’t know. This is definitely the most honest answer.)

For all their complaints of waste and incompetence, the Coalition never seriously challenged the wisdom of activist fiscal policy.

Malcolm Turnbull supported the initial stimulus packages. He only baulked at how much was eventually spent.

And last week, shadow treasurer Joe Hockey said he would take “well-considered government action” in an economic downturn if monetary policy and automatic fiscal stabilisers were ineffective. But he wouldn’t be “sending $900 cheques to dead people” or buying “overpriced school halls”.

It’s a standard opposition ploy. You agree with a substance of a government policy but claim only your team can implement it competently. Garbage, sure, but effective politics.

The ploy worked fine. By the end of 2009 the Kevin Rudd caravan had moved onto Copenhagen and Malcolm Turnbull had been ousted.

The rest of the world has been engaged in a grand debate about Keynesian stimulus, deficit spending, and monetary policy. Australia has not had this debate. The Coalition has not had this debate.

Thanks to our China-led resilience and the purge of our political leadership, Australia has largely forgotten about the whole financial meltdown and economic panic.

Kevin Rudd wants to bring the crisis up again. It’s not clear the Opposition is ready.

In Defence Of Polling

During the 2012 presidential election, Republicans had to torture opinion poll data to suggest Mitt Romney had a chance. Australians have had their own versions of opinion poll trutherism ever since Kevin Rudd was rolled.

But in recent weeks, the standard anti-poll sentiment has taken a more desperate air. On the weekend, Wayne Swan protested that leadership polls are “disrespectful to voters”.

First, let’s accept all the criticisms. Opinion polls are imperfect. Their regular ups and downs are often within a margin of error. Respondents can only answer the questions put to them, and only in the form those questions are asked. They do not usually show how much voters care about specific issues. That level of meaning has to be teased out with other, more qualitative methods.

And polls certainly cannot predict the future. Opinions can change. So the more hypothetical a question, the more uncertain the answer is likely to be.

But even with all these problems, polls are still the only actual empirical evidence we have about what citizens think about their government in between elections.

You’d have to be pretty arrogant to dismiss that.

For all the conspiracy theories about Newspoll, for all the embarrassed self-reflection from journalists, for all the blithe dismissals of polls by Labor partisans, surely it’s good to know what the public thinks.

A bit democratic, even.

The first regular political opinion poll in Australia was held in October 1941. It was a Gallup poll, run by what is now Roy Morgan Research. (There had been another poll a year earlier, commissioned by the Department of Information, but that was done for the government’s benefit.)

The result was conclusive, and important. Fifty-nine per cent of Australians supported equal pay for men and women doing the same work.

This was exciting. Before opinion polls, the only systematic accounting of public attitudes was an election every few years. An election is a very blunt instrument. Now the mind of the public was suddenly revealed to those whose jobs depended on it.

Over the next few years, questions poured out. How did Australians rate the government’s wartime performance? How were they enjoying price controls? Should horse racing be restricted during the war? Was it time to revisit the prohibition question? Should Sunday shopping be available for servicemen?

Yet the new science of public opinion was not universally embraced.

In July 1942, the Labor premier of Tasmania, Robert Cosgrove, demanded the Commonwealth government “take steps” to control the publication of Gallup polls. He reported that the Hobart Trades Hall Council didn’t know anybody who had actually been interviewed, and were therefore convinced the public was being misled.

You often hear that we’re living in a great age of polling. In his 2010 Quarterly Essay, Trivial Pursuit, George Megalogenis said that Australian politics changed for the worse when Newspoll switched from monthly to fortnightly in 1992.

But if there was a real breakthrough moment for polls in Australia, it wasn’t Newspoll in 1992. It was the battle against Ben Chifley’s attempted nationalisation of the banks at the end of the 1940s – the first true public opinion campaign in Australian history, and one which relied heavily on polling.

The political class has had more than 70 years to get used to regular opinion polls. Australia’s poll sceptics need to admit their problem is not with polls. It’s with politicians.

Let’s not blame Parliament’s leadership soap opera on the fact that politicians now have more information about what the public thinks of them.

After all, it is pretty well established by now that Kevin Rudd wasn’t dumped in 2010 because he was doing poorly in the polls but because his most senior colleagues didn’t like him. That is, Kevin Rudd was the victim of crude factional politics. His modest Newspoll decline was just the excuse.

