Working Papers

‘The Full Omelette’: Treasury After the RSPT

The post-RSPT backlash against Treasury:

A key figure in the negotiating team of one of the major mining houses puts it more bluntly: “Clearly Ken Henry was on a mission from God. The fact that Treasury had got religion was not the biggest surprise. What we were especially amazed at was the level of sheer naivete and incompetence. The grasp of fundamental economics—more specifically commercial reality—was barely past what you learn in year 12 at high school.”…

In the end the miners were not provided with Treasury’s modelling until last Wednesday. These were the numbers that, according one insider, had come from “planet Mars”.

“They had made it up and had no idea how to back it up. It was like sitting university professors down to lecture primary school students,” one of the miners’ advisers claimed yesterday.

posted on 04 July 2010 by skirchner in Economics, Fiscal Policy, Politics

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The Psychopathology of Kevin Rudd

Staff writers at The Australian have compiled a comprehensive psychopathology of former Prime Minister Kevin Rudd, showing him to be every bit as bizarre as former Labor leader Mark Latham. I was particularly struck by this passage:

In April 2008, at the height of his power and popularity, he gave an address to the Sydney Institute annual dinner that completely misjudged his audience.

Many of those there groaned inwardly as Rudd failed to read the occasion or recognise the sheer power in the room.

Rudd did exactly the same thing at the closing dinner of a private CIS function I attended in July 2008, except people groaned outwardly on that occasion. The audience included a large number of the country’s most senior business people. Half way through the speech, the people at my table were looking at each other with a WTF? expression on their face. I could not tell whether the speech was a calculated insult, or whether Rudd sincerely thought the speech was appropriate to the occasion. It was an extraordinary performance in any event.

posted on 04 July 2010 by skirchner in Politics

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The G20: Last Refuge of Political Failure

Former Prime Minister Kevin Rudd, on the eve of his execution:

We have large challenges ahead, not least of which is an upcoming G20 summit in Toronto, at which I am currently scheduled to lead an Australian delegation. This G20 summit will deal with a whole range of fundamental reforms to the financial system, which goes to the interests of the Australian banks and the cost of credit in this country.

These are important national interests to pursue, it is one reason why I’ve decided, apart from others, that its important to resolve this matter of the leadership as a matter of urgency.

Former Treasurer Peter Costello’s farewell speech to the House, after he decided being opposition leader was too much like hard work:

I do not need to say that, from our perspective, a seat at the table which represents 90 per cent of global GDP is a very, very important diplomatic position for us and for our country.

Former Treasurer Peter Costello, explaining why the G20 is very, very important:

BARRIE CASSIDY: All right. Let’s move on to the G20 now and its involvement next weekend under your chairmanship. 90 per cent of the world’s economies under one roof, but could you identify one key result you would like to see emerge from the conference?

PETER COSTELLO: First of all, let’s say, Barrie, this is the biggest financial conference Australia has ever hosted and ever will. This organisation, where Australia not only has a seat at the table, of the 20 most important economies of the world, but is chairing it, that brings together the developed world and the developing world, is important in itself. That’s significant in itself.

Alan Beattie, on how to write-up a G20 communique:

By reporters everywhere

An ineffectual international organisation yesterday issued a stark warning about a situation it has absolutely no power to change, the latest in a series of self-serving interventions by toothless intergovernmental bodies.

“We are seriously concerned about this most serious outbreak of seriousness,” said the head of the institution, either a former minister from a developing country or a mid-level European or American bureaucrat. “This is a wake-up call to the world. They must take on board the vital message that my organisation exists.”

The director of the body, based in one of New York, Washington or an agreeable Western European city, was speaking at its annual conference, at which ministers from around the world gather to wring their hands impotently about the most fashionable issue of the day. The organisation has sought to justify its almost completely fruitless existence by joining its many fellow talking-shops in highlighting whatever crisis has recently gained most coverage in the global media.

“Governments around the world must come together to combat whatever this year’s worrying situation has turned out to be,” the director said. “It is not yet time to panic, but if it goes on much further without my institution gaining some credit for sounding off on the issue, we will be justified in labelling it a crisis.”

