Labor's costly gambit

Julia Gillard

THE political toll extracted to create and sustain the Gillard minority government continues to mount -- a carbon tax in breach of promise, an alliance with the Greens, pledged poker machine laws, multiple funding deals with the independents and now the election of a Coalition rat as Speaker.

Julia Gillard will need to deliver political recovery down the track because the debt being lodged against brand Labor is fearsome. The stakes continue to mount. The risk is that Labor is lighting spectacular fires on the path to its debacle inferno.

In the annals of political rodentry Labor's deal with Peter Slipper is conspicuous yet equivocal. It virtually guarantees Gillard her full-term parliament yet it feeds Gillard's image with the public as an untrustworthy leader with an integrity problem. This is the main reason support had grown again for Kevin Rudd.

Until 48 hours ago Slipper, the new Speaker, had a near-zero recognition with the public, but that will change. Gillard has tied Labor to Slipper. He will become the latest exhibit of Labor's contentious decisions and dubious connections in the cause of its self-preservation.

Slipper's lax attitude towards parliamentary entitlements, a gift story for tabloids and talkback radio, will move to centre stage. Slipper's sins, present and past, are now Labor's inheritance. The Coalition was planning to execute Slipper but Labor voted him as Speaker before any of its own. The full story of the replacement of Labor's Harry Jenkins with Slipper may be benign.

There is no evidence Gillard did anything improper.

It is, however, an old-fashioned fix that reeks of NSW right-wing sleaze with Labor as vanguard of a political class whose goal is power and whose skills are deals to hold power. It is the sort of clever insider politics at which Labor excels. That's the trouble. This manoeuvre exposes Labor at its most vulnerable spot. A frustrated Tony Abbott's ability to incorporate this event into his central narrative about Labor -- the party that has betrayed its own people -- should not be misjudged.

Gillard as Prime Minister authorised this fix. She is beneficiary from having Labor's operating majority increase from one to three votes but will wear the blame if Slipper becomes a public liability.

For Labor, this operation was probably all too easy. Facing certain loss of preselection by his own side and having only the current parliament as his career end, Slipper was primed for seduction. Labor's maestro, Anthony Albanese, cut the deal in early morn without troubling the bartender.

Abbott, who has spent 15 months bragging about his ability to force an election on the floor, has been played for a mug by losing one of his own side. Caught with his pants down, it is an acute embarrassment for Abbott. How could he have been so careless? A certain full-term parliament will demand a major tactical re-assessment by Abbott.

The assumption that another two years in office must automatically assist Gillard is unjustified. That depends solely on Gillard's ability to change Labor policies and resurrect Labor's brand. Neither is easy. There is still little clue inside the party that Labor faces a systemic crisis. More of the same guarantees failure. The idea that another two years of Labor means the public will see the light and forgive and forget is laughable. Yet many ministers and Labor MPs actually believe this.

Labor's triumph confirms the bizarre structure of politics -- Gillard has mastery of minority government and Abbott commands popular sentiment beyond the parliament.

The gains for Gillard are tangible. The threat from Andrew Wilkie to withdraw his support if his poker machine bill is not passed no longer threatens Labor's survival. Gillard now has more scope for negotiation on the scheme.

Similarly, the risk posed by legal action against former union leader Craig Thomson no longer threatens the government's existence. The working majority of three votes purchases Gillard more discretion in dealing with the Greens, a factor that may become pivotal. The extra vote opens the possibility of more legislation being successful -- witness means-testing the private health insurance rebate and a new effort on asylum-seeker laws.

This event shifts the margin of power to Labor. It gives Gillard more authority. It invests minority government with more stability and certainty. It offers Gillard more scope to rebuild her government. Note, however, that Slipper's elevation confirms the polarisation in the system. All the usual elements are in play. Labor, once again, has played the insider politics with brilliance.

