Thursday, July 1, 2010

Could Rudd Have Been Right?

While we all eagerly await the outcome of intensive discussions between the government and the mining industry about the proposed Resource Super Profits Tax, it’s difficult to resist the temptation to wonder what the outcome would have been if Prime Minister Kevin Rudd had not had the rug pulled out from under him by his own colleagues. Despite his public protestations that there would be no back down, no retreat and no surrender, it has emerged that he had already reached a tentative compromise in principle with at least one of the major players, which was due to be unveiled the day after he was dumped. While the public tough talk might have given some people the idea that no compromise would be possible, the fact is that in any negotiation giving away your true position is a poor tactic. So, if Kevin Rudd had not been rolled, would he have achieved a resolution?

The answer is almost certainly “yes”, and more importantly it would have most likely been a better outcome than the one that will ultimately be achieved. Why? Because the Labor Government has now put itself into a position where it is more desperate to reach a resolution, and more constrained by the looming deadline of an election campaign, not to mention the self imposed deadline to have the deal done and dusted by the end of this week. Already the mining industry can rightfully claim to have played a role in the demise of a Prime Minister through its energetic campaigning. Now, they could have the chance to get rid of a second one within weeks, because if there is no agreement it would be a disaster for the Gillard government.

With those stakes, it’s a fair bet that the government will now give up more ground than they otherwise would have, possibly to the point where they could no longer afford to deliver the promised cut in company tax, increased superannuation support, and investment into infrastructure. Equally, that’s a failure for the government as it heads into an election. From a negotiating point of view, the federal government has weakened its position. From a political point of view, it could turn out that history will judge the Labor Government not to have lost its way, but to have lost its nerve and backed away from a fight it could have won.

In any negotiation, it is important to bargain from a position of strength, real or perceived. Secondly, it is important not to impose any deadline that is more imperative for yourself than for your opponent. Thirdly, it is important not to give away you cards by making public statements about the outcome which can be used against you by your opponent. Fourthly, it is important not to make concessions too early or too readily or you will simply encourage you opponent to press for more. Fifth, and most important, you must be prepared, if you do not get what you really want, to simply walk away. The new Gillard government has ticked none of those boxes, while the mining industry leaders have played the game like experts. Whatever agreement is reached, and there will be an agreement of some sort, it will less than it might have been.

It’s impossible to ever really know for sure, but it could turn out that history will judge that Rudd was right.

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