The organisation, whose existence the White House barely acknowledges and to which hardly any member government intends to give more money or extra powers, has long been fighting a war of attrition against its own irrelevance. By making a big deal out of the fact that the world’s most salient topical issue will be placed on its agenda and then issuing a largely derivative annual report on the subject, it hopes to convey the entirely erroneous impression that it has any influence whatsoever on the situation.

The intervention follows a resounding call to action in the communiqué of the Group of [number goes here] countries at their recent summit in a remote place no-one had previously heard of. The G[number goes here] meeting was preceded by the familiar interminable and inconclusive discussions about whether the G[number goes here] was sufficiently representative of the international community, or whether it should be expanded into a G[number plus 1, 2 or higher goes here] including China, India or any other scary emerging market country that attendees cared to name.

The story was given further padding by a study from an ambulance-chasing Washington think-tank, which warned that it would continue to convene media conference calls until its quixotic and politically suicidal plan to ameliorate whatever crisis was gathering had been given respectful though substantially undeserved attention.

posted on 02 July 2010 by skirchner in Economics, Politics

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All His Own Work

Former federal Labor Minister Graham Richardson, on why caucus liquidated Kevin Rudd with only marginally more dignity than afforded to Nicolae Ceauşescu:

Faction leaders didn’t make caucus members hate Rudd; no, that was all Kevin’s own work.

Hate, by the way, was the right description. From lowly backbenchers to cabinet ministers, I have never come across such loathing towards a leader before, let alone a leader who achieved the biggest swing to Labor since World War II at the 2007 election.

Not bad for a former diplomat.

posted on 29 June 2010 by skirchner in Politics

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Rudd Down, Hayek Up, Pundits Red-Faced

The exclusion of Kevin Rudd from the first Gillard cabinet completes the wholesale political collapse of the Rudd bubble. It may be coincidental, but still highly poetic, that Rudd’s demise coincides with F A Hayek’s Road to Serfdom going to number one on Amazon. Rudd was the author of a ham-fisted critique of Hayek, presented to CIS in 2006, which effectively foreshadowed his intellectual, personal and policy failings in government.

When I worked in federal politics, I was struck by how much media punditry reflected personal relationships between pundits and politicians at the expense of journalistic objectivity. Andrew Bolt rounds up some of the casualties on this occasion.  The Australian’s Cut and Paste also does its usual compare and contrast, courtesy of Mark Latham, who should know a thing or two about the bursting of media-driven leadership bubbles:

Peter Hartcher in The Sydney Morning Herald on Wednesday:

WHEN Kevin Rudd talked confidently on Monday about the strength of Labor support for his leadership it was not based solely on bravado, he has been discreetly checking that his party is still behind him. The Herald has learnt from a number of MPs that the Prime Minister’s chief of staff Alister Jordan has been talking privately to almost half the caucus. While some caucus members are edgy about their electoral prospects, Mr Jordan’s exercise evidently discovered no defectors from the Rudd camp.

Mark Latham in The Australian Financial Review yesterday:

A DEFINING feature of Rudd’s prime ministership was his constant briefing of Hartcher on the behind-the-scenes processes behind big decisions, invariably to glorify his own contribution. As one caucus wag told me earlier this year, “Kevin doesn’t change his underpants these days without telling Hartcher about it.” It would have been obvious to his colleagues (Gillard in particular) that the Herald’s story came from the PM’s office, a stunning valedictory to Rudd’s misreading of his colleagues and his ineptitude as a caucus tactician.

Alex Robson and Sinclair Davidson provided perhaps the most prescient assessment of Rudd’s likely performance in government in a Wall Street Journal editorial published before the last federal election:

If Ruddonomics wins the day, Australia could find itself back in a 1970s mindset, with bigger government and a less competitive economy.

posted on 28 June 2010 by skirchner in Politics

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Kevin Rudd’s Lesson for US Politicians

A US perspective on the repudiation of Kevin Rudd:

Six months ago, Kevin Rudd was one of Australia’s most popular prime ministers in history. The brainy and intense Labourite had beaten four-time Prime Minister John Howard in a smashing victory and his Australian Labour Party was comfortably ahead in the polls. Today he’s gone, resigning midterm rather than be dumped by his own party. What happened?


