There are three areas I think Swan should challenge Hockey on:

(a) The claimed $24 billion of savings – which somehow dropped from $40 billion odd early in the campaign with few people noticing. Most of it is smoke and mirrors, with cuts coming from not factoring in Labor spending which disappears from the forward estimates if the mining tax doesn’t go ahead. As I suggested last week, I think the reality of the Coalition’s position is to introduce swinging cuts not foreshadowed in the campaign, which will no doubt be the task of the ‘deficit and debt reduction’ taskforce Abbott previewed in his agenda for office at the campaign launch yesterday;

(b) The stimulus. The Coalition are now running the line that it was irrelevant to Australia’s performance – something contested by almost every economist, and which makes it unclear why the Coalition voted for the first tranche of stimulus under Malcolm Turnbull. Hopefully both Swan and Hockey will both be challenged on what they would do if there is a double-dip recession or further contagion from global financial kerfuffles – something so far only mentioned by Kevin Rudd;

(c) The fact that the latest economic assessment from the Reserve Bank shows the remaining stimulus spending is still important in propping up growth, given that private demand is still weak, and business investment as well in some states – particularly in Queensland where its growth is very sluggish.

Update: Tim Colebatch reports that the Coalition has only submitted 1% of its spend to Treasury for costing, and has given up even indicating costings on policies being released.

Parliament is only sitting for two weeks, and then won’t return until September. The delivery of valedictory speeches in the budget sitting shows that this term is reaching its parliamentary conclusion.

Let’s leave aside all the faffing about of the confected ‘Rudd’s leadership on the line’ narrative.

One little noticed facet of the recent onslaught on the government has been the virtual disappearance of Tony Abbott.

In one respect, that’s sensible politics – keep the focus on Rudd. But that may backfire, as I said earlier. It also suggests that the Coalition are well aware that Abbott’s terrible personal ratings, while not the subject of febrile media commentary, make him a liability when it comes to the campaign. Nor is their much evidence that the Antipodean ‘Party of No’ has spent much time on policy development.

So, there might be some advantage to going early. It would put a stop to the endless repetition of Rudd and doom noise, and particularly if there are attractive policy options in development, there may be advantages in catching the Coalition unprepared. And the polls may indicate volatility rather than doom for Labor.

Those are the arguments for. What are the arguments against?

Elsewhere: Richard Farmer:

There’s only one good reason why Kevin Rudd will not scurry off to the polls early in August and that’s if he thinks he certainly can’t win. Even if the prime ministerial judgement is that the prospects are a little dicey he will be encouraged to take the plunge. For delay that allowed Parliament to reconvene after the winter break would be confirmation that Rudd thinks defeat is likely and faced with that prospect his Labor caucus colleagues would start seriously thinking about the Julia Gillard option. If being thrown out even before an election is too horrible to contemplate, then it is time to get a hurry on.

So far the idea of a leadership challenge is no more than that — a vague thought in the back of the minds of those in the most vulnerable seats as they mull over all the “what ifs” about the forthcoming election. Opinion polls — the unreliable and meaningless guide that they are at this stage of the electoral game — do influence backbenchers and especially so when they are pointing in the same direction as their own interpretation of what the public in their own electorate thinks. When a young hard head such as former federal ALP secretary Gary Gray starts getting anxious, we can deduce that the message he is getting from the people of Brand is certainly troubling.

Not that even a new leader would fix the big problem that Gray has identified. Labor will go to the election advocating a super profits tax on mining whether it is a Rudd, Gillard or some-one-else led government. The best that ALP members from Western Australia and Queensland can hope for is a change or two at the fringes that will take enough heat out of this particular debate to get people thinking about other things as well.

The best way of broadening the issues of the political debate would be to call an election quickly and if Rudd was listening to my advice, he would be driving out to Government House this coming Sunday afternoon and thus neutering any talk of a caucus revolt before the next Newspoll produces a predictable next round of leadership speculation.

Update: According to Barrie Cassidy, the Coalition have been coming up with some policy ideas. Whether they’re policy ideas or thought bubbles and stunts, though, is another question.

Update: Possum has published a leaked minute which suggests options are being kept open for an August 28 election.

Not only did Abbott take the obvious route, for a Liberal, of public service bashing, but he also affected a disdain for the public sector which would put even John Howard to shame. Amidst his paeans of praise for small business and lauding of the mining industry, he struck another related note -

(a) that the NBN would destroy Telstra, and that communications infrastructure was a task for the private sector;

(b) that private health was a public good, and that the rebate should stay as is;

(c) that Medibank Private should be sold, no questions asked;

(d) and the doozy of the night – that the government shouldn’t build GP Super Clinics because they compete with corporate healthcare!

Make no mistake, this dude is as right wing as they come. Leaving aside the ranting about the Resources Super Profits Tax, and the drumbeat of negativity, the one theme that did emerge from Abbott’s speech was a complete disdain for anything the public sector, and public spending can achieve.

