‘Utegate’ and related codswallop

The embarrassingly named “Utegate” saga rolls on, and the mainstream media has been getting itself into a right lather about it all. On Sunday the papers were suggesting that one of Wayne Swan, Kevin Rudd or Malcolm Turnbull were destined to have their position fatally undermined by the saga, depending on precisely how events unfolded over the coming days. The News Limited stable has been particularly vehement about the matter, making best efforts to turn what is realistically a molehill for the government into a mountain. I honestly can’t see it happening. If a head does roll out of this, it will be the head of a subordinate, and for the time being at least this is the most extreme consequence that seems justified.

Thanks to the introduction of the AFP, the matter with the email has become the real deal as far as political backlash from ‘Utegate’ is concerned; any accusations levelled at Wayne Swan regarding favoritism or cronyism are neither here nor there and were quite frankly drawing a long bow to begin with. Politicians of all stripes make representations on behalf of their constituents every day, some of whom, perish the thought, they may actually know. I don’t think there is anything untoward about this. There is no allegation that John Grant has benefited from the Treasurer’s or indeed the Prime Minister’s attention, at least not to a greater extent than any other constituent has. Big, fat, hairy deal.

In any case, now that it has emerged that the email at the centre of the scandal is a “fraud”, it only remains to be seen just who composed the email, if this indeed can be determined by the AFP. It seems to me that there are only really three plausible motives for the hoax:

1) The “email” was produced by someone with ties to (or sympathy for) the Government who hoped to trick the Opposition into taking the bait and overextending its reach.

2) The “email” was produced by someone with ties to (or sympathy for) the Opposition who hoped to generate a scandal from the affair.

3) The “email” was produced as a joke or by someone in a somewhat lighthearted vain and the Opposition and the media have caught wind of it and run with it.

I find it difficult to believe that either Kevin Rudd, Wayne Swan or indeed Malcolm Turnbull would have implicated themselves in such an implausible and easily detectable hoax. Therefore one must suspect that a minor functionary with links to the Labor or Liberal Party within the Treasury is responsible for the email, and has acted generally independently on it. Idle speculation perhaps, but I suspect we will know a lot more about just which party will have egg on its face within the next 24 to 48 hours.

As time ticks by, it is becoming increasingly unlikely that the position of any of the three political figures implicated in the scandal is at serious risk. The mainstream media might even have to start considering policy issues again sometime in the near future. Crikey.

Whatever you do, don’t say billion

It was getting a little absurd and starting to backfire dramatically, so the Prime Minister and the Treasurer were forced to halt their “billion ban” charade in parliament today.

As has been previously observed:

It’s been suggested Kevin Rudd would not utter the phrase ”$300 billion” for fear his words will be used in coalition advertisements during the next election campaign.

Mr Rudd said debt would peak at “around about 200, our gross debt at about 300” in 2013-14.

Asked to explain 200 or 300 of what, Mr Rudd responded: “These are billion figures.”

The genius (whoever they are) in Federal Labor’s leadership team who seriously believed that the government could get away with its senior members not saying the word “billion” for the next 18 months or so must be living on Planet Wacky. It’s a little disturbing that this wacky idea was even successfully sold to the men who are overseeing the nation’s response to the financial crisis, and that they ran with the “billion ban” for a day or two. The Coalition would be nuts not to make fun of the Prime Minister’s use of “200” and “300” in their election campaign next year.

Madness.

Our very own red rooster and his big red numbers

Over the course of the last week, the expression on Treasurer Wayne Swan’s face has been even more deadpan than usual; so deadpan, in fact, that its as if someone from Treasury has swung an almighty great frying pan across his gloomy mug. In a sense, that is of course just what has happened. There is no tougher gig to have at the moment. Even before one considers all the election promises that Rudd Labor made back in late 2007, and the bold stimulus measures introduced during the past six months in an attempt to ward off the worst of the GFC, the government is starting behind. The tumultuous financial conditions have reduced profits, spending and incomes across the country, wiping a sizable $210 billion from the government’s anticipated revenue. Let’s be clear: whether the federal government was headed by Labor, the Liberals, or anyone else, it would have delivered a budget in the red in 2009-10 like the Rudd Government has. The buck must stop with the Treasurer, (if not he, then who else?), but its fair to say that a significant portion of the big red numbers being bandied around are not Mr. Swan’s or indeed Federal Labor’s fault.

Casting a considered eye over the opinions flying around in the mainstream media, it would seem that this is a Budget that is hard for people to support. It mixes almost evenly boosts and blows, to the point that some commentators believe it to be a confused budget, a budget that tries to stimulate the economy even as it withdraws funds from some, possibly lulling it back to sleep. There are welcome measures, such as the significant increase in payments to single pensioners, the introduction of parental leave (even if it is delayed until 2011), and the urgently needed $22 billion package of infrastructure measures. On the flip side of the coin, there are a few downright bafflers. The planned lifting of the pension age to 67 is a positively nutty idea, and gives credence to the accusation that Treasurer Swan is living blindly on the teat of the bureaucrats in Treasury. The means testing of the private health rebate is a questionable measure, given that it is likely to encourage people to ditch private health insurance and increase load on the public system. For once, Malcolm Turnbull might be on the right track by suggesting that raising excise on tobacco is a more sensible measure and can deliver the same amount of revenue.