Rudd had made the pursuit of cap-and-trade a hallmark of his tenure, calling it “the greatest moral, economic, and social challenge of our time.” But once the opposition coalition picked a new leader, Tony Abbott, in December, prospects of an agreement that could send cap-and-trade through the Australian Senate faded. Abbott labeled the plan ”a great, new big tax” and the coalition started to climb in the polls. When Rudd announced in late April that he would not push his plan until 2013, well after the next scheduled elections, his support collapsed. Recent polls show the coalition in the lead, a stunning turnaround that if repeated in the elections due within a year would constitute the largest swing between elections in modern Australian history. Meanwhile, support for the Green Party has surged to record heights as disappointed climate activists have abandoned Labour in droves.

There’s a moral here for American politicians. Voters understand that cap-and-trade is not a free lunch; pointing out the real costs will resonate with voters.

posted on 25 June 2010 by skirchner in Politics

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‘I Disrespected Hayek and Look What Happened to Me’


posted on 25 June 2010 by skirchner in Politics

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The Repudiation of Kevin Rudd

Congratulations to the ALP caucus for acting decisively to remove Kevin Rudd as Labor leader and Prime Minister. To be repudiated by his own party on the eve of an election is a well-deserved humiliation for Australia’s worst Prime Minister since Gough Whitlam. The fact that Rudd was still burbling inanely about the G20 at the press conference announcing the leadership spill must surely have convinced many members of the ALP caucus of Rudd’s disconnectedness from reality, born of his spectacular hubris and vanity.

It is noteworthy that their handling of the ETS was decisive in the demise of both Kevin Rudd and Malcolm Turnbull. The cynicism and opportunism of the Rudd-Turnbull ETS was one of the most shameful episodes in the history of Australian federal politics. It is testimony to the remarkable efficiency of the Australian political system that it is capable of so swiftly liquidating its own errors.

UPDATE:Australian dollar-denominated asset markets outperform on change of leadership.

posted on 24 June 2010 by skirchner in Politics

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Profit from Kevin Rudd’s Defeat

Go long Julia Gillard here.

posted on 24 June 2010 by skirchner in Financial Markets, Politics

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Gangster Government

Matthew Stevens on government by intimidation:

YESTERDAY we observed, like many others, that the PM has a jaw of crystal when it comes to criticism, after he dubbed unspecified Australian miners as “ugly”. Our words were prescient, because in the wee hours before The Australian hit the streets the PM had again stunned his fellow Australians gathered at the Canberra Press Gallery’s Midwinter Ball with an acerbic aside that carried with it a bleak threat to the mining industry.

“The mining industry are here tonight,” Rudd said in a prime ministerial speech that, in more normal times, would have been protected by Chatham House rules but was circulating widely yesterday.

“I extend my greeting to each and every one of them. I notice there’s a small fire which has been erected down the back. I understand that myself and Wayne Swan and Martin Ferguson will soon be erected above that fire. Can I say, guys, we’ve got a very long memory.”

This is not the first time representatives of the mining industry have been warned of retribution by this government.

I’ve been told, for example, that one very senior member of Rudd’s team made even more pointed threats to a table of mining industry folk dining in the hours after the recent federal budget. They were warned that the government intended to secure a mandate for the super-profits tax at the election and then, with victory in hand and tax in place, it would come after all those who had been dense enough to challenge Rudd’s reform.

UPDATE. Alexander Downer on the bursting of the Rudd bubble:

It has taken an incredible three years for the Australian public to realise who their national leader really is. I sat with a Labor luminary having a late-night drink in June 2008. He turned to me and said: ‘Mate, one day the Australian public will grow to hate Kevin Rudd as much as I do.’ That day has arrived.



posted on 18 June 2010 by skirchner in Economics, Politics, Rule of Law

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Andrew Charlton as Political Liability

Peter Van Onselen, on Andrew Charlton’s role in the wholesale political collapse of Kevin Rudd:

As the polling tightens and the Prime Minister’s security as leader starts to be questioned, he is recoiling more and more into a closed forum with his personal staff—chief of staff Alister Jordan, press secretary Lachlan Harris and his senior economics adviser, Andrew Charlton. All three are early 30s political apparatchiks who Rudd listens to more than anybody else, with the possible exception of his immediate family.

