“It’s the economy” should be emblazoned on the walls of every federal minister’s office between now and the next election.
The saying, “It’s the economy, stupid”, entered political folklore in 1992 during Bill Clinton’s successful campaign for the presidency against incumbent George H W Bush. President Bush’s ratings had fallen from a stellar 90 per cent approval in March 1991 to a disastrous 64 per cent disapproval within 18 months during which time the economy had slumped into recession.
In Australia, a succession of Reserve Bank interest rate increases in response to a post-pandemic leap in the inflation rate has brought economic growth almost to a standstill. Add an increase in immigration, much of it comprising foreign students returning to Australia’s universities following two years of border closures, and Australia is dealing with high rents, an inflation rate still above the Reserve Bank’s 2-3 per cent range and weak economic growth.
Yet, as long as the Reserve Bank doesn’t overreact, the economic trend is encouraging: inflation is falling, rents are beginning to moderate, and unemployment is stabilising. Unlike many other advanced economies, Australia has avoided recession.
These circumstances are reminiscent of those of the mid-1980s, when Bob Hawke, Paul Keating and their colleagues explained the international circumstances that were damaging the Australian economy – at that time, a collapse in world agricultural commodity prices – and urged Australians to stick together and see it through. In these difficult economic circumstances Labor convincingly won the 1987 election.
From 1 July this year, the recalibrated Stage 3 tax cuts came into force, giving a tax cut to every taxpayer, along with $300 a year in support for all households for their electricity bills.
Yet the public conversation at the time of providing cost-of-living relief was dominated by a recently elected Labor Senator crossing the floor, followed by talk of Muslim groupings running candidates against Labor at the next election. The government seemed easily distracted from talking about the cost-of-living relief it was providing.
Unavoidably a government needs to deal with the issues of the day, but the imperative is to stay on message wherever humanly possible.
In America, Donald Trump understands and practises this with great effect. His every utterance is designed to promote his pledge to Make America Great Again (MAGA).
The MAGA cult rose to new heights last week when followers wore bandages on their ears at the Republican Convention. Trump posted on his social media site that the would-be assassin’s bullet took off his entire ear, but he went to the doctor who told him his ear healed faster than anyone he’d ever seen. Trump claimed his ear began growing back the next day and the doctor said: “Nobody regrows ears like that.”
So effective is Trump’s messaging that his disciples believe anything he says, and the media barely bothers to challenge it.
Trump’s evangelical Christian followership might help explain much of his popularity, but the Democratic Party does not have a single, unifying message. More fundamentally, as Paul Keating has pointed out, the Democratic Party’s political problem heading into November’s presidential election is that it has lost touch with the concerns of ordinary working Americans.
Perhaps a new presidential candidate following Joe Biden’s announcement that he will not recontest will enable to party to reset its campaign story.
The Australian Labor Party has not befallen that fate, having supported working Australians and the elderly through Medicare and subsidised medicines, increases in the minimum wage and in wages for aged-care workers, greater support for working mothers, and offering free TAFE to thousands of Australians wanting to improve their skills.
But the Albanese government’s political success will depend on it crafting a message on the economy and sticking with it without distraction. That means remaining out of the culture wars between the hard left and the hard right, while ignoring the daily taunts of the Greens who seem to hate Labor more than they do the Liberal Party.
Labor can bring economic management into the climate wars the Coalition has reignited by pointing out that the Peter Dutton’s plan to prohibit large-scale renewables in favour of nationalised nuclear power would quadruple electricity prices and oblige taxpayers to subsidise coal-fired power stations until nuclear power arrived in the 2040s.
By developing and sticking with a message about the economy, the Albanese government can appeal to the great majority of Australians who have no interest in following politics on a daily basis, deploying a 21st century version of the Hawke-Keating message of let’s stick together, let’s see it through. After all, it’s the economy, stupid.
Craig Emerson is managing director of Emerson Economics. He is director of the APEC Study Centre at RMIT University and adjunct professor at Victoria University’s Centre of Policy Studies. He was an economic adviser to Bob Hawke.