Julia Gillard Rolls the Dice
Image Credit: Office of the Prime Minister: Australia (Flickr)

Julia Gillard Rolls the Dice

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U.S. President Barack Obama won re-election despite a poor economy. Can his center-left counterpart from Down Under, Australian Prime Minister Julia Gillard, do likewise this year despite the business cycle turning against her?

Launching the nation’s longest ever election campaign with a poll date of September 14th, the Labor leader sought to clear the air and put the focus back on policy.

"The benefit of fixing the date now is not just the end of speculation about election timing. It gives shape and order to year," Gillard said, urging the rival parties to “lay out their fully-detailed costed plans for the timely consideration of voters”.

Political gamble backfires

Trailing the conservative Liberal-National Coalition in the polls, Gillard’s gamble almost immediately backfired.

Just a day after her announcement, former Labor lawmaker Craig Thomson was arrested over alleged misuse of his former trade union’s funds for prostitutes, air travel and entertainment.

Along with the uproar over the departure of former parliamentary Speaker Peter Slipper, the Thomson scandal gave the Opposition more ammunition in its attacks on the prime minister’s credibility.

If the campaign started badly, it quickly got worse when two senior cabinet ministers announced their resignations two days later, adding to the uncertainty surrounding the minority Labor government.

Polls show Opposition Leader Tony Abbott would win office comfortably if an election were held today, with Labor forecasted to lose up to 18 seats in the national Parliament.

Economy faltering?

“It’s the economy, stupid” might have been Bill Clinton’s famous line, but in Australia the Coalition has made the most ground from its economic credentials and not its leftish opponent.

Despite likely undergoing its 22nd straight year of economic expansion in 2013, Australia’s faltering housing market and mining industry downturn have raised the prospect of weaker growth ahead.

On Friday, the Reserve Bank of Australia (RBA) added to Gillard’s political gloom by downgrading its forecast for economic growth to 2.5 percent in 2013, a full percentage point lower than the previous year.

Despite the much talked about switching from growth in mining to other sectors such as construction, the central bank was less confident about the outlook.

“While the underlying drivers of investment are supportive of growth, the absence of any clear indications of a pick-up in non-mining investment means that the outlook remains quite uncertain,” the RBA noted.

The bank said unemployment would “drift gradually higher” while business investment would cool, with the economy set to grow below the long-run average of around 3 percent until the end of 2014.

After abandoning its previous pledge of a budget surplus, the government’s fiscal problems have also increased with its admission of a shortfall in revenues from the new tax on mining profits.

Forecast to generate $2 billion this fiscal year, the minerals resource rent tax (MRRT) only collected $126 million in its first six months of operation. The politically costly tax was watered down after its original version cost former Prime Minister Kevin Rudd his job.

Campaign rate hike?

The RBA’s bearishness came despite it leaving interest rate settings unchanged at its first monetary policy meeting of the year on Tuesday.

Holding the official cash rate at 3 percent, Governor Glenn Stevens said the previous “substantial easing of policy” in 2012 had made another decrease unnecessary, with global downside risks said to have abated.

Yet former RBA board member Warwick McKibbin warned that the central bank might rock the government’s re-election prospects with a rate hike before the poll, should global economic conditions continue to improve.

“We’ve been adjusting monetary policy in Australia…partly in anticipation of a bad outcome in the world,” McKibbin told the Australian Financial Review.

“Now if that outcome hasn’t occurred, then you really have to get back up to where you should have been, which is closer to 4 percent than 3 percent.”

The RBA’s decision to increase rates weeks ahead of the 2007 election was considered to have help cost longstanding leader John Howard the election, catapulting his Labor opponent Rudd into the Lodge.

“You would never have predicted a rate increase during the 2007 election,” McKibbin said. “I think they will do the right thing if they have to [in 2013].”

Ironically, media commentators have speculated that Labor could call on its former leader to replace the woman who betrayed him, should the poor polls continue. With the economy softening and the RBA potentially helping the Opposition, will history repeat itself at the ultimate cost to the nation’s first elected female leader?

Comments
4
Jack
February 13, 2013 at 16:25

Low unemployment, low interest rates, sound economic growth and vision with Gonski, NBN and the NDIS. Gillard has a positive story to tell she just needs it to get out there. This has proved a challenge with over 70% of the Nation’s media controlled by the conservative Murdoch mob. This is in stark comparison to the Liberal part who implemented what at any stage of government in recent history? John Howard presided over massive under investment when the revenue was coming in. He presided over some of the highest interest rates in recent history and committed the nation to a law in Iraq that was in breach of international law. The electorate needs to hear the real story.

Lnrds
February 11, 2013 at 05:45

Right! as someone who is not a US citizen but follows US Politics.its all about winning huh?. Who cares about the middle class yeah? Gov gets punished with the loaned money from a private bank. Then the middle class, the little family guy has to pay for it and you want to know the icing on the cake? Congress, your president talks and talks all day about saving the middle class while more wars a being fought and more money pumped into the drone program. What hypocrisy! You were on Obama's campaign because you're and idiot.

Veda Atwater
February 9, 2013 at 18:45

I disagree with the assessment here. As someone who worked on Senator Obama's campaign in 2008 and then President Obama's re-election campaign in 2012 I have to say time works in PM Gillard's favor.

She has time to put these negatives behind her. She has time to create a narrative. She has time for the economy to possibly show some positive up-ticks.  In other words she has time to change the polls and come from behind.

When the 2008 Democratic Primary started Hillary Clinton was the front runner but then Barack Obama built a narrative, brought together a new base of support creating a wave of momentum that led to his win. In 2012 Romney was considered a strong candidate that would pound the president on the economy but over time it became apparent he was an empty suit that offered nothing to 47% of the electorate. The economy improved and again the rest is history.

If PM Gillard uses her time wisely she can win this election but she has to be strategic and plan for the long game. Something Obama does well. 

JohnX
February 9, 2013 at 17:26

All future is uncertain.

 

I guess, she could bribe a few Chinese military hardliners to start the war between China and Japan. It would give her at least 2 more years as no aussie Prime Minister has been removed from Office at the beginning of a war.

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