Monday, November 24, 2008

A Matter Of Trust

It’s hard to believe that it has been a year already since the election of the Rudd Labor Government. It seems like just the other day, and there is still a “fresh and new” aura about the government, even though one third of the allotted term has now elapsed. So, after the first twelve months, how is the government faring? Has it lived up to expectations, or has it failed to deliver on its promise?

If the opinion polls are anything to judge by, the gloss of the new government is largely unblemished. In fact, by some measures Kevin Rudd is more popular now than he was a year ago. Some of this might have something to do with his apparent predilection for the big symbolic gesture. His first act after being sworn in was to ratify the Kyoto Protocol. The official apology to the stolen generation made a powerful statement. The 2020 summit was another grand gesture which could be seen as more an exercise in PR than in delivering actual policy outcomes.

But there must be more to it than that. After all, if all the government had to offer was symbolism the gloss would soon begin to wear thin. People would quickly see through the veneer to the truth that despite all the big talk, not much was actually being done. So how has the Prime Minister managed to not only maintain his popularity, but to improve on it?

Many of the big promises made by the government prior to being elected are either yet to be delivered or slowly moving through the pipeline of inquiries and reviews and committees which the government has initiated. It would not be unreasonable to be asking now “where is the education revolution?” and “when will public hospitals begin to turn around?” and even “how much longer before Work Choices is completely dismantled?” For whatever reason, the majority of voters are prepared to accept that these promises will not be delivered overnight.

Of course, the one big issue which has dominated the headlines in recent months has been the Global Financial Crisis. On this, the government has been acknowledged for its quick and decisive action in delivering a fiscal stimulus package. Amazingly, even when the unlimited bank deposit guarantee unleashed the damaging flight of capital out of unsecured investments resulting in retirees having their funds frozen, the Rudd government has been judged kindly by the electorate. It seems the public approves of the government’s handling of the matter sufficiently so as to forgive the occasional error of judgment.

I could be wrong, but I think the reason for this is that people generally have the impression that the Prime Minister is being straight with us and is telling us like it is. The government has kept the faith on the promised tax cuts in this year’s budget, and has so far adhered to its schedule for change to industrial relations, education and health. At this point the government still enjoys a level of trust which is unusual in politics.

It is for that reason that the government should be honest about the prospect of a budget deficit. A wide range of responsible economists and observers, along with the Reserve Bank Governor have all indicated that a deficit may be not only inevitable, but also a good thing. It is highly likely that there will be a need for more fiscal stimulation in the months ahead in order to keep the Australian economy moving. Should that prove to be the case the choice then will be to keep the budget in surplus and let the economy stall, or let the budget fall into deficit and keep the economy alive and thus provide some relief for ordinary Australians who would otherwise suffer the most.

Despite this, Wayne Swan and Kevin Rudd are still insisting that there is no need for a deficit. It might sound reassuring now, but the problem is that they stand a very good chance of having to eat humble pie next year. If that happens, it could well be enough to destroy the trust that they currently enjoy.

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