A year thick with strategy

PARLIAMENT returns tomorrow in what promises to be a fiery 2010.

THE resumption of parliament this week will provide the government with an opportunity to seriously test the mettle of the new Opposition Leader. But it will also test the government as it tries to pull together a large legislative program ahead of an expected election later in the year.

If Kevin Rudd wants 2010 to be as successful for him as the previous two years have been, he needs to ensure Tony Abbott doesn't get traction on his key criticisms of the government's agenda.

So far Abbott has focused his attacks on the emissions trading scheme and government debt. While the politics of attacking on these fronts is simple enough, the complexities attached to each issue traverse a range of other policy areas.

Rudd started the year by talking up Australia's need to lift productivity rates. Concerns over our ageing population have also received significant airtime in the media. Debates on these sorts of issues lead to other policy debates, such as what is an appropriate immigration level, and what needs to be done about healthcare reform.

Neither Rudd nor Abbott is afraid to speak across a diverse set of policy considerations, which should make for a fascinating year.

Some Liberal MPs think Abbott may choose to target high immigration levels as something that Australia should look to change. Rudd has previously argued for a "big Australia", which includes Intergenerational Report estimates of a population of 35 million by 2050. Last week on the ABC's The 7.30 Report, Rudd was circumspect when quizzed on the matter, noting that immigration policy has always been bipartisan. That could soon change.

Skilled migration can help lift sagging productivity rates - perhaps one reason why Rudd supports a big Australia. It also provides relief from the costs of ageing by bolstering the proportion of the population of working age faster than fertility increases can. But with the budget in deficit and likely to stay there for some time, there is also an argument to be made for reducing Australia's overall immigration intake because the economy can't support the sort of spending on infrastructure that new citizens require. That argument would suit Abbott given the Coalition's line on debt.

Lower immigration could also help Abbott fulfil his commitment to a 5 per cent emissions reduction target without the mechanism of an ETS. A lower population makes achieving emissions reductions easier, as research by Monash University's Bob Birrell shows.

If the Coalition does go down the path of cutting immigration, it could make for a divisive national debate, reminiscent perhaps of the Pauline Hanson-inspired campaigning ahead of the 1998 election. It is the sort of direction a desperate opposition down in the polls could consider.

One senior Liberal who supported Malcolm Turnbull in last year's leadership showdown has told The Australian he fears Abbott may look for such a wedge issue. "It's not just not out of the question, it's in play," he says.

What the former opposition leader does in 2010 will also be worth watching. If he chooses to remain in politics, Turnbull may be a thorn in the side of Abbott's efforts to unite the Liberal Party, certainly as far as climate change policy is concerned. Even if Turnbull announces he won't be recontesting his electorate of Wentworth, holding his seat will be tough for any new candidate, and Turnbull may choose to continue to criticise Abbott's policy on climate change anyway.

While climate change will no doubt continue to be important this year, it may not be the first-order issue for the parliament that it has been. The failure of the Copenhagen conference to set binding global targets for emissions reductions may have caused the government to rethink whether it wants to fight an election with its ETS as the central issue. Abbott has taken to calling the ETS a "big tax", and Rudd appears to be retracting from the idea of calling a double dissolution on the issue.

Nevertheless, Labor knows it will have to defend its ETS. Public opinion has seen support for the ETS shrink, but an overwhelming majority of Australians still want action on climate change. The challenge for the government will be convincing people its brand of action is the way to go. The challenge for the opposition will be convincing the public it has an alternative plan that is environmentally and economically credible. That may not be easy.

While personality contests on the government side of the parliament won't destabilise the Labor Party in an election year, that doesn't mean jockeying won't be going on. Julia Gillard will look to cement her status as the heir apparent. She has had a major public relations success with the launch of her My Schools website, but she will have to manage the industrial relations disputes her new legislation is causing - especially in northern Western Australia - if she is to avoid opposition criticism that her workload is too great.