In the Wall Street Journal the day before the 2012 presidential election, Peggy Noonan wrote that, “Nobody knows anything. Everyone’s guessing … Who knows what to make of the weighting of the polls and the assumptions as to who will vote? Who knows the depth and breadth of each party’s turnout efforts?”

Her scepticism was in contrast to Nate Silver’s New York Times prediction that Barack Obama had a 90.9 per cent chance at victory. In retrospect, Noonan looks like a fantastist – someone who holds onto an outlandish view and dismisses all contrary evidence.

Polls are the best information we have about what people think about their government and public policy questions.

Politicians like to say they don’t pay any attention to polls. How terrible if that were true.

Labor’s End: Out With The Old, In With The Renewed

Let’s say Rudd returns to the prime ministership – which seems possible – and then goes on to win the next election – a big ask, but not entirely far-fetched.

What would a reconstituted and re-elected Rudd Labor government look like?

Once the horserace is over there will need to be a government, and it will need to have some policies. Better: an agenda. Even better: values.

Labor won’t be able to run on its record. Leadership changes have a funny way of repudiating all that came before.

Yet this government seems to be coming to a natural end. All the big ticket items over the past few years have been implemented (in some fashion) or abandoned.

It’s instructive to revisit Rudd’s 2007 policy speech, delivered 10 days before the election. This was the last time Labor was thinking coherently about the story it wanted to tell; the agenda it wanted to describe and the values it wanted to project.

That speech pivoted on three things. Rudd was going to repeal WorkChoices. This was done quite quickly. Labor’s campaign managers would love Tony Abbott to dash head first back into the workplace relations quicksand, but that’s not going to happen.

Rudd was going to govern the economy as an “economic conservative”, and would end John Howard’s reckless spending. This went out the window when the Global Financial Crisis hit.
Then he was going to tackle the skills shortage through education reform.

Remember the skills shortage? 2007 was so long ago. Still, an education package is being bedded down. The Gillard Government in its usual hapless way has neutered any political benefit it might get from the issue. Rather than explaining and defending their education policy, the Government seems to assume everybody knows what “a Gonski” is and why we ought to give one.

Other flagship policies of the 2007 election are old news. The carbon tax is up and running. We’ve heard enough about that to last a lifetime. The National Broadband Network is plodding along. It’s way behind schedule, of course, but who’s counting? Now that the Coalition has its own costly broadband scheme, the edge has gone off that debate.

Finally, one of Rudd’s great themes of 2007 was Australia would be a country that “makes things”. Given that he specifically meant those “things” to be “cars”, that theme is unlikely to be revisited.

So what now? It’s an item of faith among Labor partisans that Tony Abbott hasn’t released any policies. But in truth we know much more about the Coalition’s plans for the next term than Labor’s.

Last year I argued it’s more important to hear what Tony Abbott would do on his second day than what he plans to do on his first. A shopping list of policies does not make an agenda.
If Rudd returns to the leadership, this is exactly the challenge he will face too.

Dennis Glover argued in a very good essay published by the Chifley Research Centre last month that Labor has gotten its policy-making process backwards.

Rather than starting with philosophy and deriving policy detail from that philosophy, Glover says Labor has been devising policies on technocratic and managerial grounds, and then using philosophy to provide their post-hoc justification.

There’s a lot to this. Too many politicians think of political philosophy – or its marketing friendly cousin, “values” – as mere adornments on their otherwise technocratic agenda.

Kevin Rudd was a notable offender. Rudd lurched from being an economic conservative in November 2007 to the scourge of neo-liberalism in February 2009.

How could the Labor Party harbour both philosophies under the same roof, let alone in the same Prime Minister? Of course he never really believed either one. Rudd was an ideological chameleon – a technocrat who professed different philosophies as expediency demanded.

First, Rudd wanted to talk about interest rates and inflation and Howard-era fiscal recklessness, so he said he was a conservative. Then he wanted to spend money to avoid a recession, so he said he was a Keynesian warrior.

He only increased the confusion when, having slayed the dragon of neoliberalism, he passionately advocated a “market mechanism” to resolve climate change.

This chameleon approach left him weak when things stopped going his way, after the collapse of the Copenhagen climate change talks. After all, what did Kevin Rudd stand for without his overly energetic policy announcements and his air of invincibility?

Rudd’s supporters say he’s learned a lot about management style and handling his colleagues in his years in the wilderness.

