An irreconcilable difference

An irreconcilable

AUSTRALIA is a polarised nation, split on carbon pricing, divided on the Greens' ideological agenda, plagued by uncertainty over power industry investment and needing another election to resolve the latest political war over climate change.

Julia Gillard and Tony Abbott are tearing each other apart in the quest for dominance.

But there will be no easy resolution of Australia's deadlock over climate change. Above all, it is governed by an insiders-outsiders split that shaped the August 2010 election result. The insiders, usually tertiary educated, are believers in climate change action while the outsiders are either disbelievers or doubters worried about the cost-of-living impact for an improbable dividend.

The ultimate insiders constituency is the ACT, one of the richest and most privileged parts of Australia, home to the public service brains trust and the Canberra press gallery where carbon pricing is a commonsense "no brainer", same-sex marriage seems sensible, distaste for Abbott is elemental, where the Greens polled 19.2 per cent of the primary vote with the total Labor-Green primary vote last national election a whopping 64.2 per cent, affirming that for the ACT the Labor-Green ascendancy is Australia's future. At the 2010 poll Gillard's base rested heavily on southeastern Australia, divorced from the nation's "resources culture" states that drive the huge leap in our terms of trade.

Abbott's power base, by contrast, lies in rural and regional Australia, the development states of Western Australia and Queensland, talkback radio listeners, small business across the nation, visceral hostility in NSW to Labor's venal, self-serving power structure and the character of Australia's social conservatism with its rural, traditional and religious strands.

The ultimate in fidelity to Abbott is the powerful Sydney-based 2GB network with Alan Jones and Ray Hadley and their capacity to mobilise outsider opinion hostile to the insider culture now represented by Gillard Labor and its new alliance with Bob Brown's Greens.

Comparisons with the Tea Party movement in the US, founded in economic tribulation, are misleading.

But Abbott is the most populist leader in Liberal Party history, seeking to re-create the Howard battlers as Abbott's agitators.

His ability to destabilise Labor is proven. Labor resents Abbott and feels his behaviour is somehow improper and unfair for a conservative. Above all, Labor is utterly convinced of its moral, policy and intellectual superiority to Abbott on carbon pricing, a belief it thinks will be vindicated yet a belief that alienates Labor from the outsider culture and at least half of Australia's population.

The Greens, once outsiders, are becoming part of the insider culture as they gain power and influence. It is easy for Nationals politicians, many representing poor electorates, to depict the Greens as inner-city, prosperous professionals, divorced from wealth-creating "hard" industries, exploiting minority government to impose their values on the nation from punitive anti-carbon measures to recasting the meaning of marriage.

Independents Tony Windsor and Rob Oakeshott, once outsiders because they had no influence, are now trapped with an insider tag as they keep Gillard in power and back most of her policies. The pressure is telling. This week Windsor complained he had received death threats, said the abuse was fomented by "shock jocks and others" and warned of the risk of US-style political shootings. It was over the top yet revealing. Because they can make and break the government and its policies, the pressure on Windsor and Oakeshott will only intensify.

Having thrived in the past by mobilising votes "against the system", they seem uneasy at handling the responsibility they now share for the system and its policies.

This week's Gillard-Abbott carbon tax battle was a classic along insider-outside lines. Repudiating the Coalition, Gillard said: "Australians are smart, competent people. They are up to this. They will get it done and they will leave the opposition stranded as history marches past them."

Her point is that Australians are too smart for Abbott's dumbing-down politics.

Gillard warned that the "bitter, shallow, hollow people" of the Coalition would never sit on the Treasury benches again after this performance. Then she resorted to the deepest reflex of insider moral superiority: accusing the Coalition of "race-baiting", a claim on Abbott's insistence she had to withdraw. Nothing more excites the indignation of insider culture while, at the same time, driving the insider-outsider polarisation.

The claims that John Howard as PM was a racist or that Abbott, as Opposition Leader, sanctions racism or race-baiting are baseless. They don't help Labor's standing with the outsider culture, nor do they help Labor win the votes it needs for future majority government.

Abbott's tactics are to destroy Gillard's trust with the public and ruin forever her carbon tax. And this week exposed the myriad difficulties that Gillard faces in this long and unpredictable battle.

First, Gillard is breaking a clear and deliberate election promise. This is not a matter of semantics. There is no grey area here.

On Friday August 20, the day before the election, in her interview with this newspaper featured on page one under a banner heading, Gillard said: "I don't rule out the possibility of legislating a carbon pollution reduction scheme, a market-based mechanism. I rule out a carbon tax."

It was an unwise comment but calculated to check Abbott's final push. Media excuses during the past week suggesting Gillard is not really breaking a promise are craven polemics.

Second, global momentum for action is distinctly weaker now than during 2008 and early 2009 when Kevin Rudd was devising his scheme.

This will become pivotal later in the debate. The turning point was the Copenhagen conference. Before Copenhagen, Rudd looked forward to "an ambitious agreement", as he told the Lowy Institute the month before. But Copenhagen failed and the world lives in the shadow of that failure.

Any hope for a new globally binding legal agreement is remote. Gillard is right to say Australia's response must be proportionate with the rest of the world, neither leading nor lagging.

Her problem, however, is that she proposes to price carbon when national governments in the US, China and India have no such policy. This has the potential to become a deal-breaker.

Third, the situation for much of Australian industry is far different and much harsher than in 2009. Witness comments from the Australian Industry Group's Heather Ridout, to this paper: "It is doubtful we will see another Kyoto Protocol any time soon. That means we are unlikely to have a verifiable international agreement.

"The situation for Australian manufacturing is even more competitive and difficult than it was two years ago. We are living with a higher dollar. Competition in the steel market is very intense, it's coming from China, it's coming from South Korea.

"In this situation the capacity for our companies to absorb another cost imposition in a carbon price is very fraught. All options should be on the table including that of rollback until the final shape of the government's proposals is clear."

Consider this dilemma: at the precise time the Greens demand cutting industry assistance the competitive margin for most of Australia's industry is being reduced.

Fourth, Gillard's economic argument comparing her reform with Hawke-Keating tariff cuts has a critical weakness.

The tariff cuts were in Australia's interest regardless of what the world did. But as the original Garnaut report argued to the extent Australia acts on pricing carbon and other nations don't act, then Australia is a loser. While Garnaut backs a carbon price, his economic analysis remains valid. It will put Gillard's final scheme under scrutiny and demand comparison of Australia's actions with other nations to assess whether we are winners or losers.

Finally, Gillard has a problem with the political optics as this week proved yet again. Because nobody ever bells the cat it is timely to restate the obvious and essential difficulty - it is Gillard's formal, documented alliance with the Greens. The point, of course, is that Gillard didn't need this alliance to become a minority PM. The Greens were always going to back Gillard over Abbott. Yet by entering this alliance with the party pledged to steal votes from Labor, Gillard did a rotten deal. Yes, it's that simple: she has given the Greens a new authority and created a chronic problem for her own authority.

Greens leader Bob Brown keeps outsmarting Labor. Elected to the Senate in 1996, Brown is astute at prosecuting the Greens agenda while reassuring the public. He projects as co-operative and statesmanlike.

This week he wedged a clueless Labor Party over a symbolic bill concerning the territories. If Labor backs Brown's bill, as it surely will, then it facilitates the Green agenda of same-sex recognition via the ACT Assembly. If it opposes Brown's bill then it is seen as supporting "intolerable" impositions on ACT democracy.

For Gillard, the overall strategic task is daunting. She needs Greens votes but Gillard cannot afford to be seen to submit to the Greens on either carbon pricing or the social agenda. That would gift Abbott's run to power.