If government changes, so does nation

IN his final-week interview with this newspaper John Howard has belled the cat, warning against the new political era Australia confronts if Labor wins the election. Howard's scare tactic is reminiscent of Paul Keating's dictum that "you change your government, you change your country".

From the moment he entered politics, Kevin Rudd wanted to make a difference. His chance is imminent. Despite his clever me-tooism Rudd, an ambitious and single-minded leader, intends to make a difference to Australia if he prevails. Rudd will change the nation and nobody should expect anything less of a new prime minister. The magnitude of Labor's potential supremacy may be unprecedented. This was the foundation for Howard's final-week wake-up call.

His sketch of the Rudd era, if it comes, is Labor control of the House of Representatives, a Labor-Greens majority in the Senate, coast-to-coast Labor governments in the states and federally, and a Labor-trade union alliance to rewrite our industrial relations laws from top to bottom.

This portrait is not just a Howard scare. It is a realistic result from the election if the polls are vindicated. Howard calls this system "the least checked and balanced political distribution in the history of the country". This may become the crucial prophecy from campaign 2007, with Labor's supremacy comprehensive.

What Howard did not concede, though he knows, is that Liberal Party weakness across the nation is assisting Labor to such dominance. The accumulation of such political power would constitute a historic test of Labor's values, policy and character. The nature of that test is new because Australia has changed in basic ways since 1996, when Labor last governed, and the policy agenda has evolved dramatically. If Labor wins, it is Rudd who will put his stamp on Australia's future in four critical dimensions.

First, it would be Rudd Labor that finalises Australia's industrial relations settlement for the open economy of the new century, contrary to all expectations in 1996 that Howard's side would complete this process. Howard's 2005 Work Choices reform is a contested framework that has provoked a political backlash and that Labor is sworn to revise. Rudd's mandate for IR change will be unquestioned. The test for Rudd Labor is how it uses this power: whether it privileges unions and organised labour, thereby damaging Australia long term in the globalised age, or whether it strikes a superior balance to Howard's.

Howard warns his defeat means the non-Labor side will never again attempt industrial reform.

Its new folklore will be to avoid forever Howard's fate. Despite the melodrama, this is a realistic interpretation. The Liberal Party will surrender its last claim on decisively shaping the industrial relations system. That opportunity and responsibility will reside with Rudd, Julia Gillard and trade union influence.

Second, it would fall to Rudd Labor to devise Australia's institutional response to climate change. It will be the key policy innovation of the next decade. Because the debate about pricing carbon and cutting emissions has been so chaotic, Rudd faces a huge challenge to harmonise the politics with the policy.

Howard's misjudgment on climate change, perhaps his most serious domestic mistake, delivers this initiative to Labor. But this imposes a new historic responsibility on the ALP.

So far Labor is split between a market-based emissions trading response and a series of government-directed clean energy initiatives. The issue will demand, ultimately, a philosophical response from Rudd: whether to rely on the market or state planning. He had the wisdom to ask Ross Garnaut, an architect of the 1980s pro-market reforms, to provide Labor with the blueprint.

This reveals Rudd's own instincts. But the politics will be difficult, with the green lobby demanding evidence of industry shutdowns and state mandating of clean energy sources. Howard warns about the risks of a Labor-Greens alliance. The reality, however, is that Rudd must establish Labor's climate change framework on an entirely separate basis from the Greens and anchored in a national interest context.

Third, Rudd's mission is to take economic reform into areas where Howard has been ineffective.

With more reforms tied to commonwealth-state relations and given his own experience with the Goss government, Rudd's task is to use the Council of Australian Governments more effectively.

He tends to call this "fixing the Federation", an unfortunately lofty phrase that defies realisation.

The risk is that Rudd's economic agenda, by definition, is hostage to state ALP governments. The worst among them reject market pricing, privatisation and competition policy. Fiscal bribery may help at the margins.

While Howard slams the states as reform failures, Rudd is pledged to convert them as part of his solution, though on hospitals he threatens a federal financial takeover down the track. If the Hawke-Keating era was shaped by the Accord with the union movement, Rudd's may be shaped by COAG with the states, a prospect enough to frighten many political veterans. The line is drawn. Rudd declares this era of Labor supremacy will result in superior economic dividends arising from better federal arrangements that will expose Howard's failures.

The fourth area where Rudd promises to change the nation is his education revolution. In the campaign his passion has not been backed by dollars. But Rudd repeats the revolutionary goal: to make Australia's the best educated and skilled workforce in the world. It demands a huge financial reallocation through time, combined with better policy, notably towards universities. So far there is little evidence of any policy innovation.

On education, Howard warns that a nationwide Labor supremacy cannot deliver because Labor remains culturally and organisationally tied to the progressive Left, whose power base is the producer side of the education system. It is one of Howard's deepest articles of faith. And its validity will be tested by any Rudd government.

Howard sees election 2007 as a contest between values. His disappointment, surely, must be that this alleged contest of values has not won prominence. This is because Rudd denied it as a tactic and as a policy. Rudd decided he would not be wedged by Howard on cultural issues. On education, Rudd presents as a practical realist seeking better investments tied to better outcomes.

This raises a wider issue about a Rudd government: its stance on values and culture. As Howard shows, the leader's character is fundamental to projection of values. Expect from Rudd a new national direction, a path that is distinctive, that is neither Howard's conservatism nor Labor's progressive left but falls between them.