Don’t let the door hit your arse on the way out…
So Kevin Rudd has finally bowed out. Was any one else not surprised? I don’t know why they wait so long to do it. I think we all knew he wasn’t sticking around. It’s like that guy at the party who never knows when it’s time to leave. You’re doing the dishes and he’s looking in your fridge for more cheese.
And so as he packs his bags, it brings to the end a particularly interesting era of Australian politics – interesting in the way a train wreck is interesting – gory and macabre.
And as bubble head bows out there’s been a lot of rumination of how history will judge the Ruddster – and what his ‘legacy’ will be.
For my money, the biggest gift K-Rudd leaves behind is the current property boom, though I wouldn’t thank him for it. It wasn’t like he planned it. Rudd has locked in booming prices for the rest of the decade, but again, more by luck than skill or intent.
He pulled a Steven Bradbury on that one.
But to understand how that works, we’ve got to take it back to the beginning. The first of the K-Rudd legacies is the introduction of Presidential style politics to Australia.
If you remember Kevin 07, it wasn’t Liberal vs Labor. It was Liberal vs Kevin. And as much as Labor could make possible, Howard vs Kevin.
The Labor party had sensed that Howard had worn thin his welcome with the Australian public, and so the more they could make the election about him, the better. The only place you could see Howard’s face in that election was on Labor billboards.
But at the same time, Kevin had been carefully building his own media profile, and had successfully cultivated an image as a loveable nerd (no small feat in itself in a sports-mad country).
There were some in the Labor party who were already nervous about Rudd’s management style, but Labor had been out of office so long and they could taste victory. And so the Rudd juggernaut met the Howard Zepplin, and Labor romped it in.
Welcome to the Lodge, Mr President.
But this was a first for Australia. Howard was never presidential. He always looked a bit nervous talking before the crowds. Keating had the ego for it, but the public knew him as part of the Hawke-Keating dynamic duo.
Kevin was the first Australian president.
And so it will be interesting to see where we go from here. The last election was still very much defined as a clash between two presidential hopefuls.
But this shift has some interesting consequences. First, it elevates the leader into a unique position of power. The public were miffed when Gillard disposed Rudd. “Hang on. We didn’t vote Labor. We voted Kevin.” It’s not the party that has a mandate to govern. It’s the president.
But this also makes the leader uniquely responsible for any blunders of their government. When the MRRT went rouge, it was Rudd who copped it, even though Swan had designed it. And so I think we’ll see even more populist decision-making in the years to come, with the president keeping their hand in everything.
The second part of the legacy that’s worth noting is the entrenchment of Keynesian economic policy. When the GFC hit, Rudd made it clear that the government would spend as much as it takes to protect Australia.
Not on my watch, no sir!
And so Rudd dolled out the cash, and the public spent it, and it probably helped us avoid a recession or worse. (I do think Labor were a little under-credited for how they handled the GFC.)
But for a long while this kind of policy (from the throw-money-at-the-problem school of economics) was on the nose. Governments should butt out and let market forces do their thing.
So much for that.
And now our president’s are personally responsible for what happens to the economy, there’s no chance that Abbott or any PM over the next 20 years is going to sit back and let the market do a hatchet job on the economy.
And this brings me to the third legacy I want to point out. Rudd made housing a centre-piece of his GFC defence. He made it clear that he wasn’t going to let housing suffer the kind of correction that was happening in the US.
And so he increased the First Home Owner Grants and guaranteed the banks (which increased confidence, but also helped lower funding costs.)
Again, it’s impossible to know what would have happened if he hadn’t done this, but the consensus is that it played its part. Probably mostly by keeping Australia calm. A lot of people were looking at the US and saying Australia would be next. This could have sent people into self-fulfilling panic.
But Rudd lined the government squarely up behind housing, and the market kept it together.
And so this is the political reality that Abbott inherits from Rudd and Gillard. 1. Our presidents are now completely responsible for what happens in Australia. 2. If the economy looks shaky, our presidents have a green light to spend as much as they want. 3. Whatever you do, protect the housing market.
And this is one of the reasons why housing remains such a good bet. You’ve got a government (and a reasonably well cashed-up one by international standards) standing ready to defend prices and defend returns if needed.
Together with negative gearing and raft of other housing-friendly concessions, it shows you just how important – almost sacred – housing has become.
Now, you might wonder if this is altogether a good thing, but it doesn’t change the reality. And as I keep saying, don’t invest on how things should be, or how you would like them to be. Invest on the way things are.
And housing is a very, very special asset class. This is the reality.
Thank you Mr President.