Gillard's new shock tactics

Julia Gillard

BLAMING state governments for electricity price increases is the second step in Julia Gillard's new political strategy. On the back of this week's Newspoll, which saw Labor's primary vote increase from 28 to 33 per cent, it is part of the Prime Minister's plan to spend more time fighting state premiers and less time focusing on Tony Abbott.

"She needs to show the public that she cares about their problems and cost of living issues are a major problem for people," one well-placed Labor source says.

The aim is to cast Abbott aside, instead using conservative premiers as the benchmark for the type of uncaring regime Abbott might lead if handed the reins of power.

It is a strategy that has been hatched by the PM's communications director John McTernan -- a Scot with an old-fashioned view that painting Tories as cold-blooded is Labor's best chance of gaining traction with voters.

McTernan wants a Labor values debate, as do others in the upper echelons of the government, including Wayne Swan who last week used Bruce Springsteen's music to evoke class warfare.

First it was the National Disability Insurance Scheme, which saw state premiers resist funding trials, despite relatively modest requests for money. Next Gillard will call on the states to offer fair and reasonable funding in support of the Gonski report's recommendations for education. For now, the PM's attacks are focused on electricity price increases of between 50per cent and 70 per cent in recent years.

Helping the disabled, taking pressure off family budgets by doing something about electricity prices and ensuring an education system that gives children the best possible start in life. That's not a bad agenda for a Labor government to promote, especially if it can contrast its approach with a conservative movement showing disregard for such challenges.

"Liberal premiers are a pretty good proxy for the type of prime minister Abbott would be," one Labor minister says. "Only they are pretty moderate compared to his style," he adds.

For so long unable to wedge Abbott in a direct confrontation with the federal Opposition Leader, Gillard is now using the states as a proxy battleground to cause internal divisions within the Coalition. They are an easier target because they are less united than the federal opposition, which has remained remarkably disciplined in recent times. Each conservative state premier has his own agenda, as well as his own political circumstances to deal with.

State Liberal governments also can't respond to the government's strategy in the same dismissive tone that a political opposition can. "Abbott is so frustrating because he never has to come up with a viable alternative to what he dismisses or attacks," a senior government adviser tells Inquirer.

Power comes with responsibility, hence when the PM presents challenges to the state premiers they are obliged to engage in a way Abbott doesn't have to. So far, they have been easy to wedge, causing flow-on difficulties for the federal opposition.

This strategy has been a long time coming. Shortly after Labor won its way back into office as a minority government at the 2010 election, then senator Mark Arbib would point out to colleagues that new conservative state governments would change the political settings as they won office.

In late 2010 Ted Baillieu became only the second conservative Premier, joining Western Australia's Colin Barnett. Barry O'Farrell followed in NSW in March last year, and Campbell Newman took over the Queensland premiership this March.

Arbib's argument was the removal of unpopular long-term state Labor governments would make the federal government's life a little easier. He also felt that unpopular early-term policy initiatives by new Coalition governments would give the federal government ammunition to attack its political foes. But the former Labor powerbroker wanted the government to start laying the foundations for this sort of strategy well before now. Instead, Gillard's inner circle -- which Arbib was increasingly shut out of after the 2010 election result -- maintained its focus on Abbott personally, believing his unpopularity with voters would eventually correct the imbalance in the polls. That strategy didn't work.

As conservative premiers become increasingly responsible for the management of the states they now lead, the opportunities for the federal government to contrast its approach with state Liberals, and to challenge their policy settings, is becoming more obvious.

Certainly Newman is under some pressure in Queensland following the sizeable spending cuts he is embarking on. And in NSW and Victoria the new Liberal governments have shown themselves to be easy to push around on issues such as the NDIS.

Former Victorian premier Jeff Kennett's suggestion that Abbott should regard Newman's spending cuts agenda as a blueprint of what he needs to do if elected is just the sort of commentary the federal government would like to see more of.

