Can marketing save PM?

THE Rudd government has now staked its fortunes on the deepening political war with the mining industry. By their dismissal yesterday of any early settlement with the miners Kevin Rudd and Wayne Swan have signalled their plan to discredit the Tony Abbott-led Coalition as running dogs of the industry.

Rudd and Swan have decided to operate from strength. They are not for turning on the framework of their resource super-profits tax. They argue the tax is "absolutely fundamental" as an equity measure and an economic reform. They depict the industry as a self-interested lobby that refuses to meet its fair share of tax and is engaged in a $100 million dishonest advertising campaign against the public interest.

They reject the industry's claim about sovereign risk and damage to Australia's economy.

Rudd has breached the spirit and purpose of his government's advertising guidelines in Labor's "whatever it takes" paid retaliation against an industry it claims is running "an active campaign of misinformation".

Australia faces a bitter election-year contest with Labor, initially shocked by the ferocity of the mining campaign, now deciding to stand and fight. The unmistakable message yesterday is that Rudd will wage an aggressive campaign, that he will not be "railroaded" and will not make any substantive concession in the RSPT.

Rudd and Swan have put their strength and credibility on the line and the escalating struggle limits the scope for concessions. With consultations between the government and mining industry continuing Labor can decide down the track the timing and extent of RSPT modifications that fall

under its implementation and transition review.

Last weekend's Newspoll showed the public divided 41-36 against the RSPT with a hefty 23 per cent undecided. This encourages the Coalition's anti-tax crusade but still gives Labor hope that, over a long campaign, it can swing the balance. The contest, however, is not just about the RSPT but penetrates to respective economic credentials.

Both leaders are being damaged in such heavily negative politics with Rudd's net satisfaction rating now minus 18 points and Abbott's at minus 12 points. Labor is polishing its campaign against Abbott: that he is in bed with miners, loves Work Choices, unleashes lots of fear and loathing but doesn't know anything about tax or economic policy.

Abbott's no-confidence motion on Monday reveals his line of attack, that Rudd not only punishes the nation with a great new tax but is an untrustworthy leader who will break any promise to promote his cause.

Released documents authorising Labor's advertising campaign for its RSPT capture the extent to which the government is fighting for its political life.

On April 20, cabinet's most important committee consisting of Rudd, Swan, Julia Gillard and Lindsay Tanner, authorised a $38.5 million campaign over two years to promote community knowledge of Labor's tax package released on May 2 with the RSPT as its centrepiece. This decision was unremarkable. It was standard practice for such a policy. But there was no sense of urgency or emergency.

The campaign received a positive response from the Independent Communications Committee, the three-person body to ensure guidelines covering government advertising were being met.

Rudd and Swan, however, knew their tax package would trigger a clash with the miners, with the RSPT financing company tax cuts, superannuation concessions, small business tax breaks and boosting the budget bottom-line. A hefty redistribution using mining profits.

Swan says that he was "shocked" at the industry retaliation in the week after the policy's release. This involved threats to cancel projects along with the start of paid advertising from the miners. The Treasurer moved quickly.

On May 10, the day before the budget and eight days after the tax package, Swan wrote to Cabinet Secretary, Joe Ludwig, who has responsibility for government advertising, putting a new request, that the campaign be put on fast forward. With the mining ads gathering momentum, Swan was keen to retaliate. That is, he was altering the initial proposal. Swan's argument to Ludwig was twofold: the public interest and the need to correct the mining campaign.

He wrote that "since the government's tax reforms involve changes to the value of some capital assets" they affected the financial returns of mining companies and, as a result, many people would be concerned about how they will be affected. Second, because of "misinformation or misunderstandings" of Labor's policy there was a need to keep the community better informed.

Swan asked Ludwig to trigger what, in this context, can be called the nuclear button of advertising policy. This was point four in the March 2010 guidelines investing the Cabinet Secretary with authority to "exempt a campaign" from compliance with the guidelines "on the basis of a national emergency, extreme urgency or other compelling reason". And Swan

asked Ludwig to "consider this request as a matter of urgency".

There was no way that Ludwig would deny Swan. But it was a tricky and embarrassing decision in an arena where Rudd had attacked the Howard government, declared that advertising for political purpose was "a cancer on democracy" and invited the world to judge his own integrity.

It took Ludwig 14 days to reply. He gave Swan the answer he needed but Ludwig took his time. On May 24 he wrote to Swan saying he had given "careful consideration" to whether Swan's case met the exemption criteria. He gave the exemption on both grounds sought. It meant Treasury did not need to present the campaign to the Independent Communications Committee. But Ludwig expected Treasury to honour the principle that the campaign not be party political. This cannot be policed. But Swan promised in writing to uphold this condition. Under the guidelines Ludwig had to report his exemption decision to the parliament which he did on May 28, a four-day delay that meant it was not scrutinised by Senate estimates.

This narrative reveals the urgency surrounding the campaign. Swan felt the political imperative to advance the government's campaign despite further damage to Labor's integrity because of the process. It invited Abbott's mocking cry that "there are no guns in the streets [but] it is a national emergency in the eyes of the Prime Minister" because his political hide was in trouble.

It is also timely to observe that in his letter to Ludwig of March 29 the Auditor-General, Ian McPhee, said the 2010 revision of the guidelines had amounted to a "general softening" of the policy.

These events mean that at its first election year-test Labor's integrity model for government advertising has blown a big hole. The mining tax crisis exposed Rudd's hypocrisy. The issue is whether he can recover to win the marketing contest.