The Hon Peter Costello MP

Speech

Launch of “To the bitter end” by Peter Hartcher

National Library, Canberra

29 April 2009

• Peter Hartcher has an interesting literary device which he uses in this book. He tells the story of “Moby Dick” the book written in 1851 by Herman Melville. The central figure in this book is a Captain Ahab who becomes obsessed with capturing a great white whale. He pursues the whale across the ocean but his obsession ends in disaster when the whale rams and sinks his ship. The first mate to Captain Ahab is a man called Starbuck. Starbuck tries to warn the captain about the terrible consequences of his obsession but to no avail. In Peter Hartcher’s view John Howard’s campaign for re-election in 2007 is as doomed as Captain Ahab’s pursuit of Moby Dick.
• One of the Kings of Israel was a man named Ahab who got into some bad stuff which brought a warning from the Prophet Elijah. This might be where Melville got the idea. You can read about it in the Bible. You can read about Ahab in the Book of Kings. You can read about him in the Book of Chronicles. The Book of Kings ends its account by saying: “Now the rest of the acts of Ahab, and all that he did… are they not written in the Book of the Chronicles of the Kings of Israel?” In other words if you want to get the full story check out the other source.
• Hartcher’s book tells us the story of the Coalition Government and also the story of the Labor Opposition in the period before the 2007 Election. In relation to that first story – the Coalition Government I am inclined to echo the words of the Hebrew writer in the Bible. “Now the rest of the acts of the Coalition and all that it did… are they not written in the Chronicles of the Costello Memoirs?” You can get the full story from that other source. It is a best-selling publication!
• I have no doubt that I will be asked at the conclusion of this Launch on whether I agree with Hartcher’s account about this or that. I will get in first and give you my answer now. I agree with “The Costello Memoirs”. In any discrepancy between Hartcher and me, I prefer me. Let me give a couple.
• Hartcher claims, for example, that tax receipts rose as a proportion of GDP under the Howard Government compared to the Keating Government. He bases this on Budget figures contained in the 2008 Budget. I would refer him to the 2007 Budget. After 2007 Labor had the figures all redone to include GST as a Federal Tax – a way of retrospectively altering the records.
• Doing it this way shows a big jump in the base in 2000-2001. Doing the State records on the same basis shows the States introduced a big tax reduction in the same year. What happened is that the States exchanged revenue from Financial Institutions Duty, Bank Account Debits Tax, stamp duties on shares, mortgages, leases bed taxes etc for the GST. I f you count the abolished taxes as State and the replacement tax as Federal you can show State tax went down and Federal tax went up. But the States never lost a dollar and the Federal Government never gained one. You are not comparing like with like. Nor should you compare the latter years of a Keating recession tax take (and Budget deficit) with the Coalition growth period (and Budget surplus).
• Hartcher also writes that the decision of the Coalition Government to decline to ratify the Kyoto Protocol was done out of loyalty to George Bush. I have already written about this. My own view was that the Coalition negotiated a very good outcome as part of the Kyoto Protocol. Having done such a good job I thought we would ratify it. I was surprised that the Prime Minister took the view – after we had got most of what Australia wanted – that we would not ratify. But I do not think it was done out of loyalty to President George Bush. I think it had more to do with the opposition of Australian business particularly the resource companies. I never once heard Howard say it was a question of keeping faith with the Americans. As time moved on I think the resource companies came to the view that it was the best deal on offer and changed their views anyway. But by that time the Government had locked in and, under Howard, could not change.
• The second part of Hartcher’s story and the more relevant is the Labor Opposition (now Government) prior to the 2007 Election.
• Hartcher reminds us that Labor established an election winning lead from 2006 on (page 148). Rudd never out-polled Beazley as preferred Labor Leader. Beazley led both Rudd and Gillard who were stuck at about half his ratings. Only by combining both Rudd and Gillard could they match or exceed the preferred rating of Beazley. Only by combining could they assemble the numbers to defeat Beazley.
• Which is why Beazley is quoted in the book as saying: (page 266) “If you look at the reason Howard lost – WorkChoices, Kyoto and Howard himself, none of them was a Rudd dependent variable… I think Kevin would have done better [than me] by a net two or three seats. I would have had a more modest margin but a workable margin.”
• I think this is a fair assessment. The polls showed that the public had decided it was time for change. They had decided that the Coalition had been in office too long and if the Coalition did not give the electorate change then the electorate would give the Coalition change. There is a tide in politics and when it lifted Labor’s boat Beazley was not in it. He was unlucky to miss out. Rudd was extremely lucky to get his place.
• Beazley gives an interesting observation on the IR Debate where he claims credit for Labor’s opposition to WorkChoices. He explains why Labor went further than just abolishing WorkChoices and promised the abolition of AWAs which had in fact been introduced as part of the Reith Reforms back in 1997: “I don’t think Kevin Rudd was very happy” Beazley tells us. Rudd however it pains to say that he supported the position on AWAs. (page 88)
• It is interesting to read that the crucial role in putting together Rudd and Gillard to topple Kim Beazley was played by Kim Carr the Chieftain of Labor’s Victorian Socialist Left. Before pledging himself to Rudd, Carr had to convince himself that Rudd was not a free-marketeer (page 159). He also needed assurances on manufacturing which would look after the Australian Manufacturing Workers Union which is a vital part of the support base of Labor’s Victorian Socialist Left (page 160). Hartcher tells us how Rudd courted the Socialist Left by writing for The Monthly magazine. (He also used a speech to the Centre for Independent Studies to attack Frederick Hayek.) Hartcher calls it the intellectual seduction of the left. It no doubt explains why Rudd returns to The Monthly every now and then with a little more seduction for this important part of his support base for example his recent article on “The Global Financial Crisis” where he declared we were at a turning point in human history between one epoch and the next, which he told his audience, would end: “the domination of economic policy by free market ideology… variously called neo-liberalism, economic liberalism, economic fundamentalism, Thatcherism or the Washington Consensus.” It was all so different from his speech to the London School of Economics in April 2008 where he endorsed globalisation as: “The liberalisation of global capital flows; the liberalisation of global trade flows; and the explosion of the new information communication technologies that have underpinned both.” In April 2008 he went on to argue: “We need to maintain a global regime that fosters open capital markets that allocates the world saving to its most profitable uses…”