But Gillard's difficulty in turning her attacks on the states into a winning strategy comes on two fronts: she needed to condemn electricity price rises much earlier, before her personal standing in the polls sank to the depths that it now has. And she risks being exposed as contradictory, given that the carbon tax does put upward pressure on electricity prices.

Abbott labours this second point, even though it is universally accepted that the impact of the carbon tax only inflates electricity prices by about 10 per cent. Renewable energy targets also put upward pressure on prices, but that is a bipartisan commitment.

The bulk of price rises have come about because of the significant injections of funding going into poles and wires to upgrade networks in order to "gold plate" them -- as Gillard termed it -- against blackouts during peak usage, and because the regulatory structures reward state-owned electricity assets with high dividends when making such investments.

"State governments are effectively price gouging voters" is how one senior Labor figure puts it to Inquirer.

Were Abbott to nuance his message on electricity price rises beyond the role of the carbon tax, it would be easy for him to point out that state Labor governments were responsible for long-term under-investment in electricity infrastructure, which has resulted in larger investments in recent years pushing up prices. He could also note that state Labor governments failed to embrace privatisation (courtesy of union resistance), which might also have helped overcome some of the upward pressures on prices.

But Abbott's focus on the carbon tax risks him being left behind in this debate, which is exactly Gillard's intention.

Gillard's wedging of state Liberal premiers is a particularly difficult one for them to navigate through. She condemns them for feeding off higher than necessary dividends courtesy of electricity price rises, yet also attacks the premiers for not stumping up more money for worthy social initiatives such as the NDIS.

It is a fiscal wedge born out of the vertical fiscal imbalance that has long existed in Australia. The solution to this situation is federal-state co-operation to achieve taxation reform. In the present political climate that appears less likely than ever.

In terms of the substance behind Gillard's political strategy, however, she has problems.

We still don't know how the NDIS will be funded in the longer term. The same goes for funding the Gonski recommendations. And while Gillard is on firm ground when she points out that rising electricity prices are more about "gold plating" the infrastructure than the effects of the carbon price, what, if anything, she can do about price rises is another matter.

And is the public still listening to her anyway? As the clock ticks towards the next election, Gillard's strategy is becoming more audacious. Attacking others for electricity price increases certainly fits that formula. It is a head-on response to Abbott's claims that the carbon tax is responsible for cost-of-living pressures associated with energy price rises across the board, and it is reminiscent of the approach Mark Textor used to advise John Howard to adopt when he was confronted with politically difficult issues.

Shine a light on the problem before turning it on your political opponents, Textor used to tell Howard. This approach immediately avoids the appearance of running scared on the issue in question, which is how Gillard has come across on cost-of-living issues during much of this term.

Howard famously adopted this approach when he declared that the 2004 election would be about trust in the wake of a series of controversies -- from children overboard to the war in Iraq -- that called into question the then prime minister's truthfulness.

Gillard's speech this week attacking state governments for electricity price rises shines a light on an issue her carbon tax has long been blamed for.

However, the move to blame state governments for price rises associated with unnecessary spending on poles and wires is a shift. In July last year Gillard told parliament that electricity prices had gone up "because there is a need for more investment in electricity, that investment is costly and it has been flowing through to electricity prices".

At the time Gillard was unwilling to cast blame at the feet of the states because of a fear that her carbon tax's impact on prices would quickly become the story. She has jettisoned that fear now, realising that if she hides from other factors affecting the cost of living, Abbott will continue to be able to put most of the blame on the carbon tax. The present federal government strategy may be coming too late to have a material impact on the political settings as both major parties gear up for the return of parliament next week. But for the first time in a long time, Labor MPs have hope, not just fear, running through their veins.

Gillard supporters say the past few weeks are a perfect illustration of exactly what they said would happen once the carbon tax came into effect. The debate would move on, and the polls would improve. They have always said a full-term Gillard government would look far more effective than a mid-term minority parliament.

In contrast, Kevin Rudd supporters are waiting to see if coming polls reflect the latest Newspoll.