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The Labor government under Rudd-Gillard failed the most basic test

On September 7, 2013, the federal election in Australia saw the incumbent Labor Party deposed in fairly categorical terms and replaced by the “born-to-rule” conservative coalition (Liberal and Nationals). The Labor Party had been in power for two terms since 2007 after defeating the conservatives even more categorically, who had, in turn, been in power for 11 years. The Labor Party stormed to office in the 2007 federal election, taking 22 seats of coalition (and a further 1 from an independent) to hold 83 seats (primary vote 43.38 per cent, and two-party preferred 52.70 per cent). The conservative coalition was reduced to 65 seats (in the 150 seat lower house). The conservative Prime Minister lost his own seat so great was the rout. Between 2007 and 2013, the Australian Labor Party squandered that lead and in the process we had three Prime Ministers (2 different) as the Party factions conducted an internecene war. After last Saturday’s defeat, one of the Labor Prime Ministers (who had been deposed in June 2013 as a result of her total failure to win electoral appeal) wrote her assessment of the state of Labor as a result of the electoral defeat. The article – Julia Gillard writes on power, purpose and Labor’s future – is an extraordinary exercise in self-denial, despite much of it providing an assessment that I would agree with. But in the big issue – of economic credibility, Ms Gillard demonstrates why her Party was unfit to govern and why the conservatives are back in power and beginning yet another period where the rights and outcomes of workers will be attacked and dragged down. But this has only happened because of the monumental failure of the Labor Party to present a progressive alternative at a time when they had the Australian voters eating out of their hands.

Labor was elected to office in 2007 with Kevin Rudd as the leader and then Prime Minister. It was a major landslide in their favour and the party was poised for a long period in office and with that, the chance to really reorient the political landscape away from the neo-liberal dominance that had been so strongly created by the defeated conservatives, and which, the public had rejected in the 2007 federal election.

The Labor party squandered that opportunity. I will come back to that opportunity lost.

In 2010, Julia Gillard deposed Kevin Rudd after a struggle for leadership. I won’t go into all the political machinations relating to these shenanigans. It is clear that the public has not been told the full story and both sides of the battle Rudd and Gillard lied about their own roles.

But it was clear the Labor Party thought that Gillard would be an irrepressible force and would storm homeat the next federal election. She thought so to and called an election in August 2010. It was a debacle.

In the – 2010 Australian federal election – the Labor Government won 72 seats (losing 11), and recorded a primary vote of 37.99 per cent (down from 43.38) and a two-party preferred vote of 50.12 per cent (down 11 per cent from 52.7 per cent).

The Party was forced into minority government has a result.

From 2010 onwards, the primary vote sank to the low 30 per cent range and it was clear an electoral wipe out was coming. I do believe that Ms. Gillard was subjected to an organised campaign of sexism and undermining.

This article by Anne Summers (June 27, 2013) – Bully boys win Gillard stoush but we all lose – is pretty close to the mark.

A lot more work has to be done examining the evolution of the “bullying, stalking, undermining and outright treachery” that brought Gillard down.

But having acknowledged that, the Labor Party brought itself down – irrespective of the sex of its federal leader – because it bought into the neo-liberalism paradigm, which ended its capacity to differentiate itself from the conservatives, in an electorate that tends to conservatism.

In the 2013, Federal election, the Labor Party looks like it will have around 55 seats (remember it had 85 in 2007 and 72 in 2010) and the conservative coalition will have around 90 odd.

The primary vote of Labor is down to 33.58 (from 37.99 per cent in 2010 and 43.38 per cent in 2007) and the two-party preferred vote is currently at 46.58 per cent (as at Monday, 16 September 2013 02:56:57 PM and were published at 02:56:57 PM – via the Australian Electoral Office Virtual Tally Room.

Whichever way you slice the cake, the shift from 2007 to 2013 in political sentiment in Australia is massive. In 2007, the Australian population were sick to death of the conservative coalition. By 2013, it has judged the Labor Party to be ungovernable and has consigned it to at least 2, but probably 3 or 4 terms in opposition.

The pragmatic choice over principled choice in the Labor Party goes back a long way now. Over the weekend, I watched the movie – Balibo – which is a disturbing and graphic account of the murder of 6 Australian journalists (5 in Balibo itself and the last, Richard East, on the waterfront in Dili) during the invasion of East Timor by the Indonesians in late 1975.

The murderers have never been brought to justice. Australia’s official role in the matter is repugnant in the extreme. There is clear documentation – motivating some of the film – that the Australian government was told via three official cables that Indonesia had plans to invade East Timor.

It is clear the Australian government played along with the Indonesian government’s pretence that it had no intentions in this regard.

The Australian Prime Minister at the time was Gough Whitlam leading a Labor Government.

His Ambassador to Indonesia at the time, one Richard Woolcott does not appear in the film but was the author of the three cables back to Canberra and the Labor Government about the invasion.