That’s lovely. But at the next election, we’re not voting for who works best with others. We’re voting for a government. Once all the leadership argy-bargy is over, we’ll need to know what a second Rudd government might be like.

At Risk Of An Asylum Seeker Underclass

A reductio ad absurdum is an argumentative ploy to show a proposition is wrong by taking it to its most absurd extreme.

Australia’s asylum seeker debate is one great big reductio ad absurdum.

Take, for instance, the fact that Australia has excised itself from its own migration zone. Or that Australia now has a policy of indefinite imprisonment solely because legislators can’t close a bureaucratic loophole.

Here’s the latest madness.

The Government has released 16,000 asylum seekers into the community as they wait for their refugee claims to be processed. The asylum seekers receive around $220 a week from Centrelink. Most of this goes towards rent. But they’re on bridging visas which stipulate that they’re not allowed to get jobs.

And nearly half of those asylum seekers are subject to the Gillard Government’s “no advantage” rule, which means they could be in limbo like this for a very long time. They will have to wait as long as they would have if they’d remained in a refugee camp. That could be many years.

It’s all a bit of a problem.

On Sunday Opposition spokesman for immigration Scott Morrison suggested on Channel Seven that, since these asylum seekers are hanging around not doing much, why not have them work for the dole?

Under his plan, if asylum seekers in the community want food and accommodation, they’ll have to work on “community projects”. And they’ll be paid in vouchers, not cash.

Morrison’s proposal cobbles together two existing programs with vastly different purposes.

The vouchers part of the policy superficially resembles the income management program imposed on some welfare recipients, most famously as part of the Northern Territory intervention.

But income management is for people who – the Government believes – are unable to manage their finances. Its purpose is to “encourage participation and to increase … financial literacy”.

Income management is infantilising. This proposal is worse. If asylum seekers on bridging visas are capable of working, it ought to be assumed they’re capable of household budgeting too.
Similarly, work for the dole is supposed to encourage welfare recipients to join the workforce.

Yet they want to enter the workforce. It’s just their visa conditions make work illegal.

Without the traditional justifications for income management and work for the dole, all that is left is a proposal to force a class of foreigners to clean gutters and tidy parks for food.
Would this be like prison work? Or is more like indentured servitude? Forced labour? The Channel Seven report speculates they might live in “group accommodation, possibly work camps”.

Just as damning was the quick approval of the proposal by the Immigration Minister Brendan O’Connor: “I’d like to see [asylum seekers] participate and contribute and I think it’s therefore worth considering”.

Recall that Brendan O’Connor has spent the last few months declaring how concerned he is about hypothetical cases of people who hold 457 visas being exploited. Apparently O’Connor thinks it’s ok if the Government exploits people who are holding bridging visas.

Anyway, enough about political hypocrisy.

A few years ago I argued in the Drum that most of Australia’s asylum seeker problems are the fault of the United Nations 1951 refugee convention.

The convention divides migrant populations into two groups. There are those who are moving across borders for economic reasons. Then there are those who are moving across borders because they have “a well-founded fear of being persecuted” – and are therefore eligible for refugee status if they seek asylum in a signatory country.

The former group is assumed to be independent and responsible for their own upkeep. They are supposed to get jobs to get by. For this group, migration is seen as the result of individual choice.

The latter group is assumed to need protection. They become wards of the state, given accommodation, welfare, and social services. Here, migration as sort of global safety net.

But the division is false and misleading. If you browse the Refugee Review Tribunal decisions you’ll see how it collapses when it meets real life.

The problems with the division are magnified when countries deal with those who are seeking asylum – in other words, those who have not been yet granted official refugee status.

The convention gives refugees the same “right to engage in wage-earning employment” as any other citizen.

But we haven’t granted asylum seekers their refugee status yet. And – because they say they came to our shores for protection, not jobs – the Government has decided they should be prohibited from working while they wait.

Add to all that the punishing indeterminacy of “no advantage”, and this is Catch 22 stuff.

The Coalition’s proposal would make the asylum seekers’ legal limbo even worse.

Freezing foreign migrants out of the normal workforce creates exactly the sort of resentful underclass that conservative sceptics of immigration worry about. Immigration policy design can have severe social consequences down the track. Just ask Germany.

We’re living through a great age of migration. We’re going to have to start thinking seriously about what that means.