Labor must lift game to retain economic credibility

LAST month Newspoll revealed that the Coalition continues to be regarded by voters as better than Labor at handling the economy.

But the results were close, with 45 per cent of those polled favouring the Coalition and 40 per cent the Labor Party.

It shouldn't take opposition finance spokesman Barnaby Joyce too long to erode that advantage, with his loose rhetoric on debt and default. Throw in strong criticisms by former treasurer Peter Costello during the week about Tony Abbott's paid parental leave scheme, funded by raising the company tax rate for big businesses by 1.7 per cent, and you have the makings of a decline in voter confidence about economic management.

While the Coalition has continuously held a lead over Labor on economic management for the best part of two decades, the size of that lead has been contained to less than 10 percentage points since Labor has been in power.

By contrast, in October 2007, just before Kevin Rudd was elected Prime Minister, the Coalition was the preferred economic manager by a whopping 53 per cent of voters to just 29 per cent for Labor, a 24-point differential.

Of course, being the preferred economic manager wasn't enough to save John Howard's prime ministership, with an "it's time" phenomenon taking hold in large parts of the electorate.

Labor's improved standing as an economic manager can be explained partly by its handling of the global economic downturn.

Early commentary critical of the stimulus spending (including by me) has been replaced by a recognition that swift action (roof insulation problems aside) helped stave off recession.

But improved economic management ratings for Labor are also a natural by-product of being in power and therefore able to display a proven capacity to do the job. (Consider Wayne Swan: subjected to a great deal of criticism before taking over as Treasurer, as well as soon afterwards, but now settling quite nicely into the role.)

Incumbency has its advantages. But if the government doesn't start becoming more prudent in its decision-making, no amount of slip-ups by the opposition finance spokesman (or loose commentary by the former treasurer) will preserve Labor's improved reputation for economic management.

Rudd made the political decision to say mea culpa for his mishandling of the home roof insulation scheme, taking the heat off his Environment Protection Minister, who continues to sit in cabinet. Given the arrogant way Rudd has returned to the parliamentary cauldron during the past two weeks, the mea culpa seems like a distant memory. Although the tactic was a good one, Rudd needs to be careful he doesn't throw doubt over the government's entire legislative agenda just because one area of the stimulus package was poorly implemented.

With an election year loaded with large-scale promises on health, education reform and plans for action on climate change, Rudd wouldn't want voters to judge his ability to deliver on commitments according to his failure to deliver on roof insulation.

The opposition line - "Why would you trust Rudd to take over public hospitals when he couldn't be trusted to safely install pink bats in roofs?" - is a powerful one.

If the government wants its approach to policy implementation to improve, it needs to start applying a more rigorous cost-benefit assessment to some of its decisions, ideally before it makes them. It must stop acting like an organisation that handles other people's money (the public service) and start acting like one that is handling its own money (a business).

The roof insulation scheme was rushed into effect without the necessary due diligence to ensure it would be a success. The $43 billion national broadband network was decided on (by one of the poorest performing cabinet ministers, Stephen Conroy) without modelling to ascertain whether it would be economic and therefore attractive to business investors. The emissions trading scheme was put before the parliament with only a selective release of modelling on its effect on the national economy, unapologetically so according to the responsible minister, Penny Wong.

And so the list goes on.

But standard business practice dictates that risk assessments need to be conducted before embarking on a particular course of action. While most business people may not make good politicians, good business practice certainly is a must for good governance. Labor may not be the natural party of business, but it needs to take a more business-like approach to the way it governs if it wants to match the high expectations it set for itself with a policy follow-through that delivers results.

THE final parliamentary week saw the well-worn practice of government backbenchers asking what are called Dorothy Dixer questions of ministers. The theme the government's tactics committee chose to focus on was the notion that, as health minister during the second half of the Howard government, Abbott "ripped a billion dollars" out of the public hospitals system.

What is disingenuous about the allegation is that it refers to projected, not actual, spending. Actual spending on public hospitals doubled during the lifetime of the Howard government. But, yes, Abbott shaved $1bn off projected increases in spending when he was health minister.

What is ironic about the allegation is that Labor will need to do exactly the same thing across a host of policy portfolios if it is to get the budget back into surplus and pay off the debt it has racked up during the past two years. If Rudd wants to live up to his self-styled tag as a fiscal conservative he will need to rip billions and billions of dollars out of projected public spending across a host of areas in the years ahead.

Just to be clear, according to the Australian Institute of Health and Welfare, federal expenditure on public hospitals went from $5.2bn in 1995-96 to $10.7bn in 2006-07.

If Labor wants to attack the prioritisation of where the Howard government chose to curb spending and where it allowed middle-class welfare to bulge, by all means do so. There are plenty of nuanced points of attack worth making.

But don't invite the public to form a view that the government is being tricky with the figures in a bid to paint Abbott as a minister who let health spending decline when he did not. Especially when tighter budgets will become more necessary in the years ahead if Labor wants to get the deficit under control.