A chance for Turnbull to win the next election on economic reform

Comments on Paul Kelly “Economic reform a Turnbull minefield”, 16/09/2009, http://www.theaustralian.news.com.au/story/0,25197,26078848-12250,00.html

Economic reform may or may not be a Turnbull minefield. It depends on how Turnbull and the opposition take the current opportunities that the Rudd government has offered them.

Paul Kelly argues that “the Liberal Party confronts a novel political and intellectual dilemma: how does it present as the party of economic reform when the new policy fashion is fiscal stimulus and labour market regulation?” based on that “the two events reshaping Australia's policy debate are Kevin Rudd's 2007 election victory that crushed the 20-year momentum towards labour market deregulation and last year's global financial crisis that enshrined fiscal expansion and state intervention as the ameliorating responses.”

While what Paul Kelly’s statements are true, the performance of the Rudd government over the past two years has presented Turnbull and the opposition some unique gifts in defeating the incumbent government at the next election next year.

Gillard/Rudd have misused the mandate they got from the last election on IR reforms and swinged too much towards inflexibility of the labour market towards collective agreements. This exposes a weakness in their approach to IR reform, that is, ideology driven as opposed to get the balance “right”. Turnbull can attack the Rudd government on productivity and efficiency while keeping fairness as a balance.

Politically, Turnbull needs to accept that Work Choice has been dead and the coalition has moved on from that. What they have to do is to correct Gillard/Rudd’s over regulation of the labour market to make it both fair and efficient. That is what Turnbull should argue.

On the fiscal stimulus, the Rudd government is even more vulnerable. The cash handouts have been wasteful and led to unnecessarily larger budget deficits and government debt. The school education spending has been exposed as not only wasteful, but also as having little to do with education revolution and hence future productivity. The list goes on and on, like the $43 billion NBN with no business case study.

Turnbull and Hocky need to accept the need for fiscal stimulus but focus efficient and effective fiscal stimulus as opposed to panic spending behaviour of throwing money at all costs at the expenses of government budget and debt.

So there are already enough opportunities for Turnbull to get on upper hand with the Rudd government in the two areas that Paul Kelly has argued to be a minefield for Turnbull. They are now in favour of Turnbull than Rudd.

One of the main issues is likely to be in the area of the ETS. This has been the coalition especially Turnbull’s weak political spot. What Turnbull needs to do is to neutralise this issue and that should not be difficult to achieve, particularly given the government has also been exposed as inflexible and could not even get any non-government senators on side.

I see the next election is winnable for the Coalition if it can avoid any more big political mistakes and focus on the economy, labour market and responsible government.