Comment

Hard to pick the winner in this two-horse race between Turnbull and Shorten

One can never write off any runner in a two-horse race. The leading horse might trip, when he's winning by a country mile. It might be struck by lightning or a suffragette. The jockey might fall off. The rider might be disqualified.

Hardly anyone, myself included, thinks that Bill Shorten and Labor could, or should, win the election later this year. But, most likely, there's seven or eight months to go, and anything could happen to the love affair between Malcolm Turnbull and the electorate. He wasn't doing so well at this point last time he was leader.

Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten.
Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten.  Photo: Alex Ellinghausen

But will Shorten be best positioned to take advantage of any luck that comes his, and Labor's, way?

Shorten could make his own luck. He could set himself a serious goal of having himself, and his team, regarded by the electorate as at least the equal in economic competence of the Coalition frontbench. That shouldn't be hard, particularly with the legacy of Abbott's budget failures, the Hockey implosion, and the unconvincing initial performance of Scott Morrison as Treasurer. It would would involve knocking down some myths of Abbott's creation, but Labor would have to treat the public, and the public interest, seriously in the economic debates this year. So far that's not happening.

Shorten could do all of that without really expecting to win. But even if he lost, he might have the dignity of having been taken seriously, and of having put Labor back into the hunt.

The big challenge for Turnbull and the Coalition in the lead-up to the election is to fashion a budget policy that is appropriate to the economic conditions and which can fit within a Liberal Coalition of fiscal prudence and austerity. That dual task will be very difficult. In opposition, Liberals, including Turnbull pretended that there was a Labor-induced debt and deficit "emergency". Their own stewardship has been no better. But Labor, for all of its recent and intimate experience with economic management, has become generally focused on populism.

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Turnbull may well be assisted by the help of Martin Parkinson as his chief adviser, but it cannot be assumed that Parkinson, now in Prime Minister and Cabinet, can command the allegiance of the Treasury from which he was sacked.

An associated challenge for Turnbull is to prepare, in public, a bold taxation program which can be taken to, and sold to the electorate. At the very least it must help address the government's revenue crisis. But there will be contradictory expectations, including of changes in the mix between taxes on income and expenditure, on land and capital, on companies and tax-dodging multinationals.

One way or another, a statesmanlike Turnbull and his Treasurer Scott Morrison must be seen to plan and provide a rough balance between the income and expenditures of both federal and state budgets over a budget cycle.

The public will not abide substantial cuts in health or education expenditure, and expect budget strategies that incorporate provision for disability schemes. The gap cannot be closed by mere trimming, efficiencies or the supposed reduction of "duplicated" services. Those wells are almost dry. Experience also shows that the public will always blame the Commonwealth for shortfalls in health and education services, even though, strictly, these are state responsibilities. Three decades of COAG-style deals and economic reform have not changed public expectations.

The temptation for Labor is to jeer from the sidelines. Refusing to countenance any measure that will increase the general tax burden, they can simultaneously reduce the Coalition's room for manoeuvre by the generation of successions of media crises in attempts to embarrass the government into ruling out increased consumption taxes, imposts on the family home, or superannuation entitlements. The prospect of a tax on lettuce is already too much to bear. Next it will be cake.

Labor has found the populist temptation difficult to resist. Its fervour is perhaps reinforced by the desire for payback for the Coalition's sabotage of efforts, such as they were, to implement tax reform during the Rudd and Gillard governments, and the whole Coalition's sheep-like performances on "great big new taxes". That Coalition economic spokesmen (they were all men) were absolutely dismissive of talk of systemic revenue strains, the movement out of the mining boom, and the ever-receding mirage of a balanced budget no doubt increases the temptation to return the compliment.

If Labor successfully sabotages budget reform now or before the election, it will, most likely, hurt the Liberals more than Labor in the short term. After all, it's more likely than not that the next government will be a Coalition one, and it will perform less well if it has no money. Moreover, the evidence suggests that voters blame governments for failure to achieve outcomes, not oppositions for frustrating them, even over mandates. Abbott did not suffer for his obstruction; why should not Labor be as opportunistic?

However, while such a strategy could hurt the Coalition, it will probably hurt the economy more, and in ways that are not in the Labor interest, short, medium or long term, nor in the national interest, as Labor sees it.

The economy is slowing in any event. It is hard to imagine that Turnbull plans to go to the electorate with a raft of spending plans, or tax cuts independent of any plans for adjusting the taxation mix. Labor can hardly, credibly, do so either. We may be in for a repeat of the 2007 election, where Labor seemed more fiscally conservative than a reckless Coalition.

But Turnbull could well be on a winner, as Howard was, with a considered plan for tax reform. He may seem the statesman, Labor the party of limited, and limiting, vision. And courage.

