Federal election 2016: Labor errs on the politics of economics

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If you are the leader of a party known for sending a cashed-up budget into the red when last in office, then the last thing you should do is behave in ways that confirms your opponents' worst depiction of you.

That's effectively what Bill Shorten has done with his "10-year economic plan", which promises bigger surpluses in the so-called medium term - 10 years from now - but admits the deficit will first go backwards over the conventional four-year budget cycle.

Malcolm Turnbull, Scott Morrison and Mathias Cormann could hardly believe their good fortune on Wednesday.

After all, Labor's deeper deficit plan effectively reinforced their critique: that Labor, as a party, is institutionally profligate and would never reach the long-term surplus.

Opposition Leader Bill Shorten and shadow treasurer Chris Bowen after the Queensland Labor Business Breakfast on Wednesday.Credit: Alex Ellinghausen

In light of this attack, one might have expected Shorten and his shadow treasurer, Chris Bowen, to over-compensate - to come in with a sharper fiscal consolidation than the government's aimed at, snookering it politically. It has worked before: remember Kevin Rudd's clever self-description as a fiscal conservative in 2007? Backed by his campaign plea to a panicky John Howard that the reckless election spending must stop in the national interest?

Shorten and Bowen knew the risks but felt they had little choice. Their spending commitments on health and education are central to the Labor program but mean the budget is initially overwhelmed on the spending side and only repaired in the longer run by growing revenue from higher capital gains taxes on property, and reduced negative gearing losses.

But elections are political exercises and turn on themes rather than arcane accounting details - hence the vast sums spent on campaign advertising. To be effective, those themes must have verisimilitude - a feeling of being true.

Unfortunately for Labor, thanks to the Coalition government's success in air-brushing the GFC from the picture, the charge of fiscal looseness has stuck.

This makes it all the more necessary for Shorten's Labor to challenge that prejudice. Proposing a worsening deficit over the only timeframe that counts, does the polar opposite.

In this election, Labor is running against two opponents. One is the remnant popularity of Turnbull, who despite voter disappointment over abandoned social and environmental policy, retains the upper hand on economic credibility as an accomplished businessman.

The other is more resilient again: it is Labor's own record of perennial deficits and endless, over-the-horizon surpluses.

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