• Reconciling the international Kevin who believes in free capital flows and liberalised trade flows with the domestic Kevin who opposes economic liberalism and the Washington Consensus maybe as easy as understanding that at one level he is talking to foreign audiences and at the other assuaging the left wing opinion necessary to keep elements of his Party and support base happy.
• After the “zig” to the left to get the leadership, there was the “zag” to the right for the purpose of the election. Labor began to market Kevin Rudd as an economic conservative. (page 176) Hartcher calls it “One of the most remarkable political ads screened on Australian TV”. I couldn’t but agree. It featured Kevin Rudd saying: “A number of people have described me as an economic conservative. When it comes to public finance it’s a badge I wear with pride”.
• I don’t think he is wearing that badge any longer with or without pride. We have a revelation from Labor’s Tim Gartrell: “Just before the ad went to air I thought, F…! Was Rudd right? Was his claim independently verifiable? Had a number of people really described him as being an economic conservative?”
• After a google search he was able to find two references – that’s right two references – to the issue. One was written by Paul Kelly and one which suggested that Rudd himself had told people he was an economic conservative. So who were the people who called Rudd an economic conservative other than himself? One journalist – once – apparently.
• You can see how the spin machine was highly tuned from the outset.
• During the election I, for one, told anyone who would listen that there was no evidence that Kevin Rudd was an economic conservative. . Now that the Budget is deeply in deficit, now that we have had unprecedented new spending, now that Rudd has declared the death of economic liberalism, is it still a fair description? Was it ever a fair description? How much scrutiny was there of Rudd’s pre-election claim?
• It is all a question of comparison. Rudd was, back in those days, promising to be tough on spending. Hartcher records Rudd as criticising Howard for announcing $9.5 billion of new spending over three years in his November 2007 election speech. To the spontaneous cheers and applause of the Labor Party he said: “Today I am saying loud and clear that this sort of reckless spending must stop.”
• $9.5 billion is a little less than the amount Rudd spent in November 2008 when he distributed cheques and urged families and seniors to “Spend, spend, spend”. Howard was talking about $9.5 billion over three years – 36 months. Rudd accomplished it in one month. And for good measure backed up with another $43 billion four months later and turned a $4.7 billion broadband promise into $42 billion!
• In fairness to Hartcher his book was written before this spendathon began and when he was writing it, $9.5 billion over three years would have looked a lot. But it shows how far the toleration for spending has come.
• Now Mr Rudd would no doubt argue that spending in November 2007 was bad and spending in November 2008 was good because of the Financial Crisis:- it was bad to spend money when we were in surplus and had the money but good to spend it when we were in deficit and didn’t have it. I think most journalists supported the first package thinking that would be level of the fiscal stimulation. And then they supported the second thinking that was the total of the fiscal stimulation. And now they are gearing up for another package. There seems to be a great tolerance for all this spending. It took the Coalition 10 years to pay off $100 billion of Labor debt. Within a year Labor had re-borrowed the lot and within another year it will borrow as much again. How many years will it take to pay off this debt?
• President Obama’s Chief of Staff Rahm Emanuel recently said: “You never want a serious crisis to go to waste, and what I mean by that is an opportunity to do things that you didn’t think you could do before.”
• I suspect this Government didn’t think it could possibly increase spending by $100 billion or run a deficit of $30 billion or borrow the amount of $200 billion. But you have got to hand it to them. They haven’t let this crisis go to waste.
• All of this is supported by an endless stream of announcements that keep journalists chasing tomorrow’s story rather than checking up how yesterday’s worked out. I call it the greyhound theory of politics. The greyhounds enter the track to chase a lure. Whilst they are running they are jockeying against each other. They are competitive. They want to get it first. None of these animals ever stops to ask why it is that no one ever catches the lure or why it is that a lure has never been caught on a dog track. As long as they are running fast they will never reflect upon the last race, or the one before. The idea of the lure is to distract them. And as long as journalists are chasing each new announcement, each new leak, each new piece of “private” research – so private that the Government wants them to publish it on the front page of their newspapers – there is little time to think why it is that they are running around in circles and who is controlling the game.
• I am astounded that the Government after $100 billion in new discretionary spending since the last election is briefing to the effect that it is making really hard decisions to save money in the Budget. I am even more astounded that this is being seriously reported. One would think that if it was necessary to save some money then some part of that $100 billion would not have been spent in the first place. But obviously I don’t understand these things. That realisation dawned on me when I read the front page of the Easter edition of the Australian Financial Review which read as follows: “Rudd’s Big Easter Surprise – spending and saving at the same time”. You can both spend and save at the same time? This truly is a holy mystery. I thought of it over Holy Week. It is something that I will dwell upon for a long time.
• I will dwell on it maybe as long as it takes to pay off the debt from all this saving and borrowing. It took 10 years to pay off Labor’s $100 billion of debt. How long will it take to pay off the $200 billion that it is now out there accumulating? We will have a long time to reflect on that!