In 1996, the economy was recovering under Keating, albeit too slowly, and like Rudd today all Howard offered was forward momentum and the excision of everything you hate about the incumbent.

In 1998 the main economic achievements were offshore, the proposed GST was lied about, and Labor got 51% of the vote.

In 2001 and 2004, the issue was national security: first bin Laden and the Tampa, then Mark Latham.

No opposition leader has ever won on the purely technocratic terms of economic management (besides, the idea that the best thing government can do is get out of the way tends to undercut any credit for good economic news). Opposition leaders win when framing their appeal in terms of a cultural shift. Menzies in 1949, Whitlam ’72, Fraser ’75 (OK, so he went into the election as PM but the principle stands), Hawke in ’83, Howard in ’96 – all of them promised a cultural shift, a new way of looking at things rather than just a new set of faces or a new way of doing things.

Even Keating’s appeal to Labor in ’91 with the Placido Domingo stuff promised a change being as good as a holiday and a new way of doing things whhile staying in government.

Howard’s themes in ’96 talked about buying your own home (stop that bitter laughing), civility in public discourse (I said stop it) and an end to political correctness, relaxed & comfortable etc.

Beazley and Crean never offered any profound cultural shift. They thought they were the incumbent, having to compromise to get legislation through, the small target (rather than making the government the target, as Rudd is). This is understandable for the only Labor leaders who spent more of their careers in government than opposition: it’s also understandable why they never made it to the Lodge (except for dinner).

(1) The Herald Sun data does not change my point about duopolies. A longer term view of supermarket prices shows that they did not maintain their real value from 2003 to 2007 (this is from an Australian Consumer Association ‘typical basket’ study, and I note that the ACA are often vociferous critics of the supermarket chains). Since the Coles/Woolies so-called ‘duopoly’ existed since before that time, I hope we can agree that any recent rise in some components of the CPI is very unlikely to be due to any ‘producer pricing power’; and

(2) The fact that you use the term ‘free’ in relation to healthcare and education shows that we live on different planets. There is simply no such thing as free education or free health. Anyway, the main game is in the method of delivery, not funding source (ie. privately provided universal education can be funded through taxation). As I’ve asked others before: why are you willing to trust your food supply (and your pharmaceutical supply!) to private enterprise, but not all of your healthcare?

Cheers
BBB

Thanks for your considered response. To your point about the pricing power of the Coles/Woolies duopoly, I refer you to my post above about the increase in the cost of food staples relative to the CPI.

I don’t agree with you in principle that pure economic liberalism should extend to health and education, an argument I attribute to a naive belief in the efficiency of market-directed outcomes.

Free, universal healthcare and education are the bedrock of a civil social democracy. If we start applying the profit motive to these goods, we risk destroying what little social fabric we have left.

The great irony is that Howard is intent on winning his ideological war in these areas, nominally for economically progressive reasons, but in fact to achieve socially conservative ends.

In all other areas, he serves the interests of the capitalist class against consumers.

But Howard, as a result of his ideological obsessions, has been focused entirely on freeing up a labour market that already works efficiently and fairly.

There are many perfectly rational reasons to oppose Workchoices, but I have not encountered the “it ain’t broke, don’t fix it” line before.

Please explain.

“you’re assuming the answer to the real world economic concerns like rising grocery prices is on the demand side of the equation – cutting taxes, increasing subsidies etc”

Not at all. It’s definitely part of the solution, though. One other part is improving conditions for business investment, thereby increasing marginal productivity, real wages and the purchasing power of ordinary workers. No doubt this is why you are in favour of lower company and capital gains taxes.

What we need is greater liberalisation of product markets.

Agree 100%. And bring on the liberalisation of education and health markets! Depressingly, I fear you will have many special reasons for excluding these key markets…

But Howard, as a result of his ideological obsessions, has been focused entirely on freeing up a labour market that already works efficiently and fairly.

This line is a travesty when you consider that we continue to have over 4% unemployment. How is 4% under-utilisation efficient? Wages in many areas are above their market-clearing rates. This is a human tragedy of massive proportions. Wealth re-distribution may be morally defensible(to a degree). But meddling in the labour market is a really braindead way to achieve it. It’s no more rational than looking after the low-paid by implementing retail price controls. Ask the low-skilled unemployed, some of the most vulnerable members of the community, about the ‘fairness’ of exclusionary minimum wages.