Underlying the policy and personality issues both sides of politics will face this year is the spectre of rising interest rates. Consecutive increases in interest rates crippled the Howard government before it went to the polls in 2007. Rudd and Wayne Swan have argued that likely interest rate increases only represent a return to normal setting after the dramatic reductions to help stave off recession, a point echoed by the International Monetary Fund. But in time voters might begin to question the increased financial burden higher mortgage repayments place on their lives. The danger for the government is that voters may associate interest rate rises with too much stimulus of the economy. That's certainly the line the opposition will run.

But Abbott and his team are by no means going to have the economic debate all their own way this year. Rudd and Swan were quick to respond to the global downturn with stimulus measures, and they have already argued their actions saved jobs and prevented recession. The Coalition opposed the extent of spending in the stimulus package, giving the government an easy argument that the Coalition would have failed to save the national economy had it been in charge of the Treasury.

Labor's internal polling and focus group research shows that Abbott may have a problem with his economic management credentials. The most publicly discussed negative Abbott may face in his bid to become prime minister is how women view his leadership, a point reinforced last week when comments he made about women's virginity hit the headlines. However, behind the scenes Labor is more focused on tapping into voter concerns over how Abbott would manage the economy, and that line of attack is likely to dominate its question time performances in the next two weeks.

One of the big question marks for 2010 is what the government will do on healthcare policy and how it will respond to the Henry review into Australia's taxation system. At the last election, Rudd promised to take over public hospitals if standards weren't raised, but he and Health Minister Nicola Roxon seem to have realised this is easier said than done. As a former health minister, Abbott is sympathetic towards a commonwealth takeover of health and has written about the virtues of doing so. But he also knows it is an issue on which he can attack Labor for over-promising.

The government has the Henry review in its possession but is yet to release the recommendations to the public because it is still trying to work out a response. Both Rudd and Swan are on the record as criticising the previous government for not being prepared to tackle reform of the taxation system beyond changes associated with the GST. But tax reform as a policy script in an election year can be dangerous, even for a government riding high in the polls. The dilemma for Rudd is that if he promises in broad terms to do "something" about tax reform after the next election, it might feed into the opposition's narrative that he is all talk and no action.

In addition to some of the policy areas mentioned, the government's national broadband scheme and controversial internet filtering laws will face tough scrutiny this year. Rudd is trying to rewrite the rule book for a government in its first term in office, leaving major policy reforms until its final year.

Labor presided more than it reformed in its first two years in power, and now must deal with a host of issues in its final 12 months before an election. At one level this is understandable because of the timing of the global financial crisis, forcing major reforms on to the backburner (with the exception of Labor's election commitment to scrap Work Choices).

But that won't help the fact that looking busy in a final parliamentary sitting year can also look messy. And Abbott is just the kind of retail politician who will look to exploit such optics.

Not everything that will happen this year is within the Prime Minister's orbit of control. He will be campaigning simultaneously with state Labor government re-election campaigns. Tasmania and South Australia go to the polls in March and both outcomes are far from certain. Victoria's election is in November, probably soon after the federal election, and in March next year the unpopular NSW government must also face the people.

So the campaigns for the nation's two largest states will be on in earnest throughout this year just as Rudd is selling his message. The Prime Minister will be relying on voters differentiating between state and federal issues, given that the state Labor governments seeking re-election are all long-term administrations that could find winning more difficult than federal Labor should.

The real impact of so many elections will be on the party organisations, the Liberal Party in particular. Strapped for cash, the federal wing of the Liberal Party will find it especially difficult to raise enough funds to stay competitive with a government well ahead in the polls.

There is a degree of uncertainty over what the terms of campaign financing will be, with the government expected to bring legislation forward this year on the back of last year's green and white papers on campaign finance reform.

The federal parliamentary year will be busy, fiery and full of policy debates. But despite the contest set for the parliamentary year, it could all lead to a predictable election outcome. First-term governments don't usually lose elections; federally the last time it happened was way back in 1931. And federal Labor and its Prime Minister have dominated the polls like no other first-term administration.

Rudd, The Australian's Australian of the Year, would be within his rights to be relaxed and comfortable, despite the challenges his government faces this year as he prepares to submit to the judgment of voters.