Some Labor MPs worry that they are too narrow a set of opinions to give Rudd the perspective he needs to regain the trust of ordinary voters. As one senior Labor source noted: “The advisers around him work on the idea that we are smart; the punters are dumb; they won’t recognise that we are running a scam.”

Andrew can’t take credit for Rudd’s political successes and then shirk responsibility for Rudd’s failure.

posted on 13 June 2010 by skirchner in Politics

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iPredict Australian Federal Election Market and Election Timing

iPredict has launched a market on the outcome of this year’s Australian federal election, with a Labor Prime Minister (not necessarily Kevin) priced at 51% and a Liberal Prime Minister (again, doesn’t have to be Tony) priced at 45%.

Anthony Green provides a handy primer on likely federal election timing:

As the Constitution prevents writs for a half-Senate election being issued before 1 July this year, the first possible date on which a House and half-Senate election can be held is 7 August.

Constitutionally the last possible date for the election is 16 April 2011.

However, the fixed term election dates for Victoria on 27 November 2010 and NSW on 26 March 2011 mean that the Federal election will have to be over by the end of October to avoid overlap with state polls.

With football finals in September, and Commonwealth Games in October, that means the date for the Federal election date is likely to be either in August, early September, or between the 16th and 30th of October.


posted on 11 June 2010 by skirchner in Economics, Financial Markets, Politics

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‘A Politician with Rage at His Core’

Samantha Maiden reviews David Marr’s profile of Kevin Rudd and the barely contained rage that motivates the Prime Minister. At the same time, Paul Kelly discusses Kevin Rudd’s Whitlamite experiment in big government:

Kevin Rudd is taking Australia on to a new policy trajectory of state intervention, control and faith that “government knows best”.

This looms as the decisive judgment on the Rudd era. It constitutes a break from Australia’s post-1983 tradition of pro-market, middle-ground economic reform. It is not necessarily unpopular but raises the alarm that Australia is marching a false policy path…

Yet Labor keeps moving in the direction of Rudd’s maiden speech philosophy. “I believe unapologetically in an active role for government,” he said. He repudiated the view that “markets rather than governments are better determinants of not only efficiency but also equity”. It is a sweeping statement. And it is entirely consistent with his interventionist car industry agenda, plans to build 12 new submarines, compulsion for new spending programs, government-directed nation-building across several fronts and declared timetables to reduce homeless levels and close the gaps for indigenous Australians.

The unifying idea is that government direction or intervention or ownership is the way forward. It fits into a more personal theme: Rudd knows best.

Sadly, Rudd has no shortage of enablers, including the likes of Paul Kelly, who continues to cheer the fiscal stimulus in the linked story. Kelly does not seem to understand that the problems with the stimulus spending are not simply problems of implementation.

posted on 07 June 2010 by skirchner in Economics, Fiscal Policy, Politics

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Three Wasted Years

Former federal Labor minister Gary Johns on three wasted years of government:

a government without purpose roams the stage with nothing to show and looks to pick a fight or blame others, in this case state governments for allegedly choking the hospitals.

The Department of Prime Minister and Cabinet is overwhelmed by constant requests from the Prime Minister’s office for new and better schemes and promotions and photo opportunities. There is no agenda, no priority setting and no point at all except to get Rudd on the front page…

The electoral timidity, the profligacy, the spin, the lack of reason, the internal bullying, the vast waste of money, the interminable photos with children, the transparent use of religion with the photos at church on Sunday, have all embittered his already unimpressed caucus colleagues.

posted on 29 April 2010 by skirchner in Economics, Politics

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Break Up the States

Former NSW Treasury Secretary Percy Allan argues for breaking up the states into 15 to 25 smaller governments.  It is a refreshing alternative to the kneejerk centralisation that characterises the political response to most problems.  Increased jurisdictional competition and regulatory arbitrage would go a long way to solving a host of problems.  Handing more power to Canberra just compounds these problems by making decision-making even more remote from the localised and often tacit knowledge needed to address them.

posted on 06 April 2010 by skirchner in Economics, Politics

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