Last week was one of the most politically eventful since the election of the Rudd Government. But how crucial was it to the future of the Government and the Opposition?
The National Accounts for the March Quarter showed a seasonally adjusted growth in GDP of 0.4%, avoiding two quarters of negative growth and denying oxygen to those who wanted to call a recession. Moreover, there was evidence that the fiscal stimulus packages had contributed significantly to that outcome, although favourable terms of trade had contributed even more. Kevin Rudd and Wayne Swan were delighted, like parents of a lost child on its return. They had feared the worst and the onslaught of criticism that would have followed. Their relief was palpable. In contrast the Coalition was frustrated. While it might be unfair to assert that Malcolm Turnbull and Joe Hockey wanted recessionary figures, they were clearly disappointed that one of the main planks supporting their debt and deficit platform, namely that the stimulus packages had not been successful in avoiding a recession, had been denied them, at least for the time being. In a media conference Turnbull took less than a minute to say he was pleased with the figures and several trying to make the point that the result was mainly due to the trade figures and had little to do with the stimulus packages. The tiny graph he exhibited to the media to reinforce this point seemed to attract more amusement than enlightenment. [more]
Question Time gave the Opposition another opportunity to press its argument that avoiding a recession was almost an accident and had little to do with Government policy and action. But the relentless pursuit of its case gave Rudd and Swan many opportunities to counter the argument and mount the ‘talking down the economy’ slogan, more of which we will hear in the days ahead and during the next election campaign.
Then the very next day the Fitzgibbon affair came to a head and he resigned. The media was soon out with the usual clichés – ‘what a difference a day makes’ and talked of the resignation ‘overshadowing’ the good economic news of the previous day. Well it may have been a fleeting shadow, but it is perhaps a metaphor of media imbalance that it even contemplated that the downside of one would cancel out the upside of the other. If Rudd had to choose between good economic figures and saving a minister, we all know what he would choose.
Question Time that day was very different. Questions about the economy were relegated to the end. Clearly the Coalition had had enough mauling the day before and had made little headway. So they had prepared another battery of questions about Fitzgibbon, only to find he had denied them by resigning an hour before. So they adopted plan B and attacked Rudd over a 12 year-old ute a Brisbane car dealer had loaned him for use in his electorate, which has been on Rudd’s register of pecuniary interest for over two years, accusing him of advocating on behalf of the dealer an application for support from the OzCar fund to assist car dealerships unable to raise finance, which is not yet operative as the passage of the enabling legislation is still being blocked in the Senate. Rudd was surprised by the initial question; some columnists said he was ‘flustered’ and his ‘hands shook’ – if that was so, it is not surprising with such a question out of left field that cast doubt on his integrity. By the time he had checked with his department he was armed with detailed answers to Turnbull’s questions, which he transmitted with vigour, but as Rudd put it to Kerry O’Brien that night on the 7.30 Report, Turnbull just ’barrelled on’, following his father’s advice way back, to ‘just keep on punching’. The whole of QT was an appalling exhibition of political opportunism. Unable to get traction with its economic argument, and frustrated by having to abort its Fitzgibbon attack, it reverted to a personal attack on the PM, hoping no doubt to draw a parallel with the UK Labor Government’s scandal over politicians' allowances. It exemplified Turnbull’s approach, so well exposed by the title of Anabelle Crabb’s Quarterly Essay about Turnbull ‘Stop at Nothing’.
The media has asserted that Fitzgibbon was seen by his colleagues as a weak link, not so much because of his performance in his department which has been generally lauded by senior Defence officials and Defence experts, but because of his carelessness in attending to personal details. No doubt his eventual removal was on their minds and, if the rapidity of his response is any indication, heavily on Rudd’s too. So making a virtue of necessity, Rudd soon announced John Faulkner as Fitzgibbon’s replacement, a widely endorsed move, even reluctantly by the Opposition, and within days announced his reshuffled ministry, which promises to be even stronger than the one it replaced. By and large the media has been approved the moves, although some insist that they were motivated largely to satisfy factional pressures. The Opposition soon came out singing from the same song sheet with member after member asserting that factional requirements were behind the moves, certainly not merit, as insisted by Rudd. Chris Bowen was singled out as an example of promotion as a reward for supporting Rudd. His failure with Fuel Watch, which the Senate blocked ensuring its failure, Grocery Watch, which is operational under the auspices of Choice, and the employee share scheme, now modified by raising the threshold for ineligibility, were quoted as instances of failure. The only one to acknowledge the merit of an appointment was Joe Hockey who recognized the talent of Greg Combet and in an unusual act of generosity said that all the talent did not reside in the Coalition.
So what can we make of the week just past? In The Weekend Australian Paul Kelly, wrote a piece Oh what a lovely crisis that begins “This week delivered Kevin Rudd two golden opportunities: the chance for Australia to avoid a technical recession and the chance to fix the crisis within the defence portfolio. Neither should be underestimated.” About the economic performance he said “The extent of Australia's superior performance to this stage is stunning.” Kelly went on to quote Access Economics' Chris Richardson who said."We are through the most dangerous period. I think the stimulus we've done still made sense and it's good by international standards." Kelly warned about the danger of Government hubris, quoted the RBA view that once recovery begins the Government will be called on to show fiscal restraint, and suggested that whether such restraint has registered ‘in its DNA’ will become the real test of its character. On Insiders he reinforced his view that the week had been a strong one for the Government notwithstanding the resignation of Fitzgibbon. On the same show Lindsay Tanner gave the strong message that fiscal restraint would be needed during recovery and that the Government was committed to it.
Even days after the announcement of the March National Accounts, economists are still arguing about whether or not we are in recession. In a convoluted piece, Tim Colebatch asserts today in The Age in A beautiful set of numbers tell only part of the economic story that the figures in the National Accounts ‘don’t add up’ and that the data tells us that Australia is in recession. Michael Stutchbury insists that we do have a recession. In the SMH in a piece Exports real key to recovery he says that “...the economy's growth prospects will be determined by a clash between resilient export volumes and falling export prices”, and that “The best way to resolve this is to maximise export volume growth, which would hold up GDP and limit the rise in unemployment.” Michael Pascoe in a piece in The Age, We're in a technical recession after all argues that instead of using the seasonally adjusted growth figures that gave 0.4% growth, the trend figures are more reliable and if used would have given 0.1% negative growth, and a ‘technical’ recession. These opinions fly in the face of other economists’ opinions such as those of Access Economics and several writers in the weekend papers.
Prediction is a hazardous exercise in politics, especially when economic factors are operating, but since success at accurate prediction seems to be more a matter of chance than reason as evidenced by past predictions, my prediction might be as likely to be correct as that of others. My prediction is that the week just past will be shown to be crucial to the success of the Rudd Government. Irrespective of what the naysayers still argue, the avoidance of a recession and all the retribution that would have been heaped on it by adversarial columnists and the Opposition, the quick resolution of the Fitzgibbon affair and the appointment of a strengthened ministry, all within four days, augers well for the second half of Government’s first term.
My prediction is that although there are likely to be setbacks, mistakes and possibly some adverse statistics, this week past will mark a crucial and positive turning point for the Rudd Government.
What do you think?