It will be interesting to observe how Messrs Rudd and Swan react to Turnbull’s suggestion, and indeed to see how the public reacts to the Federal Opposition’s constant carping about the level of national debt. One does get the sense that the broader public is quite concerned about the hundreds of billions of dollars of public debt that Australia is now swimming in. This is a real concern, but it is a concern that is being simplistically tended by the Coalition. For his part, Malcolm Turnbull seems determined not to utter a word about the possibility (nay certain fact) that his team would also find itself in billions of dollars of debt if it were in government now. What remains to be seen is whether or not the sheer magnitude of the red numbers here are enough to get some people to lose faith and start to consider the opposition as a viable alternative government.

Make no mistake, this is the start of Malcolm Turnbull’s big chance.

Setting a date with a bullet train

So far, I don’t think Joe Hockey has been much chop as Shadow Treasurer. He has come up with the odd good line, but I don’t think his political manner (for want of a better term) really suits the portfolio he has been thrust into. On the other side of the fence sits Wayne Swan, a man with probably less confidence or exuberance than anybody who has been Treasurer for well over a decade. Despite this, he has one key strength: the capacity to bore. Swan is a technocrat through and through, and when he hasn’t been putting his foot in it, he has been ideal for the government from a noise minimisation perspective. Hockey’s gregarious nature and his often jocular approach to managing his portfolio does not match up well against Swan’s colourless demeanour. The Opposition need sharp and incisive, not rambunctious. It needs a Nick Minchin-type on the attack.

With this year’s Federal Budget still a month away, the sniping has already begun. Joe Hockey has come out in the media asserting that the Opposition will block the Budget if it feels that there it contains “waste” or “mismanagement”. On recent form, one would have to think that the Opposition will view at least some of the Rudd Government’s further stimulus measures in this way. It’s a pretty gung-ho approach to take when one considers the Prime Minister’s extraordinary approval ratings and the general mood of the electorate, which is predisposed to supporting the government in times of crisis. While thus far this year I have felt that the Rudd Government would serve a full three years before calling an election, despite the emergence of several double dissolution triggers, if the Opposition blocks some key planks of the Budget, I think calling an early election would be justified and even, arguably, desirable.

More interest rates gubbish in the media

With an interest rate cut all but announced for tomorrow, I have been bemused to observe the public debate on interest rates once again focus on a red herring. Treasurer Wayne Swan has taken the brave and perhaps politically unusual step of declining to demand that Australia’s banks pass on the hypothetical interest rate cut to consumers. Shadow Treasurer Julie Bishop has taken precisely the opposite tack, criticising the government for not demanding that the banks pass on the cuts:

Reserve Bank governor Glenn Stevens has reportedly told Prime Minister Kevin Rudd that squeezing the banks too hard could make it unprofitable for them to lend and push the Australian economy into recession.However, opposition treasury spokeswoman Julie Bishop said passing on the full RBA cut would help keep people in jobs and the Australian banking sector stay strong.

“One of the most important ways to keep our financial sector strong is to ensure that Australians keep their jobs so that they can pay off their mortgages … their bank loans,” she told reporters in Perth.”

And that is why if there is an interest rate cut tomorrow it should be passed on in full so that people can keep their jobs and keep paying off their financial obligations.”

This debate raises some interesting questions about what Commonwealth Treasurers should and shouldn’t do, or perhaps more interestingly, what they realistically have the influence to do. Should Wayne Swan really be getting on the blower, as Julie Bishop seems to be suggesting, to the chiefs of the big five tomorrow and demanding that they immediately pass on the hypothetical cut to consumers? Does Julie Bishop, a so-called economic rationalist, have so little faith in the market that she feels the Treasurer needs to instruct individual private organisations on how they run their business? Put simply, it is an absurdity.

There are three points worth making here in rebuttal to Bishop’s foolishly populist demands:

1) It is not the Commonwealth Treasurer’s role to attempt to run the business of Australia’s big five banks by demanding that certain monetary policy actions be taken;

2) The Treasurer’s views are probably the least of the concerns of Australia’s big five. They are businesses answering to their customers and shareholders, not the fiefdoms of the Treasurer. here Any views that Treasurer Swan attempted to impose upon them would almost certainly be ignored;

3) It is almost a certainty that one of the big five will elect (if not immediately, than in the relatively short-term) to cut rates and seek to make their offerings more attractive to consumers. When this happens, there is a pretty good likelihood that the others will follow suit in due course.

This is not a good start from Bishop. One wonders whether the Turnbull Opposition is going to suffer for not having someone who can reliably score the odd point (e.g. the Opposition Leader!) against Swan opposing him in the Shadow Treasury.