In August 1975, one of those cables said (published by the Canberra Times on January 16, 1976):

It would seem to me that this department [of Minerals and Energy] might well have an interest in closing the present gap in the agreed sea border and this could be much more readily negotiated with Indonesia than with Portugal; or independent Portuguese Timor … I know I am recommending a pragmatic rather than a principled stand but that is what national interest and foreign policy is all about …

In October 1975, five of the Australian journalists perished under the TNI assault on them.

Labor abandoned any notion of principle and hundreds of thousands of Timorese were slaughtered by the TNI during the invasion and subsequent occupation.

From that time onward, the Labor party operated as a party that wanted power at all costs.

In last weekend’s Guardian article from the former Prime Minister Julia Gillard – Julia Gillard writes on power, purpose and Labor’s future – there is a lot of self-justification.

I agree with some of the assessments that she makes. For example, it is without doubt that:

Labor comes to opposition having sent the Australian community a very cynical and shallow message about its sense of purpose.

But, in part, that message was drummed into us for three years while Ms Gillard was the leader and Prime Minister.

It is no doubt that:

Labor unambiguously sent a very clear message that it cared about nothing other than the prospects of survival of its members of parliament at the polls.

But when Ms Gillard chose to adopt policies such as detaining refugees and their children in prison camps after they fled their own lands, in part, to escape conflict that the Australian defence forces had wrought on them as part of illegal invasions in the name of the “war on terrorism”, she played the same game.

The part of her final assessment I am qualified to write about is the commentary on “Labor’s economic record”, which is discussed in the context of how “Labor is on the right side of history on carbon pricing and must hold its course”.

This is what she wrote in this regard:

Governing during the global financial crisis and through the harsh structural adjustment being driven by the high Australian dollar was not easy. The continued writedowns to revenue were a source of despair as we worked to manage government finances.

In such challenging times no government would have got everything right, but Labor did get the big economic calls right. Yes, a surplus was not achieved in 2013. But yes, the economy and jobs grew, the AAA rating was conferred and maintained, inflation was tamed, interest rates hit 60 year lows, debt is completely manageable, and Australia remained, throughout the past six years, the envy of the advanced Western economies. Labor should not succumb to the 2013 equivalent of the 1996 “Kim Beazley black hole”. In opposition, Labor should fight for its economic reputation …

Specifically, the Government should be continuously reminded about its effective embrace of Labor’s budget strategy. After all the venom spruiked about debt, deficit and the so-called “budget emergency”, Joe Hockey and Andrew Robb produced a four-year budget which was only $6bn different from Labor’s. Their fevered pursuit of Labor on fiscal policy came down to a derisory 0.4% difference in approach.

Which I assess to be a major reason the Labor Party is now in opposition and in tatters as a political force.

Look at the things that Ms Gillard is highlighting. The so-called “big economic calls” seem to be the primacy of the “surplus” – “the AAA rating” – low interest rates – manageable public debt – convergence of “Labor’s budget strategy” and the strategy put forward by the new government in the last week of the election campaign (while still in Opposition).

There is no mention of her government’s failure to keep unemployment or underemployment down.

She tells that “the surplus was not achieved in 2013” but does not acknowledge (and is probably incapable of doing so) that not only were the economic conditions of the day always going to prevent the achievement of a surplus but that their obsession with surplus exacerbated those economic conditions and caused tens of thousands of workers to lose their jobs – totally unnecessarily.

Ideology won over from responsible government.

The fact is that the onset of the global financial crisis gave the Labor government an unprecedented opportunity to re-educate the public about the role of budget deficits in managing the economic cycle.

Far from being seeing deficits as abnormalities that should be expunged as soon as possible, the Labor government should have provided leadership in building a public understanding that on-going deficits are essential to support growth when the non-government sector is clearly intent on restoring the viability of its balance sheet after a period of unprecedented credit bingeing.

The Labor government should have told the public that budget deficits add to aggregate demand, which supports private sector saving and underpins employment growth.

They should have told the public that deficits made us all wealthier in material terms and helped provide opportunities for upward mobility.

They should have told the public that currency-issuing governments can ignore credit rating agencies and that public debt ratios are irrelevant.

They should have told the public that it is the real economic outcomes that matter not the irrelevant financial ratios that neo-liberals demand we focus on above all else.

They didn’t, and in that sense they failed to seize that historic opportunity to turn the debate.

The following graphs summarise this failure.

The first graph shows the two broad aggregates from the Australian Bureau of Statistics – the Broad Labour Underutilisation rate (left-axis) and the official unemployment rate (right-axis). The former adds underemployment to the latter.

You can see my most recent commentary on the labour force data – Australian Labour Force – bad and getting worse.

