What went wrong for Labor, and what it means for everyone

12 Oct 2004

AFTER an election in which Labor looked like having a reasonable chance right up to the last few days, the outcome, a net gain of seats to the government, has produced a good deal of shock on the Labor side of politics. Why did things goes so badly?

Right across the country, state-level issues ran against Labor. This partly reflects the fact that Labor is in office in every state, and in some cases, has been in office too long. But mostly, it was idiosyncratic stuff, that could have gone either way, but happened to go against Labor. Even popular Labor governments ran into strife.

Second, Labor suffered again from holding off too long on key policy issues. The tax policy went reasonably well (but would have done just as well if it had been announced earlier), but the forest policy was clearly a disaster in political terms - the substantive merits are more complex, but precisely for that reason needed more argument and explanation. Instead the whole thing was left until the last few days of the campaign. The Labor planners ought to have been able to work out well in advance whether they could work out a deal which would satisfy the unions while achieving enough protection for the forests to keep the Greens onside. If it couldn’t be done, a political strategy to deal with the consequences needed to be worked out. Instead, they seem to have floated the policy and hoped for the best. This allowed Howard to announce a non-policy in response, without any time for Labor to do anything about it.

Third, and contrary to a lot of post-election claims, the campaign showed that health and education can win elections. The problem for Labor was that Howard was willing to outbid them, putting a heap of money into both bulk billing and state schools, even if it was poorly targeted (in policy rather than electoral terms) and hedged about with all sorts of silliness, like the idea of channelling funds through through parent bodies. As I said several times during the campaign, Howard’s concessions, on Medicare in particular, mean that he has admitted defeat on the core ideological issue of the size of government.

Fourth, there’s economic management and the scare campaign on interest rates. Undoubtedly these were the winning issues for Howard, as he had hoped. Contrary to some claims, I don’t think the two issues can be separated. And it was always going to be hard for Labor to make the case that Howard’s reputation as an economic manager is overblown. (I did so here (0), but I’d hate to try and condense it into a 30-second spot). A big problem here is the continuing memory of Keating, which makes the mistakes of fifteen years ago still powerful electoral ammunition for the government - it’s as if Gough Whitlam had been able to run against the 1961 credit squeeze.

Finally, there are the prospects for Howard’s next term. It’s clear enough that he will be able to push through the remaining elements of his 1996 program, the full privatisation of Telstra and a final instalment of industrial relations reform. Assuming that the Coalition wins half the seats in the Senate, this will require the support of either Family First, or one of the Democrats. Neither can be taken for granted (for example, Family First does not support the privatisation of Telstra), but the government’s position is so strong that some sort of deal will almost certainly be struck.

For the rest, the government’s campaign platform was designed to match Labor - so it doesn’t imply a mandate for anything much in the way of free-market reform. It’s possible that, as on some previous occasions, Howard will repudiate his promises as ‘non-core’ and embark on a new round of radical reforms. This is, however, the less likely outcome. Even the Telstra privatisation will cause a lot of political pain.

In any case, there aren’t that many options on the table. Tax reform is unlikely to be affordable, the government is now committed to saving Medicare and bulk billing, and pushing privatisation on to Australia Post seems most unlikely.

The big issue is whether Australian can continue continue to avoid a recession. The imbalances we’ve piled up in terms of household debt, the trade and current account deficits and the inflated price of houses can only be sustained, if at all, with low world interest rates, and those rates depend on the willingness of the Chinese and Japanese central banks to sustain them. Howard’s reputation as a good manager owes a lot to luck, and luck always runs out in the end. But Howard’s luck has lasted longer than most.

Professor John Quiggin is a federation fellow in economics and political science based at the University of Queensland and the Australian National University.





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