A moderate budget from the new moderate Labor

Even without delving into the details, you can get a reasonable feel for what sort of federal budget Labor has just delivered by considering the published reaction to it. The Federal Opposition has predictably “slammed” the budget, describing it as a “typical Labor high-taxing, high-spending budget, which targets people that it doesn’t like”. I wasn’t aware that budgets could “like” or “dislike” people, but I guess that’s just Doctor Nelson not letting his use of grammar get in the way of his spittle-flying (and self-serving) rage. This budget is not adventurous enough to give Nelson the fillip he needs. Bob Brown has declared that the Federal Government has failed the country on climate change with its budget, without really highlighting why this is so. He does inform us, however, that this budget confirms that Kevin Rudd is no “Robin Hood” and that rather he is actually a “Little John”. What this means precisely is not particularly clear. Perhaps Brown has determined that Rudd is a kindly, overweight bear.

Other commentators are divided, although on balance opinion seems to be positive. Scott Murdoch has described the budget as “laden with common sense”. Business groups are positive about the message of fiscal responsibility that the budget has sent, with the opinion of prominent economists seeming to tend towards begrudging approval. Notorious but generally reliable economics grump Ross Gittins is a bit more negative, rating the budget as merely “ok” and highlighting some areas where he feels the government should have done better. Peter Hartcher in the SMH is quite uncharacteristically critical, questioning whether the budget will really serve to fight inflation, and making this fairly strong accusation about Kevin Rudd’s leadership and his priorities:

Kevin Rudd seems to think the election campaign is still under way. He seems to have trouble realising that the campaign is over. He is now supposed to be governing.

Tonight’s budget set out to please many and to upset few.

Hartcher is being just a little unfair on that last point. I am sure that every former Federal Treasurer in living memory has sought to please many and upset few with their respective budgets; let’s not delude ourselves that this is not the nature of the game. If, in the current troubled economic climate, the government has managed to tick most of the important boxes from a fiscal management perspective and keep most people happy, it has probably achieved something quite worthwhile.

Indeed, from what I can gather from Swan’s speech [PDF], this budget has delivered pretty much everything that has been foreshadowed and promised, with no big surprises or as the Treasurer describes then, rabbits. As much as the media may have become accustomed to budget night rabbits, the character of the new administration and the prevailing economic conditions have served to end the budget night rabbit season bonanza entrenched by the Howard Government over the last decade.

Budget night may be drabber as a result, but the country is better for it.

The tax cuts we have to have

One question we will perhaps never truly know the answer to is how much Federal Labor really believes that the tax cut package it took the last election is truly the right way forward in a policy sense. Most readers will likely recall that Labor more or less just “stole” the lion’s share of the Howard Government’s proposed tax cuts for their own package, reducing the cuts slightly for those on high incomes to claim the “economic conservatism” high ground, and proposing some actual reform of the tax brackets for the nebulous future. The rationale for Labor’s approach would seem (at least for cynics like me) to have been born out of three brutally pragmatic political principles:

1) Beat or at least draw level with Howard in a contest of tax cuts. Despite the inflationary risk, people over the last decade have shown a keen desire to vote with their hip pocket.

2) Win the economic conservatism high ground. The Coalition’s merciless pursuit of Labor over the interest rates experienced during the Keating years was intellectually dubious but incredibly effective, so this was a must.

3) Don’t stuff it up – minimise risk. Going into the campaign proper, the Opposition had a sizable lead in the polls. The danger with proposing to do something daring and bold from Opposition on tax was that the Coalition would take the opportunity to do even better, or else find a flaw with Labor’s proposals. It’s hard for the Coalition to attack Labor’s tax policy if it is 90% theirs as well.

Thus far the Prime Minister and Treasurer Wayne Swan have repeated ad nauseam in the media that the tax package that they took to the election was the tax package they were going to deliver. This ensures that the government does not suffer the inevitable backlash should they deliver something different to what was promised, and also provides a degree of political cover should inflation continue to escalate. Sure, Labor may well be delivering an inflationary package of tax cuts to the electorate, but the majority of the electorate voted for it, so the average punter has some piecemeal responsibility for the state of the economy.

George Megalogenis takes a different critical tack in today’s The Australian, having a go at Wayne Swan over the Treasurer’s fairly muddled attempts to explain away why Labor thinks that its promised tax cuts amount to tax reform. The point he makes is technically correct, although in truth I think this column is somewhat on the pointless side, coming as it does after the government has already committed to the electorate that it will deliver the particular package of tax cuts that have already been outlined. Make no mistake, I don’t think Wayne Swan, Lindsay Tanner or indeed Kevin Rudd truly believe that the tax package they are planning to deliver to the electorate in May really amounts to tax reform; but when it comes to reform in the short-term, they are stuck between a rock and hard place. Their commitment to the tax cuts laid out during the election campaign has been mercilessly re-iterated. The implications of backing down now are all too clear and would give an almighty free kick to the Federal Opposition.

In short, Federal Labor is politically bound to the package that it proposed during the election campaign, and I don’t think Megalogenis or anyone else should be particularly surprised that the likes of Swan and Rudd talk up the package in the media. For the short-term, Labor have promised window dressing. That is what they are now politically obliged to deliver, regardless of the innumerable structural reforms that will go begging in the interim.