Can a souffle rise twice? or a rich fruitcake with nuts?
Paul Keating used to refer to himself as the Placido Domingo of politics, but judging by last night’s performance on The 7:30 Report his political voice has improved with age and he can justly lay claim to the mantle of Pavarotti at his peak.
If present day federal Labor had someone of PJK’s prodigious communication skills, it would never have been tagged by Howard with the mantle of high interest rate party:
KERRY O’BRIEN: Alright, but if you want to see Labor engage in those kind of debates, before they get to that, how does Kim Beazley shake the high interest rate voodoo at the next election that John Howard used so effectively at the last one?
PAUL KEATING: First of all you take him on. John Howard had the highest interest rates in Australian history – 21 per cent bank rates in 1982. What did he leave? He gave us a huge recession and 11 per cent inflation. We had interest rates peaking at 18 per cent, but we came out of it with 1 per cent inflation. I mean, we had stagflation under Howard. We had stagnant growth and inflation.
KERRY O’BRIEN: But you had such a low inflation rate in part because you flattened the economy with the recession.
PAUL KEATING: He did too but he came out with 11 because he had no wages policy, no structural change, no abolition of tariffs, no improvement in trend productivity. And, of course, it’s the low inflation rate – Kerry, the real rate of interest has been 3.5 per cent for 200 years. If the inflation rate is 2.5 per cent add 3.5 to 2.5 and the nominal interest rate is 5 [KP: – actually it’s 6, but who’s counting?]. The reason the housing rates are here now is because of our success in breaking the back of inflation. Howard couldn’t do it, didn’t do it. So why didn’t we take him on on interest rates? Because we were too stupid. That’s why. Too gutless.
Nor would Howard and Costello be getting away with masquerading as great economic managers, not only because of the above but because of this:
PAUL KEATING: Well, I think that to win you have to win on the main game, the economy, and you have to take the Government on on the main issues. I mean, what I left John Howard and Peter Costello was the golden circle of economics. 5 per cent per cent for wages, 3 per cent for productivity, leaving 2 per cent for inflation. When I left, trend productivity was twice the level of the previous 25 years. Now we’re back to the previous 25 years. 1 or 1.25 per cent. How do we go now? It leaves 3.5 per cent or 4 per cent for inflation. The central bank governor Ian MacFarlane knows that, that’s why he’s got the screws on now. So here’s a government that’s been in office for a decade, and what’s happened? Trend productivity has gone from 3 per cent to 1.5. Now the national debt – remember the debt truck they had running around in my time. It had $199 billion written on the side of it. It’s now $473 billion. It’s now 51 per cent of GDP. Between 1999 and 2004 there was no investment in Australia, it all went into housing and consumption all borrowed on the current account. When Peter Costello runs around saying, “Oh we’ve paid off the debt.” It’s like the pea and thimble trick. The Government debt or the massive private debt abroad? It’s continuing to grow.
KERRY O’BRIEN: But, you know, you’re saying these are the things that Labor should be engaging in debate with the Government on, but if Kim Beazley was here now and this was a private conversation between the two of you I’m sure part of the conversation would be him saying to you that, “But Paul, whenever we try to engage in economic debate we’ve got the Government saying to us that we’re the high interest rate party, we’re the party that left them with a massive deficit and they sheet that back to you.
PAUL KEATING: Kim’s raised these issues in speeches. He’s raised the current account debt. At what point do the rest of the world say, “Well look Australia, your call on savings goes beyond your domestic savings such that now 51 per cent of your economy is borrowed from abroad. With maturities less than 12 months.” They’re still going to continue to fund that current account with a margin close to US rates. It’s not going to happen. In the end the economy is going to slow up, because fundamentally the Government’s done nothing about the real debt. I don’t mean the easy debt the one you pay off with Telstra sales. I don’t mean that one. I’m talking about the real one, the elephant under the carpet one.
No current politician on either side can hold a candle to Keating as an effective political communicator, able to convey complex economic concepts in graphic terms everyone can understand. The elephant under the carpet ranks right up there with the banana republic.
Keating’s proposed policy prescriptions for today are also worth highlighting. On returning surpluse revenue to the community without fuelling inflation or interest rate rises (which you’d have to predict as a result of Costello’s forthcoming budget if the leaks are accurate):
KERRY O’BRIEN: With the little time that we’ve got left I want to make the most of it. When you hear of Costello surpluses as big potentially as $17 billion, do you feel any envy? What would you do with a surplus like that today?
PAUL KEATING: If you didn’t want to add to spending as Chris Richardson said in your piece, but you had the surplus, I’d pay the tax cuts as savings into superannuation accounts. Under the scheme I set up we’re at 9 per cent of wages, we should be at 12 or 15, at least 12. So if we paid the tax cuts into super accounts, a) they wouldn’t be spent, b) they’d be preserved till age 65 and we’re a national savings safist (?), on the cabinet room table with all those National Party characters trying to spend it or in people’s super accounts locked up to 65. That’s what I’d do with the money.
The question I would have liked to see O’Brien ask Keating was whether, if he had his political time over again, he would have chosen to pay those “L-A-W law” tax cuts as superannuation rather than renege on them entirely. It was that betrayal and dishonesty more than any other single action that doomed Keating’s prime ministership. Of course, Howard has told many equally big political porkies subsequently (children overboard, Australia’s commitment to the Iraq war, AWB etc), but none has impacted ordinary people directly in the way Keating’s broken tax promise did.
Keating’s future tax prescriptions are equally interesting. He was a bit more elliptical about this, but he seems to be suggesting that the top two marginal rates for individual taxpayers be reduced to around 35% while the corporate rate and CGT should be increased to that same 35%. It sounds to me like an eminently saleable and economically responsible idea.
Here’s a man still pulsing with ideas, passion and conviction, unquestionably the greatest economic reformer in Australia’s history (not that there’s much competition). Howard and Costello have coasted along on Keating’s formidable coat-tails ever since 1996, mostly asleep at the wheel as Keating says. And Beazley, Crean and Latham have let them get away with it.
Here’s a radical left-field suggestion. Draft Keating back into Parliament and the Labor leadership via a safe seat and an engineered by-election. Labor certainly isn’t going to get within coo-ee of victory next time with any of the current batch of pretenders to the top job. What have they got to lose? Keating would put the economy and Howard/Costello’s failures front and centre of the policy debate, and apply the blowtorch to their bellies in a way that the circumlocuting Beazley could never manage. And I reckon he could convince the people of what is unquestionably the truth: that the almost 15 years of unparalleled growth and prosperity Australia has enjoyed are very largely a result of the courageous economic reforms over which Keating presided.
I was going to couch this post in terms of Keating as a classic Shakespearean tragic hero, brought undone by his own fatal flaw/s: the fatal misjudgment over “L-A-W law” and the cumulative misjudgment of focusing on third order “flick the switch to vaudeville” policies once he had seized the leadership mantle from Bob Hawke. Reconciliation, the republic debate, engineering APEC etc. It was this sort of stuff that caused then ALP National Secretary Gary Grey to christen Keating “Captain Wacky” in the run-up to the 1996 election. But if Keating had a wacky phase it’s long gone and replaced by an unmatched mature but still passionate grasp of Australian politics. Draft PJK! Experiencing Keating’s leadership would no doubt still be like watching a high wire act without a safety net, but they’d be exciting times, and I reckon he’s the only politician capable of skewering Howard’s pretensions and exposing him decisively as the tawdry, divisive little Nixonian crook that he is.