The revenue crisis is real enough and getting worse. It cannot be addressed just by improved measures against profit-shifting by multinationals, or tax dodging, or measures to raise a billion here, a couple of billion there. Real money is involved, as Everett Dirksen might say. (The other great Dirksen quote, appropriate for these times, is, "I am a man of fixed and unbending principles, the first of which is to be flexible at all times.")

The expenditure crisis is real enough too, particularly with new and higher spending necessary for national disability schemes, and the need to address the massive state shortfalls caused by the hospital pass delivered by Abbott and Joe Hockey in 2014.

There is no evidence that Labor is, historically, a higher taxing party than the Coalition. Or, over the past four decades, more fiscally irresponsible, or demonstrably worse economic managers.

But there is at least a tradition, one that survived the economic reforms of the 1980s, that Labor is more attached to spending programs, and has greater faith in the capacity of collective activity to improve people's lives. The focus on social welfare programs, and, usually on infrastructure, has invariably been a Labor plus, as against the Coalition.

In practice, despite the pressure from ideologues on different ends of the scale, a bipartisan consensus gives us about 25 per cent of GDP (in both the revenue and spending ledger) is about right for Australian conditions. That makes Australia's overall public spending, or revenue raising, compare favourably with comparable countries, with lower levels of debt and deficit.

However, in the short to medium term, revenue is heading towards 22 per cent and no correction is in sight. Right now that's more embarrassing for Turnbull; down the track it is a nightmare for an incoming Labor government, whenever it comes.

A frustrated Coalition can be expected only to slash programs, even at short-term political cost, and to shift further burdens to the states, with commensurate increases in grants. Reinstatement is ever more difficult than repair.

Shorten, and Labor, can affect these debates. How they do it will be critical to how seriously they are taken at the election. But Labor can also benefit, or lose, from events outside their own, or Turnbull's control.

We seem to be blundering through international stock market uncertainty, and doubts about the Chinese economy, in part by confident talk. But no one knows better than Turnbull that markets, and prosperity, depend rather more on confidence than on facts, or how quickly the mood of markets can change.

Australia's fortunes, and the political temperature, could also change abruptly as a result of fresh crises in Japan, heightened confrontation between China and its neighbours, including the United States, over its sea boundaries, or a blow up with North Korea. Who knows how the United States presidential campaign races will affect the US economy, the European economy, conflict in the Middle East, the Hindu Kush and North Africa? Will Australian political, economic and national security management be nimble and agile enough to avoid serious injury to the nation, as well as damage to the party of government?

Malcolm Turnbull may be the darling of the electorate, and on this account alone command the support of his parliamentary party. But he has ideological enemies within it who will not hesitate to move against him if he shows any weakness. Some are not beyond deliberate sabotage and destabilisation. The Liberal Party is heavily factionalised, and, as with Labor, some players would prefer for the party to losepower than their factional enemies prosper. Others, even in Turnbull's side of the tracks, always put their own interests and survival above the interests of the party.

There's still a whiff of scandal, and dirty political linen, hanging over some party operators, particularly in NSW. The damnable thing is that one cannot control the timing of developments, and must expect, more or less that bad news will emerge, perhaps by deliberate leaking, at the worst possible moment.

In presenting an image of responsible, pragmatic, government, Turnbull is being assiduous about wooing rebel senators but his very wooing of them has reminded them of their power over his future, and their capacity to demand a high, perhaps an impossible, price. Generally, the rebels have more to gain, politically, from denying government what it wants. Double dissolutions are generally empty threats, likely to do more harm than good.

Heaven knows how long Turnbull can maintain his popularity by seeming to be a calm and confident figure, reciting balm about innovation, agility and nimbleness, and how great it is to be alive.

But when faith in him fails, or evidence emerges that he cannot stop the tides, it seems unlikely that there will be a simple reversion of preference to Shorten. Or that it could happen so quickly that Labor went to an election with Shorten at the levels he enjoyed before Liberal politicians put Abbott to the sword. It would take some time before failure, or falling short of expectations, turned into a sense of collapse of confidence in his administration, along with anxiety to be rid of him, as fast as possible.

Shorten, and his team, have some opportunity to show themselves when parliament resumes. It is already apparent from Turnbull's discursive, argumentative and persuasive style in answering questions that he takes questions seriously. He should be taken up on his invitation to treat and to debate. The public deserves something better from a putative alternative government than a succession of similar pre-crafted questions drafted for rhetorical effect on variations of the "when did you stop beating your grandmother" theme. There is no surprise, and, generally, no effect.

One can assume that a skilled minister, or minister, will see immediately the innuendo of any question actually seeking information rather than concession or surrender. But a counter attack is more difficult if the battle is fought with facts rather than opinions, and the record rather than the record player.