Nominally an economic liberal, Howard through his policies has in fact increased the duopolisation of Australian business (Woolies/Coles; Shell/Caltex; Qantas/Virgin; Fairfax/News Ltd; Telstra/Optus), with a resulting increase in producer pricing power.

These comments about duopolisation are also misconceived. Duopolies in themselves do not, have not and will never increase producer pricing power. The number of suppliers/purchasers in a market matters much less than is often assumed. This is why that that most evil of duopolies, Coles/Woolies, has not been unable to maintain the real prices for its products: As has been pointed out before, since at least 2003 nominal prices for groceries have not kept up with the CPI. That is, the relative positions of Coles/Woolies vs individual consumers has gotten better for the ordinary consumer since 2003. Now, how can this be if Coles and Woolies have ‘producer pricing power’ as you claim? Do you think this the outcome of choice for lazy duopolists?

Cheers
BBB

THE cost of staples such as bread, fruit and vegetables has risen by more than three times the rate of inflation over the past three years.

And the cost of childcare and fuel have leapt by more than four times the consumer price index.

A Herald Sun analysis of CPI components over the last three years confirms the mounting cost of living pressures facing average families.

And things could get even tougher next week, with the Reserve Bank odds-on to raise interest rates again.

The latest Australian Bureau of Statistics figures show the consumer price index rose by 8 per cent since June 2004.

Nominally an economic liberal, Howard through his policies has in fact increased the duopolisation of Australian business (Woolies/Coles; Shell/Caltex; Qantas/Virgin; Fairfax/News Ltd; Telstra/Optus), with a resulting increase in producer pricing power.

What we need is greater liberalisation of product markets. But Howard, as a result of his ideological obsessions, has been focused entirely on freeing up a labour market that already works efficiently and fairly.

As to productivity, Howard has stifled entrepreneurship and increased regulation – again at complete odds with his public image as a liberal. And he has frittered away from the windfall from the commodities boom, instead of investing it updating the nation’s social and economic infrastructure.

I wouldnt be ruling a Lib win out just yet, they look tired and stale, but I havent seen any great efforts by rudd to differentiate himself from Howard, that may be his undoing.

Another interesting thing about your post is the reference to slowing productivity. Why do you think that has happened? Not enough capital out there for investment in plant/equipment, etc.? Or just the economy soaking up more and more marginal workers (ie. the low-skilled)?

Cheers
BBB

Sure governments can influence growth at the micro level through industry policy. But the big macro lever – control over interest rates – is held by the Reserve Bank. And even then, borrowing costs are overwhelmingly influenced by outside forces. The big fall in rates through the 1990s was a legacy of globalisation and inflation targeting. The influence of fiscal policy in demand management is over-rated, and while Howard and Costello have made a fetish of budget surpluses, anyone who knows anything about economics will tell you it is not the size of the budget balance that matters but the change from one year to the next. If we were to go into recession, it would be entirely appropriate for the budget to go into deficit. But of course, Rudd has been wedged on that one and dare not tell the truth for risk being seen as economically irresponsible.

In fact, there is a good case to made that Howard’s economic “management”, such as it is, has represented one of the greatest wasted opportunities of modern times. He has had the great good fortune to govern in a particularly benign economic period internationally, with growth here buttressed by the biggest commodities boom in at least a century. Yet he has frittered away that windfall on middle class welfare and expensive exercises in creating wedges and putting out political fires to maintain his own grip on power.

Labor is doing a good job moving the economic debate away from macro-economic indicators to the real world of shopping for groceries, paying rent, educating kids and filling up the car. But Rudd should also be able to find ammunition in the fact that net foreign debt has doubled since Howard came to power (remember the debt truck?), we have run a trade deficit for five years despite a 50-year high in our terms of trade and our interest rates are second highest in the OECD after New Zealand. Yes, the unemployment rate is low, but we have run out of skilled workers because of a lack of investment in education and training. Productivity has slowed, infrastructure is inadequate and we are unable to growth the economy much beyond 3 pct per annum without generating inflation pressures (which partly explains why rates have gone up four times – with number five due next week – since Howard’s rates lie in the 2004 election campaign.)

One of Howard’s great supposed strengths, then, is exposed as a mirage. His other, national security, is even more flimsy, given the Iraq fiasco and his outsourcing of our foreign policy to an incompetent and corrupt cabal in Washington.

Just why would anyone vote for this man again??