Labor Must Unveil Economic Credentials

by Dennis Shanahan - The Australian

So, now what does Labor do? Labor has pulled itself out of the fatal zone on the back of the unions' campaign on industrial relations reforms in the past couple of months. But what does it do in the next few months?

John Howard is conceding he has "lost some bark" and there is public unease about the industrial relations changes. After a year of momentous legislative change Coalition primary support is at its lowest for two years.

At the end of the parliamentary year, Labor is feeling buoyant after Wayne Swan has managed the first political hit on Peter Costello over the appointment of Liberal supporter Robert Gerard to the Reserve Bank board when he had an outstanding tax office claim of up to $150 million through tax evasion.

Even satisfaction with Howard's performance has barely lifted off a four-year low, back to the bad old days of early 2001 when he was being labelled "mean and tricky", the Coalition was being hammered by high petrol prices, small business dissatisfaction with the GST paperwork was hurting and the Liberals had lost a blue-ribbon seat in Brisbane.

According to Newspoll, the Coalition's primary support is at 38 per cent, a decline of 10 percentage points in just six months, which would mean a Coalition defeat if an election had been held last weekend.

Why then do I ask what does Labor do now? Doesn't it just sit back and harvest the disaffection over industrial relations, get ready to say "I told you so" as the economy slows and keep the pressure on Howard to make a decision whether he goes to the next election? Well, no, at least it shouldn't, because it has been there before and fallen horribly flat.

The past 48 hours has made it imperative that Labor look carefully at where it is and where it has to go to have any hope of pegging back what in normal terms would be an unassailable Coalition majority of 24 seats and a raft of Labor seats on a knife's edge.

Labor has three challenges it must meet if it is to win the next election: economic management, national security and leadership.

While the Gerard appointment has hurt Costello in terms of political judgment, particularly among his colleagues, it is unlikely to hurt his credentials as an economic manager. Swan doesn't even assert that it is a question of economic credibility, for the shadow treasurer it is more about a question of Costello's character and suitability to lead: "He has completely capitulated because his standards have found to be wanting. He's failed the integrity test," Swan crowed this week.

But having returned to his last of the economy, Costello showed no signs releasing his grip on claims for good economic management. Costello has been able to point to record low levels of unemployment, historically low levels of interest rates and budget surpluses.

Howard maintains - even as a former treasurer - that Costello is the best Treasurer Australia has ever had. "The best way to protect workers in this country is to have a strong economy," Howard said yesterday.

This is where the Coalition will return every time, like a dog to its dinner: economic management, low interest rates and low unemployment. This is Labor's challenge, to demonstrate economic credentials and show that appointing a dud to the Reserve Bank board is about more than Costello's personal judgment and lack of application.

Of course, Costello was quick to push this point. As the national accounts were released Costello was quietly optimistic about the projected 3 per cent growth for the economy despite the "slow start" to the year. Surely Costello would have been quietly relieved, in a perverse way, for the Gerard affair, which overshadowed Labor's claims it intended to make foreign debt one of the three main issues of its agenda.

When foreign debt hit a record high last week, Labor was distracted by the Gerard affair. Further, Labor's industrial relations spokesman, Stephen Smith, was virtually without any spotlight despite the passage of the industrial relations reforms. Labor was on a short-term winner but needed to keep pressure on the long-term gain of industrial relations.

On security issues Labor has improved its position, according to Newspoll. Given that only 12 months ago this week, Mark Latham appointed his shadow ministry and had Kim Beazley in defence and Kevin Rudd as foreign affairs spokesman, there has been a better performance as Beazley's experience has been on show and Rudd's prosecution of an Iraqi exit strategy, more troops in Afghanistan and the wheat board payments to Iraq have hit home.

But for Labor the real political challenge is leadership.

Costello has spiked the Liberals' leadership tensions and Howard can comfortably craft a way out of the industrial relations doldrums. It seems extraordinary but this week two years ago Latham was elected as the leader of the Labor Party to oppose Howard at the election.

Costello's declaration, to his own supporters and boosters as to anyone else, that he won't challenge Howard, has answered a question Labor really didn't want answered before Christmas. Just as Beazley's satisfaction rating is lifting, Howard, who is still preferred by two-to-one over Beazley as prime minister, is the Labor Party's biggest threat.

On historical trends, unless there is a dramatic change on preferred prime minister next year, Labor can't win with Beazley as leader on a campaign of industrial relations resentment.

But maybe Labor just wants Beazley to do what he does best - heal divisions, limit damage and go close to victory. Any alternative aimed at a go-for-broke win smacks too much of the helter-skelter ride Labor had under Latham.