It's really not all Julia Gillard's fault. She's just the wrong person in the wrong place at the wrong time. Tony Abbott would be no different. We like to think that it's important to have the right person as prime minister. It is. But there's still only just so much that they can really do to change anything. If we've got confidence in their ability and the story they're telling about the nation, this oozes across into other issues. But it's not the key driver. The real engine is the economy. This is the true key to political fortune. And it drives on, largely independent of government: doing its own thing no matter who thinks they're sitting in the driver's seat. Just look at the statistics. Since World War II the biggest single influence determining if a government will be re-elected has been the economy. If politicians (informed by economists) really understood the way it worked, they'd keep it stoked up and running smoothly all the time. The point is they don't. The biggest fraud is the person who tells you they're holding all the levers and they're going to release one and let the steam out here, while keeping the pressure building up somewhere else. The simple reality, outweighing all the froth and bubble of parliament and all the noise and clamour of the blaring television bulletins, is that in the globalised, interconnected world of today the politicians don't possess control over the financial system, even though this is the main factor determining their future.
US President Bill Clinton expressed this political reality concisely, using four words. ''It's the economy, stupid'', he insisted. He was right. And, unfortunately for Labor, the global economy has gone wobbly at just the wrong time.
Back in 2008 the government acted quickly and decisively to allow us to avoid disaster. It deserves credit for that. But people are aware it was the surplus that successive Coalition governments had built up over decades that permitted the pump priming. And Labor failed to rebut the allegations of waste over school building programs and pink batts. This, coupled with the selling skills of Wayne Swan, has limited the kudos people are willing to give to the government. People expect to see the federal budget brought back into the black, not leaking red ink everywhere.
The country does have a debt problem. The trouble is that individual households have borrowed too much. This has built up a mountain of money owed to other institutions. While inflation was doing its good work, eating up the debt and keeping the liquidity sloshing around the marketplace, this didn't matter.
House prices are the key to understanding what's been going on. These make a mockery of the suggestion that inflation was under control during the Howard years, whatever the monthly bulletins claimed. Everyone was drinking from the same reassuring cool-aid, just as they had been in Japan before the property bust of the early 1990s. But what was really happening was slightly different to the happy, simplistic narrative.
Productivity increased. The dollar went down and we sold more overseas. The supply of money grew: but it wasn't backed by real goods. It was the ''financial industry''. Little gritty seeds of problems began to germinate within society. The latest OECD report on inequality, Divided We Stand, demonstrates that although during the Hawke/Keating and Howard governments our income growth was second highest in the world, this wasn't shared out equally. The wealthy grew richer faster than anywhere else. The poorer lagged. Inequality zoomed as the tax-take shrank.
Households burdened themselves with more debt even as the government reduced it. Today Australians owe more, proportionately, than any other nation. Is it really any wonder no one is spending? Particularly when the credit squeeze is biting and the banks can't find money to lend. And the Aussie dollar heads higher, propelled by mineral exports, until even lean and efficient manufacturers can't make a car.
Put it all together and you get a crisis of confidence. We're used to the economy moving like a caterpillar, quickly surging forward before stopping again as it waits for the tail to catch up. Government and the Reserve Bank supposedly use fiscal and monetary instruments to smooth this path, keeping the momentum steady. Unfortunately, economics is not a science and the bank's governors are not brain surgeons. That's why things go off the rails so regularly.
Economic theories go in and out of fashion, but their foundation is always the same. Growth. Since the 1600s this has been the dynamic force that has created today's world. That was roughly the first time more than half a billion people lived on the planet. It wasn't until the 1920s that we had more than two billion. Today there are more than seven billion people on the planet.
Thus far, things haven't come to a crunch. It's a bit like the property market. We're still in the expansionary stage of the market. But what's happened overseas is giving people pause before they rush to commit to more spending. There's a new wariness about because of global uncertainty. Added together, the drain on unrenewable resources; prospect of climate change; depression in Europe; rising power of Asia all add to the uncertainty.
On top of all this is our own domestic political situation. Gillard's done a great job shuffling legislation through the Federal Parliament - but that's been balanced out by the disasters. She just can't get the nuance of the moment right, whether she's mangling the language at her own federal conference (''We are Us'') or refusing to put poker-machine legislation before Parliament (even though this was the reason she formed government).
But the fact that she fails to inspire is, probably, irrelevant. New policies are needed to deal with a new world. Would any of the other candidates for the top job really dare to introduce these?
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