Ms Gillard assumed the leadership role at a time that the Government was vehemently withdrawing the fiscal stimulus and pursuing a budget surplus. It was also a time that the non-government sector spending was deficient in terms of what was needed to support employment growth. The gains made by the fiscal stimulus in 2008 and 2009 were lost and the economy declined.

The next graph shows the picture from the employment side. The Employment-Population ratio is a measure that allows us to see how employment was growing in relation to the population (scale) and disabuses us of false conclusions when politicians tells us how many thousands of jobs have been created under their watch.

The reality is that total employment (which has been biased towards part-time, underemployment) has failed dramatically to keep pace with the growth in the working age population under the previous Labor government.

Ms Gillard failed to acknowledge any of these facts. They summarise how far removed from progressive policy making her government and her party became. Whatever else they did while in power, they failed the basic skill test – to stop unemployment from rising!


Clearly, there is much more to write on this period of government in Australia. It has been a complex period and certainly the challenges raised by the global financial crisis made governing difficult.

But the reality is that just as the Labor party abandoned principle in 1975 over East Timor, the most recent iteration of Labor power also saw it buy into the neo-liberal market rhetoric at the expense of principle.

It allowed itself to indulge in an obsession about budget surpluses knowing it was driving labour underutilisation (both unemployment and underemployment) up and knowing that joblessness causes misery for the individuals and their families that have to endure the plight.

It did so because it thought that would be rewarded by an ignorant electorate that would see it as good economic managers.

But unemployment is never really accepted as being a good outcome and in many electorates (particularly in the old Labor heartland of Tasmania) the voters sent the signal to the government – failure and out!

That is enough for today!

(c) Copyright 2013 Bill Mitchell. All Rights Reserved.

This Post Has 5 Comments

  1. Brilliant article, Bill. One of your finest. (Still wish you would have run for the Senate.)

  2. Gillard was Deputy PM in the first Rudd government. A deputy is supposed to be loyal to their leader.If they can’t be loyal then they must resign to the back bench and challenge when and if appropriate.
    Instead,Gillard,with the support and encouragement of some elements in the Labor Party,agreed to a backstabbing exercise under cover of darkness. Gillards fate was sealed from that time onwards and she exacerbated the situation by making a whole succesion of silly statements.
    Predictably,she is now trying to justify her actions.
    Rudd did a creditable job of salvaging a lot of seats from the wreckage with very little time available.Hopefully the new leader will be able to build on this platform,unify the party and produce some sensible and decent policy.That should include economic policy.We will need an effective opposition for the next 3 years at least.

    I predict that we are in for a very rough ride from Abbot the Rabid Rabbit and his fellow Howard retreads.
    Ho Hum,back to the 19th century already.

  3. We should never forget that Gillard first undermined Rudd. As Deputy PM, she did a dirty deal with the mining magnates, reactionary union officials and the right wing of Labor to depose Rudd in a highly treacherous manner. All to give the mining magnates what they wanted (no MRT tax on super profits) so she could get power. It was total cynicism and opportunism. Gillard had zero credibility after siding with the capitalists against the workers.

    By the same token, Rudd stuffed up too. And the entire Labor party deserves withering condemnation for their lack of working class values and lack of humanity and integrity on issues like asylum seekers. Labor is now a party of Rats (to use Labor terminology). They have ratted on the working class who create all the wealth. I vowed some time ago (several elections ago) to never vote for them again. I vote as left as I can get in my electorate. Usually it’s the Greens as there are mostly no socialists. Admittedly, my Rep preference must end up with Labor. Not much I can do about that if I want to lodge a valid vote.

    The Greens are the best bet even though they too buy into the neoliberal myths about macroeconomics. I really question the intellect and education of most politicians, even Greens. They clearly don’t read much history or political economy. If they did, they could see through neoliberalism and neo-classical economics with ease. They have no vision either. We should 50% of the way to a fully renewable economy by now and we haven’t even started (well we are about 1% there).

  4. I had to laugh on the day after the election, so many people cursing Tony Abbott and the Liberal Party.

    6 years of Liberals will show everyone that there is no fundamental difference between the political parties and it is the system that is flawed. Economic management is currently defined as an art where a government categorically fails to support the economy in any meaningful way while pandering to the lobbyists of wealthy private entities.

  5. Ikonoclast – If the Greens are the best bet then it must be a one horse race.They are off with the pixies on most issues. And that is an opinion from someone who was a member for a brief period many moons ago when I was somewhat more naive than I am now.

    I’m not sure what you mean by a renewable economy. Hermann Daly is one of the leading exponents of a “Steady State Economy”. The blog,Daly News (CASSE) is worth a read.

    If you mean renewable energy then I am afraid that you are barking up the wrong (Green) tree.Nuclear energy is the only available non-polluting technology which will get us off the coal train in the time available before the whole rock show runs off the rails.
    But there is about as much chance of that happening in our current “stupid is good” culture as there is of MMT being adopted.

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