The pitch

IN terms of election psychology, the message this week has been Kevin Rudd's claim for policy ascendancy over John Howard.

Rudd seeks to undermine Howard's greatest single asset: the authority vested in incumbency and reflected in superior economic management.

Having been a dutiful exponent of me-tooism for 11months, Rudd displayed astute timing in his change of course. He picked the policy launch week to smash the mould, pompously accuse Howard of an "irresponsible spending spree", and cast himself as the Reserve Bank candidate responding to its warnings about higher interest rates.

On the national stage the evidence is powerful and backed by the polls: Rudd is outmanoeuvring Howard. But the election is not a foregone conclusion. The test is whether the seat-by-seat Coalition grassroots campaign can defy the national swing enough to stop Rudd winning the 16 net seats that he needs.

Howard has long thrived as a leader who markets several brands. But Rudd has seized this mantle during the campaign. He is the candidate of the future, the fiscal conservative and the architect for better education, health and skills.

Consider Rudd's performance. In the first week Rudd all but matched Howard's $34 billion tax cut in the single biggest pledge of the election. This week, with his big spending done, Rudd cast himself as apostle of fiscal virtue, declared that recklessness must end, that restraint must prevail and that his launch spending would equal only 25 per cent of Howard's. It illustrated Rudd's opportunism and flexibility, which have confounded Howard during 2007.

Howard and Peter Costello were right to attack Rudd's hypocrisy. Costello said: "When Labor was last in office, the budget was $10 billion in deficit, commonwealth debt was $96 billion and it was my task to balance the budget. We have now had 10 surplus budgets. I would know if Mr Rudd had supported those budgets. Let me tell you, he didn't."

Howard and Costello keep repeating Labor's poor voting record on economic reform over the past 11years. There is no denying their point. The question is: does this mantra have traction any more? It is true the total spend for both sides differs only marginally. But it was Rudd, not Howard, who acted this week on Reserve Bank advice and warnings. It was Rudd, not Howard, who shifted his policy outlook. It was Rudd, not Howard, who changed tack to alter the election symbolism in favour of low inflation.

And it was Howard whose policy speech last Monday may be remembered for pledging a $9.3 billion spend within hours of the independent bank forecasting that underlying inflation will hover at about the 3 per cent mark until 2009, risking further interest rate rises.

In campaign parlance, Rudd halted Howard from gaining the penultimate week momentum. Rudd's restraint reinforced a series of Labor messages: that Howard is spending too much too late, trying to save himself at the risk of economic responsibility.

If Rudd had to create a new persona, the effort would have failed. But Rudd was backing his claim to be a fiscal conservative, reinforcing one of his brand names. More important, Rudd was acting and thinking like a prime minister.

This point may or may not penetrate the campaign. But it is the real significance of his policy speech: it is an omen of how Rudd would behave in office. Rudd has already pledged a razor gang to review programs under the oversight of Opposition finance spokesman Lindsay Tanner. In private, Labor figures are convinced that hefty savings can be made.

Expect Rudd, if he wins, to put heavy emphasis on an anti-inflation economic agenda involving demand, participation and productivity.

The attack yesterday by Nationals leader Mark Vaile on the auditor-general for his critique of alleged Coalition rorting of regional grants is a giveaway sign of a government under intense and perhaps fatal pressure. This attack erodes the notion of incumbent authority and financial responsibility. It seems devoid of rational calculation.

The decisive external event for the campaign was the Reserve Bank's interest rate increase in the fourth week. This changed the tone and priorities. It exposed the Howard Government, derailed its message and gave Rudd a fresh opening that he has seized.

Listen to Rudd the day after his launch: "I've always had a pretty prudent approach to what we'd be doing as far as this campaign (is concerned). Remember, all year I've said I'm an economic conservative. Most of the year I've been saying we'll end up with a bigger budget surplus than those guys. And guess what? Yesterday I delivered on those undertakings."

The story of the campaign is Rudd exerting more influence over the national debate and the Howard Government seeking to survive on the strength of its local seat-by-seat campaigning.

By contrast, in each of his previous wins from 1996 onwards, Howard as leader shaped the national agenda. Rudd has challenged this ascendancy, striking at the heart of Howard's authority.

Starting with climate change, broadband, education and Work Choices, Rudd's tactic now is to confront Howard on fiscal conservatism, interest rates and running a modern economy. The assault is comprehensive. Me-tooism was a defensive tactic within an offensive strategy.

Howard's policy launch was conspicuous for fighting a Labor Party that Rudd has either disguised or eliminated (time will tell).

Howard's performance was vintage. He was older and slower but lethal still. The launch would have ruined the Labor Party of Mark Latham or Kim Beazley. His problem is the disappearance of the familiar beast that Howard loved to beat.

Facing the nadir of his political career, Howard reverted to big spending on behalf of his values. He produced a $6.3 billion education package radical in conception, attractive to voters and ideological in upholding the Liberal Party's freedom-of-choice philosophy. If Howard loses, the voters will have drawn a line under his technique of funding choice off the budget. Howard offered a tax rebate (up to $400 for each preschool and primary child and $800 for each secondary school child) for costs including fees, laptops and excursions, and applying to government as well as non-government school students.

This was a political wedge against Labor and a hefty commitment in dollars for every household with school children. It seems to have had little impact, though Coalition MPs may use the pledge to sway votes at the local level. Rudd refused to be wedged on an issue that, a few years ago, would have incensed Labor and provoked an ideological firestorm. After all, the policy involves another avenue to assist private schools, and repudiates the idea of free public education while having no means test. Perhaps it symbolises that many debates of the Howard era are being extinguished as Australia moves towards a new era.

Belated signs of fiscal restraint were apparent this week in the sheer modesty of Rudd's "education revolution" and in Howard's restrained health package. The upshot was predictable.

Opposition health spokeswoman Nicola Roxon asked: "What health policy? Where's the funding?", attacking Howard for failing to produce a detailed policy. This followed the Coalition's $248 million for aged-care places to free up hospital beds and also to double capital funding for nursing homes.

At the same time a relieved Education Minister Julie Bishop mocked Rudd over the non-appearance of his education revolution. "Where's the revolution?" Bishop asked in her debate with Opposition education spokesman Stephen Smith.

It is an excellent question, given the expectations Rudd created and on which he has not delivered.

In his launch Rudd talked about the revolution coming in a series of chapters. Maybe it is a very long book. His initiatives were a net $539 million skills package, a $1 billion plan to give every senior school student access to a computer, and a near doubling of Howard's university scholarships, costing $201 million. The school computer plan follows the earlier tax refund for a home computer scheme.

The worth of such pledges is not in question. Let's grasp one point: this is not the promised education revolution. It is neither Labor's main spend nor does it involve major policy redesign. Education policy has got locked into Rudd's image as the leader of the future. Computers are an enabling force but they do not constitute an education policy. This promise, no doubt, is popular but it does not reflect a balanced policy.

There is virtually nothing in Labor's plan to improve teacher quality, the pivotal factor at school. Incredibly, there is no new policy or funding for universities. It is tempting to think the revolution got sidetracked by the triumph of fiscal conservatism.

In the debate, Smith said the source for future funding growth for universities remained the federal government and rejected outright the fee deregulation proposed by the Group of Eight universities. Yet, as Rudd and Smith know, education remains a plus for Labor. It is also their long-run project and, if

Labor wins, expectations will remain high about their delivery.

The penultimate week leaves two impressions of Rudd: the extent of his political skills, making him a worthy opponent for Howard, and the extent of his policy caution and prudence, which are omens of how he would govern.