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October 2006
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Daily Media Quotation

At Last, The ALP Makes The Fight Interesting

October 31, 2006

by Steve Lewis - The Australian

Labor has embarked on a twin attack against John Howard's traditional areas of strength - national security and interest rates - in a risky strategy that will help decide the outcome of next year's election. Having been comprehensively outflanked in 2004, a more assured Opposition is taking the fight to a Government that looks increasingly vulnerable to shifting public opinion and the new interest rate paradigm.

A fortnight after launching a censure motion against Howard over the coalition of the willing's flawed strategy in Iraq, Kim Beazley and co yesterday were prepared to attack the Government over interest rates. Placards were even raised as part of a premeditated stunt, reminding the Prime Minister that voters are forking out more of their wages to meet the mounting mortgage repayments and credit card bills.

Labor has no option with this strategy. It must neutralise the economy as an electoral winner for the Coalition if Beazley is to have any chance of winning office.

But every bold campaign brings with it an element of risk. Howard and Peter Costello know the memory of 17 per cent interest rates under Paul Keating remains etched in the minds of millions of voters. Still, Labor is correct to go after the Government over its economic record. What were until a few weeks ago no-go zones for Labor have become central to its election strategy. Who would have thought?

The strategy reflects a bolder approach to politics from Beazley, who has shed the mantle of timidity in favour of a more muscular style. Yes, there remain big questions over his capacity to cut through, but surely he cannot be accused of being the meek Kim of previous years.

The pressure on the Government is growing as it confronts perhaps the most testing economic environment since the 1997 Asian financial crisis.

There are divisions and concerns emerging in the Government over the interest rate issue. Although last Friday Howard gave the Reserve Bank the green light to tighten monetary policy, his deputy, Nationals leader Mark Vaile, yesterday adopted a different view. Another rate rise would be a "killer blow", Vaile opined.

It was a stark reminder of the dangers for the Government of rates going up during an election year, with much of Australia suffering the worst drought on record. The Government must better rehearse its lines or it will pay a high political price.

The prospect of another rate rise - the fourth since the 2004 election - comes as the Treasurer and senior ministers prepare to start framing next year's budget.

What an exquisite dilemma the Government faces. Voters will be expecting Costello to unveil another sizeable tax cut. The temptation will be there, particularly with the Government guarding a surplus of $45 billion over the forward estimates.

But with inflation topping the 3 per cent mark, and respected organisations warning the Government to shed its profligate ways, there is a strong case for a further tax cut to be deferred. That is the view adopted by senior government figures who venture that a pre-election tax cut is off the agenda. We will see.

The pressure on the Government comes as Howard prepares for the battle of his life against a resurgent Labor Party that will target voters in mortgage-belt electorates with its interest rate campaign.

The added benefit for Labor is that Howard's defiance over interest rates will help it mount the case that he looks out of touch with middle Australia.

Labor's treasury spokesman Wayne Swan offered a taste of this yesterday. He argues that Howard's line - that interest rates remain lower under the Government than under Labor - "stands in defiance of what we call the new interest rate reality. For him to stand up and say they are low shows that he doesn't get it".

The dilemma for the Government is summed up by Michael Baume, a former Liberal senator who was rewarded for years of service by being appointed Australian consul-general in New York. Baume, who gained notoriety by leading the-then Opposition attack against Paul Keating's piggery, summed up the Coalition's dilemma in a recent essay, How Labor can Win.

Now an associate with Sydney-based PR firm Jackson Wells Morris, Baume argues that Howard faces "an even greater electoral risk" in NSW as the state's economy slows. "While many aspirational voters in Sydney's western suburbs felt comfortable with high mortgages when asset values were rising, the last three years (have) seen a 10 per cent fall in Sydney property value and there is little evidence of any early recovery," he writes.

With household loan servicing costs at 7.9per cent of total household income - compared with 7.6 per cent under Keating - Baume argues another rate rise "would add to the Howard battlers' discomfort".

Labor's hope is for this discomfort to cascade into a torrent of anti-government sentiment by the next election. Privately, many Coalition MPs recognise the dangers of heavily geared households facing another rate rise or two. It may be the tipping point for perhaps tens of thousands of households.

Perhaps, but Labor's challenge remains to convince middle Australia that it has a convincing blueprint for the future and that it can be trusted with the economy. It will be helped by the economy turning downwards and rates heading further north.

It will have to do more, though, to earn the trust of middle Australia.


Steve Lewis is The Australian's chief political correspondent.

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