PM's Loose Talk Sparks Tensions

by Glenn Milne - The Australian

Not only has the Prime Minister tried to drive a stake through Peter Costello's leadership ambitions, but to make matters worse, on Saturday night the Treasurer's beloved Essendon got smashed as well.

Asked yesterday about the shattering defeat Costello, who's the Bombers' No.1 ticket-holder, remarked ruefully: "Yeah, sometimes coaches can hang around too long."

Whether he meant it or not, some took the reference to be aimed not at Kevin Sheedy but at John Howard. That's the point; from here on, every comment or action by either Howard or Costello will be viewed through the distorting prism of their increasingly visceral leadership contest.

It will be the same for the Government as a whole. As in the case of the Hawke-Keating struggle, the administration will increasingly become gridlocked. All decisions will be weighed against the impact they have on either man's ambitions.

Even without events in Athens, this was already happening. The camp within the Government betting that Howard had decided in his own mind to go this term, and the to-ing and fro-ing over the proposed scale of the budget's work-to-welfare reforms were seen as evidence that Howard was not interested in tackling such politically sensitive reforms. Rather, the theory went, he'd rather avoid the political pain, walk out of office with his popularity intact and leave the hard yards to Costello as his successor.

Obviously in the wake of the Prime Minister's remarks in Athens, that theory, at least, can be junked. But already senior Government figures are dreading the final budget rounds to come this week.

And of course the two key figures involved in these final decisions will be Howard and his Treasurer. In the wake of last week's eruption these meetings will be shot through with tension, each man eyeing off the other. The key relationship within the executive is effectively finished.

Certainly Howard and Costello will continue with the business of government. Ultimately the fate of both depends on it. Never friendly, only overcordial, their relations are now shot through with suspicion. The trust, if there was any left after Howard dudded Costello on the leadership transition in mid 2003, has now completely gone.

The Prime Minister's insistence that his Athens comments were misconstrued has only made matters worse. Howard, aware of the story about to break in Australia on Saturday, put this to his deputy in a phone call on Friday night. His attempts to head off the crisis failed.

Costello didn't believe him then and he doesn't believe him now. And this is the important point. It does not matter what Howard does; if Costello thinks the statements were wilful, deliberate and provocative – which he does – then that is all that counts in terms of the fallout between them.

Costello is on solid ground here. A reprise of the trip belies a pattern of behaviour on the Prime Minister's part. First there were his musings on leadership in the context of the election of the new Pope; with a smile playing around his mouth Howard said "patience was a virtue" when it came to high office. The laughing reporters on the trip were clearly in no doubt it wasn't Cardinal Ratzinger he was referring to. The shared jollity must have stuck in Costello's craw.

Then, on Saturday last, a story appeared in the Daily Telegraph, penned by political correspondent Malcolm Farr. Overseas trips with the PM ensure good access – one of the reasons senior journalists go on them. Farr's well-sourced story asserted without equivocation that while Howard was committed to a smooth leadership transition it would be "later rather than sooner".

Then came the Athens declaration; that Howard believed he could beat Kim Beazley. The obvious inference; he was planning to go to a fifth election. Given the previous incidents recounted above, Costello believes Howard had form and had been working up to his pronouncement.

Now Costello has retaliated. In a disciplined performance on the Ten Network's Meet the Press yesterday, the Treasurer drew his own line in the sand. Referring to the seamless 1995 leadership transition in which a stricken Alexander Downer handed over to Howard, courtesy of Costello deciding not to contest, the Treasurer made the message extant; it was the manner of this transition that set the Coalition up for the current sustained period of electoral success.

The Treasurer's challenge to Howard was clear; he must do the same thing or risk consigning the Coalition to another long period in Opposition. The implicit threat was there: Fail to do this and I will come after you, a prospect which risks tearing the Liberal Party apart.

Now the media will demand Howard respond. This will require a new formulation on the leadership from Howard. But anything less than an acceptance of Costello's position – which automatically infers a handover – will not satisfy the Treasurer.

So the Prime Minister is in a tricky position, put there by Costello. But so too is the Treasurer. If the Prime Minister stands him up, the Treasurer's ticker will become the issue; has he got the bottle to tear Howard down? Costello alone knows the answer to this question.

Howard still has the power of incumbency. But his ill-discipline and self-indulgence in Athens has already ceded Costello the moral ascendancy and the political momentum. It has allowed Costello to paint himself as the hard-working Treasurer, whose toil on the budget has been betrayed by a self-absorbed Prime Minister.

This is not the way Howard would have wanted the penultimate episode of their leadership rivalry to have begun. He would have been better served by Costello making a tactical error, then moving on him quickly before Costello had time to organise his still depleted numbers. The result would have been a humiliating defeat for the Treasurer.

Now Costello is in a position to garner the sympathy of the party room. It is Howard who is the destabiliser. It is the Prime Minister who has rendered the budget dead in the water as a launching pad for the Government to re-establish its economic credentials in a post-election atmosphere of rising interest rates. It will now be looked at almost solely in terms of how it affects Costello's chances of assuming the leadership and Howard's chances of retaining it.

It's going to be a tough nine days until budget eve.