Abbott’s protracted campaign against all and any stimulus spending, echoed by his fans in the press gallery, is cut from the same cloth. What we’re seeing is a brazen agenda to discredit public purposes in favor of corporate interests, and his conservative rhetoric about government eschewing worthy causes is only the tip of the iceberg.

Repeatedly over the past two years, Rudd has demonstrated that he aspires to be a great reformer who will leave a mark on history. He has also demonstrated that he has a risk averse, conservative streak that causes him to turn tail at the first sign of trouble.

This trait has seen him repeatedly offer great visions only to back down when the going gets tough. The tendency to overpromise and underdeliver has been at the heart of his recent poll woes. But this budget reveals that such a political personality has some compensations when we look at the thinking behind some of the key budget measures…A similar dynamic can be see to be at work on health. Rudd set out to engage in the major structural changes the sector needed to tackle the challenges of the coming decades. In the end, what he delivered was a nudge in mostly the right direction.

Conventional wisdom has to come from somewhere, however, and the government’s approach to a fairly minor but occasionally politically sensitive area – sports funding – is entirely consistent with this thesis.

At the start of its term, the government conducted the Crawford review of government sports funding in Australia. It took a hard look at the way government money is spent on sport. While it made some fairly uncontroversial observations about the lack of coordination in sports programs, the need to focus on participation, and so on. But its most contentious argument was the idea that Australia grossly overspends on Olympic sports, which has minimal impact on anything other than TV ratings. Unsurprisingly, the Olympic sports, and the Australian Olympic Committee, lobbied furiously against this idea, and sought a bucketload more money so the new generation of Simon Fairweathers, Jai Wallaces, and Bridgette Gustersons can bring everlasting glory to Australia.

And so, quietly, the government has finally responded to the report. It’s adopted some of the recommendations, with a focus on increased participation (especially for women and disabled athletes). But the Olympic movement won their battle:

At the elite level, $237 million is allocated over the next four years ”to allow our elite athletes to continue to entertain and inspire us”. That includes $52 million for the Australian Sports Commission’s high-performance programs and $62 million for the Australian Institute of Sport.

Australian Olympic Committee president John Coates was happy last night. Coates said the increase would be sufficient to ensure Australia went into the London Games on an equal competitive footing and that sports were able to retain top coaches and identify emerging talent.

A nudge in the right direction, certainly. But tens of millions of dollars will still be spent on a few minutes’ entertainment every four years, sucking money and effort from more valuable pursuits.

Anybody like to venture a guess as to what’s going to be in it?

Update: [by Mark] My take  on the reply is here.

It’s being billed as an opportunity for Wayne Swan to save Kevin Rudd, which I think is pretty hyperbolic (and it’s always interesting to contrast the journosphere’s attack on the government for hyperbole with their own commentary). But there is no doubt that what’s anticipated to be a “no frills” statement is now of more political importance given what’s been happening recently in the polls. While the concept of the “Budget bounce” is now somewhat discredited – given the public disinterest in the latter years of the Howard era in responding positively to the ritual handouts – the ALP will certainly be hoping that tonight is the first step on the road to political recovery.

Wayne Swan will be hoping both to cement Labor’s reputation as economic managers (and the current turmoil in world markets and in the Eurozone will no doubt be used as a point of contrast with Australia’s fiscal and economic position) and to use the opportunity of a set piece speech which has a large unmediated audience to convey a message which will concentrate minds on the case for the Government’s return. So there probably will be no huge surprises, but it’s being tipped that some major announcements in skills and training will supplement what we already know about the Government’s intentions in health and super and other policy areas.

The Budget will also shift the dynamics of the political debate, leaving the opposition with no further wiggle room on policy and finance, unable any more to say “wait til the Henry Review and the Budget”. The former excuse has also run out of steam, with the previous suggestions that the opposition itself would use a resources rent tax as a pot of gold for promises falling victim to their jumping on the cynical mining industry bandwagon (along with the corporate cheerleaders among Labor premiers).

Similarly, the Government will be trusting that an improved fiscal outlook will defang a lot of the rhetoric about “debt and deficit”, and enable Labor to get back onto the front foot. A virtue will be made of austerity, with Swan no doubt about to claim that he’s eschewing the big ticket spending that Costello/Howard budgets sought to lure votes with in election years.

It will be interesting to see whether Wayne Swan, as I suggested he should, also addresses the question of what the Government can do to maintain living standards for electors, and in this context, the personal tax cuts and lifting of thresholds and the Low Income Tax offset may feature prominently.

Tony Abbott will be under great pressure in his reply on Thursday night, because we’re about to get to that part of the electoral cycle where the negative message has been pushed about as far as it can go, and he has to come through with some sort of idea of what sort of Government he would lead.

There’ll be a surfeit of instant commentary, no doubt, and you might like to take a look at Crikey’s live blog, whose cast of thousands includes John Quiggin, or the Twitter hashtag #budget. Ben Eltham also has a worthwhile preview at New Matilda.

I’ll save my further thoughts on the Budget for a more considered look some time over the next few days.