Just as Gillard was skilful at forming minority government and getting 254 bills through the parliament, she has now bolstered her floor majority as a minority PM. The rural independents, Tony Windsor and Rob Oakeshott, are getting accustomed to negotiating with Labor. The crossbenchers are more alienated from Abbott today than 15 months ago. His unremitting campaign to force an early election lies broken and beaten. At every point inside the beltway, playing insider politics, Gillard has left Abbott for dead.

She recently got the carbon pricing bills through the parliament. This week her mining tax bill went through the lower house. It took the High Court to throttle her Malaysia Solution and this remains the unresolved policy problem of the big three, carbon, mining and boats.

But at what cost has Gillard succeeded? For every insider success Gillard has paid a price in the wider country. The most recent Newspoll has Labor's primary vote at 30 per cent and a Coalition primary vote lead of 48-30 per cent. The fall in Labor's primary vote from 38 per cent at the August 2010 poll constitutes probably the biggest and fastest voting collapse in Australia's history.

There is something debasing about minority government. Its capacity to make the usual business of governance nakedly grubby is striking. The price of insider success comes with deals and compromises that only damage Labor as the governing party.

The challenges Gillard confronts during the next two years are daunting in the extreme. The world faces a unique and unpredictable economic crisis. The eurozone is engaged in a survival struggle that threatens a European recession. Political deadlock in the US weakens American economic prospects. The patchwork or three-speed Australian economy poses stark risks for Labor. Treasury deputy secretary David Gruen says the 2011-12 budget forecasts imply 70 per cent of Australia's economy will not benefit from the mining boom and will grow at only 1 per cent. Actual results will surely be worse.

The consensus that elected Rudd Labor in 2007 has collapsed. That is proved by the demise of the ALP primary vote. Australia today is a divided polity rent with four profound divisions.

First, an alienated corporate sector openly challenges Gillard Labor which it mistrusts; witness the new Business Council of Australia chief, Tony Shepherd, calling for urgent revision of the industrial laws and hostility from small business to myriad policies, notably having to finance most of Labor's lift in the super levy from 9 per cent to 12 per cent. The rift between Labor and corporate Australia seems unbridgeable.

Second, Labor's institutional ties to the trade union movement constitute a policy and political negative only guaranteed to grow more serious and more obvious to the public. As trade union private sector coverage falls to about 15 per cent, union pressure on Labor policy becomes more overt and damaging. The ACTU has no strategy of governing in partnership with Labor but operates as a privileged interest group, alienating majority opinion and weakening Labor's reform credentials.

Third, progressive politics in Australia is fatally divided long-term between Labor and the Greens. Gillard's formal association with the Greens has poisoned attitudes towards Labor across much of the nation. Labor has no strategy for fighting on two fronts against the Coalition and the Greens. The instincts of senior ministers to distance Labor from the Greens are correct but hard to implement. Greens leader Bob Brown has wedged Labor -- he is perceived as winning concessions from Labor yet able to denigrate Gillard when their policies collide. There is no sign of the Green primary vote falling away.

The consequence is Labor remains trapped in the contracted political centre ground.

Fourth, Labor is bedevilled by policy and delivery failures. There will be no easy relief from its reputation for incompetence. Witness the flaws in its mining tax, the problems in its three-year fixed-price carbon scheme with the rest of the Western world in retreat on this front and the monthly arrival of 600 boatpeople demonstrating that Labor cannot control Australia's borders.

Such points qualify the false optimism that a full-term parliament means the pendulum naturally returns to Labor. Gillard, however, has won a better chance for recovery. This is because Abbott's failure to procure an election must drive a tactical rethink within the Coalition. The truth is Abbott's early election obsession had become a disease. The polls, however, reveal his success and his new challenge is not reinvention. It is about offering more hope, engaging in constructive policy debate and limiting the Dr No image.

Labor knows how much damage Abbott has done to its standing. Given Labor's vulnerabilities its survival strategy during the next two years depends on ruining Abbott. That is the only road back. It is the chance Labor has won for itself.