Saturday Morning Musings - the Walesing of Mr Rudd

Earlier in the week I wondered whether the Rudd Government's decision to defer action on an ETS might not draw former opposition leader Turnbull back into politics. According to various media reports this morning he is indeed reconsidering his decision to leave Parliament at the next election.

In June 2008, I wondered whether Mr Rudd was in danger of being New South Walesed. I said then: 

Now, or so it seems to me, Mr Rudd is in danger of becoming a somewhat up-market version of NSW. There are the same tendencies to try to do too much, to moralise, to be reactive, to respond to problems with yet another strategy. If this continues, the Rudd Government will fail.

In January 2009 I commented on the continued New South Walesing. The trigger was the appointment of a number of senior former NSW officials to senior positions in Canberra. My concern lay not in the caliber of the people, but the culture from which they had come. I concluded:  

I can understand the Government's desire to appoint people that they know. My problem is that they come from a system that does not work very well and indeed cannot because of systemic problems. All three have been acculturated by that system.

This leads me to my core concern: do they have the capacity to stand outside the system, to develop new approaches, or are they going to simply reinforce Mr Rudd's existing approach? If the second happens, they will simply continue the New South Walesing of the Rudd Government.

It seems to me that the recent decision on cigarettes completed the process. Putting aside public policy issues associated with the decision to move to plain packaging at some point in the future while increasing excise now on tobacco products by 25%, the way it was all done was classic New South Wales.

The Government was in trouble for non-delivery across a range of areas, including the decision to defer action on an ETS, previously presented as a response to Mr Rudd's view of climate change as the great moral issue of our time. The Government also had two major and complex issues on its plate, the proposed health care reforms plus the forthcoming release of the Henry Tax review. It needed a quick circuit breaker that would grab the headlines.

The move was replete with the features we know so well from NSW.

It came complete with a range of numbers: the number of people smoking will be reduced by - add figure; the number of lives saved will be - add figure; we will increase revenue by - add figure - that can then be used to fund other health initiatives.

It was talk tough, filled with the language of warfare. As I listened to the PM, I had this vision of Mr Rudd as head taking his stick to Big Tobacco, Mr Rudd's phrase. He would not be bowed by the nasty tobacco companies. This was a moral crusade. This was the toughest decision against tobacco in the world.

It was also not very well done.

Unpacking the wrapping, we have a move to plain paper packaging at some point in the future. However, all the practical issues here have still to be worked through. Then we have what was is essentially a revenue matter that would normally have been dealt with in a budget context, coming into effect the next day. By announcing it in the way he did, Mr Rudd caused a spike in tobacco sales that reduced revenue.        

One of the practical problems that the Rudd Government faces lies in the way that over-the-top rhetoric affects expectations. Major taxation reviews are always difficult, more so when expectations have been heightened. Now the Government has to manage what, by all accounts, will be major recommended changes in a greatly heightened political atmosphere. Again, its rhetoric is not helping, nor has the apparent leak of the idea that the recommendations will include a resource rent tax.

The suggestion that the Government wishes to avoid or at least reduce the re-emergence of a "two speed" economy is not, to my mind, especially sensible rhetoric. If part of the economy is to grow significantly faster than the normal rate of economic growth, it has to attract resources from elsewhere. By implication, that means slower growth elsewhere. Further, and as I argued in Australia's economic fragmentation, the Australian economy is made up of a number of sub-economies all growing at different speeds. It's not just two speeds, but multiple speeds.

The suggestion that Western Australia might consider seceding as a consequence of possible taxation changes is not especially sensible. It has proved hard enough to subdivide existing states within the Federation, even though constitutionally possible. At the time WA voters voted for secession and nationhood in the 1930s, this could theoretically have been achieved through an Act of the British Parliament. Westminster declined to do this because it was an Australian matter. Now there is no way that I can see to do it outside mass civil unrest or armed rebellion.

While not too much weight should be placed on WA secession arguments, the political issues should not be ignored.

WA has long seen itself as different from the rest of the country, dominated by and ignored by the east. It was a line-ball call whether WA would join the Commonwealth in the first place. Then, once in, we had the attempt to opt out. Since then, there have been periodic grievances that have reinforced the sense of separation. The refusal of WA to participate in the transfer of GST revenue under Mr Rudd's health proposals was a sign of that state's concerns.

It is too early to pre-judge the Henry Review. However, the current political climate does make it more difficult to have a sensible discussion.