Elsewhere: John Quiggin in Crikey [paywalled].

Update: Peter Martin says that Swan will announce a return to surplus in 2012-13.

For those who don’t want to wade through all of it, Bernard Keane has analysed Abbott’s address at Crikey:

Yesterday’s economics speech by Tony Abbott was a major disappointment, confirming rather than reversing the impression that the Opposition leader and economics don’t have much more than a nodding acquaintance.

Keane’s on the money in suggesting that it’s thin gruel, when you strip away the decontextualised Keynes quote and the statistics. Its sole take away message appears to have been contained in the twin claims that the 1997 Asian Currency Crisis was a bigger threat to the Australian economy than the Global Financial Crisis (demonstrably untrue, but in the Abbott style of “our crisis was bigger than your crisis”) and that Tony is not actually the ghost of B.A. Santamaria but rather imbued with the values of Peter Costello and John Howard. (It would be interesting, of course, to discuss precisely what constituted the values of Peter Costello and John Howard.) So, it’s really an attempt to reassure the business horses who were stampeded by Abbott’s recent thought bubbledom.

For what it’s worth, I thought Joe Hockey made a better fist of defending a very shaky brief on Lateline last night than his Leader, though Tony Jones was able to expose the contradictions in what passes for reasoning among the Coalition – the Liberals stand for low taxes, but on the other hand, we might need an awful lot of levies because of Labor’s terrible wasteful spending. What Hockey did show, as did Abbott, is that the cupboard on either substantive policy measures or the savings that would need to be identified to make the ‘debt’ line more than rhetoric is bare. It’s certainly not impossible for the Liberals to advance a fiscal policy from opposition, but they’re always waiting; waiting for Henry, waiting for the Budget. As with health, this mob don’t have much of a clue what they might do if they were elected. They just know they’d like to be.

Elsewhere: Public Opinion.

Update: Ben Eltham in New Matilda.

The state election campaign was a shambolic affair, and it was almost lost. Despite an inept performance, Labor was re-elected primarily because the “jobs” theme and the promise to continue to invest in public infrastructure despite the economic crisis touched a chord with voters. Anna Bligh made much of standing up to credit rating agencies.

So why the turnaround? A couple of factors are at work. The first is Bligh’s inability to set her own direction, adopting rather the path of least resistance recommended by right wing apparatchiks in her office. Let one grumpy voter in a focus group whine about debt, and, well, forget the election promises. Secondly, there’s the misplaced obsession with “strength”, driven by the same advisers. This apparently means tossing Labor policy out the window and pursuing supposedly popular brawls with unions.

This mob have an inability to understand that Labor governments always need to pursue a direction contrary to that favoured by the big end of town to be a success. Talk of ‘reforms’ in the context of short-sighted privatisations is quite risible in this context.

Nor is Bligh apparently capable of learning from the past. Wayne Goss’ government was defeated not by the ‘Koala road’, but in large part because years of managerialist lunacy alienated the public sector vote. Similarly, the slashing of services in outer suburban and regional areas and decisions such as the one to close down the QR workshops in Ipswich in the midst of a recession and deep structural economic change had a lot more to do with the rise of One Nation than some innate Queensland redneckism.

Peter Beattie knew all this.

The irony – or rather, one of the many ironies – is that the government and top bureaucrats have recently been pontificating about the need for public sector spending to create demand in a sluggish economy. That seems – insofar as it means anything – only to apply to bricks and mortar and roads and bridges and to completely eschew people’s livelihoods. All ‘Bligh the Builder’ is paving the way for at the moment is her own defeat.

If you’ve got a lot of time on your hands, here’s the Budget papers.

So what goodies from Unkie Wayne did I miss while I was out enjoying a very nice meal?

You came into politics as a rare beast – successful in business, charismatic, intelligent, representing a vibrant small “l” electorate in Sydney, a man not frightened to take on a case or a cause, a serious contributor to the climate change debate and a tough nut. Not a bad resume for an aspiring Prime Minister.

Yet, within just a few months you are in danger of throwing that reputation to the dogs and joining the queue of failed opposition leaders.

At the G20 this week Obama said he gave only one piece of political advice to Gordon Brown, facing an election – “Gordon, good policy is good politics”. He said results may not be immediate, but would prevail.

Not bad advice, Malcolm. Why don’t you forget that Peter Costello sits behind you – and just do what your instinct and brain tells you?

I think it’s too late now for Turnbull to take that advice. The irony of the Liberals’ leader as saviour fetish is that it prevents a leader from actually leading from opposition, because there’s always another waiting in the wings. Turnbull’s just taking his turn as the sacrificial lamb, and I wouldn’t be surprised if he doesn’t last the term. Perhaps that’s why he and Hockey are talking about blocking supply. An early election might be his only hope of survival.

What Turnbull needed to do was to do a Tony Blair or a David Cameron – take on the recidivists in his own party, strike out in a new direction, and dare the dissidents to do their worst. His failure to do this will most likely see him become a footnote in Liberal history.