Peter Hartcher’s essay is as elegant and erudite as its author. Hartcher correctly believes that economic outcomes shape political ones. That is, the better the economic results across key indicators – employment, interest rates and inflation – the greater the certainty that any incumbent government will be returned at the polls. He must therefore adhere to James Carville’s First Law of Politics: “It’s the economy, stupid.”

Applying the general rule to Australia in mid-2007, Hartcher assumes that strength of the Australian economy puts the outcome of the imminent federal election almost beyond question – that is, a fifth victory for the Liberal–National Coalition. Hartcher expects that Howard will stare down the Opposition and again pull victory from the looming jaws of electoral defeat, just as he did in 1998, 2001 and 2004. He believes that Howard understands better than any other Australian politician how to stimulate the two opposed lobes of the brain of Hartcher’s bipolar Australia – Horne’s Lucky Country and Renouf’s Frightened Country.

Howard’s skill is to know just how much pressure to apply to bring about the desired political outcome. First, he will attack the frightened country lobe by conjuring up the hideous terrors that will ensue if Rudd were to win. Then, the stern father will be replaced by forgiving Dad proffering the political equivalent of a Bex, a cup of tea and a good lie-down. Why risk Rudd when you can stick with the Devil you know?

The shape of the scare campaign is obvious. Rudd will be painted as a naive, inexperienced control freak, a myth-maker about his family history and assassin of the Anzac Day Dawn Service, unable to be entrusted with running a $1 trillion economy. His religiosity will become a signifier of hidden zealotry. Rudd will become a baby-faced axe murderer stalking every coal-industry job and town, doing the bidding of a cabal of effete Europeans and shadowy United Nations scientists.

In Hartcher’s view, the combination of stellar economic figures and Howard’s undoubted campaigning skills cannot but deliver what would be Howard’s greatest, and probably last, victory.

Hartcher’s analysis is powerful. It has history and commonsense on its side. The economy has apparently never been better. In addition to the blessed trinity of economic indices – inflation, unemployment and interest rates – consumer confidence is at record levels, the share market is at an all-time high, and, in April 2007, the Australian dollar soared through the US$0.80 cent barrier with ease.

As of April 2007 almost the entire Australian political class believes that Rudd simply cannot win the next election. The commentators and learned observers have determined to their satisfaction that a Rudd victory is theoretically impossible. 

The only trouble is that the Australian people seem stubbornly disinclined to follow the script. The completely unforeseen sensation of the 2007 political season, at least for the first half of the year, has been that the better the economy has performed, the worse the Howard government has slumped in the polls. Rudd has established ascendancy over Howard as preferred prime minister.

Instead of seeing the lazy assumption fulfilled that the Liberal government would surf the economic wave to the shore, we are witnessing a real contest between the as-yet-irresistible political force of Rudd Labor and the long-time immovable object that is the Howard government. The clever money remains on the immovable object, but the political weakness of the Howard government has been exposed. At least for the time being, the link between economic and political outcomes seems to have been sundered. 

The reasons why this has happened deserve consideration. There are at least three good non-economic reasons why the unthinkable may happen and the Australian people may vote to change the party of government for only the sixth time in sixty years. 

These reasons are age, arrogance and values.

First, age. John Howard is old. He leads a tired and tiresome government. Any policy good that he might have achieved has now faded into history. Howard refused to retire after his 2004 victory to permit a generational change in leadership. Prime Minister Costello would have been, and may still be, a far more formidable challenger to Kevin Rudd than John Howard. While Howard’s acolytes in his party and the press gallery remain in denial, the real story of the government’s 2007 polling collapse is that the Australian people seem to have turned against Howard and wish him gone.

Second, arrogance. The longer any government remains in office, the greater it revels in the certainty of its own convictions. To a long-term government, each election victory is like rebooting a computer – the sins and omissions of the previous term are wiped away. But while governments absolve themselves of their transgressions, the electorate remembers. The sins of the past are not forgiven but accumulate like toxic heavy metals in shellfish. The Howard government bears a heavy burden of accumulated grievances stretching back to 1996 – the imposition of the GST, the rapid escalation of tax imposts, the cynical exploitation of the Tampa episode and children overboard, and the scandal of the AWB bribery of Saddam Hussein’s regime. The people no longer extend to this government that most precious of all political gifts – the benefit of the doubt. The government has been led by the same troika of senior ministers for over a decade – Howard, Costello and Downer. Each of them is now subject to the law of diminishing returns – the more they appear, the less interest they generate.

Third, values. In the end, economic outcomes are not the only determinant of political outcomes. Values, culture and ideology are also significant factors in determining the shape and nature of our societies. Economic rationalists have kidded themselves that ideology is dead, that neo-liberal capitalism has triumphed and enjoys widespread popular approbation and support. But when neo-liberals talk about the economy, they talk about macro-economic indicators. They do not concern themselves with the social effects of their economic policies. Economists have this luxury, but politicians do not. The economy of the economists and the commentators is increasingly not the “felt economy” of the people and the voters.

Peter Hartcher is certainly correct that the economy will more or less determine the 2007 election outcome. It is just that the economy he contemplates is not the economy in which the great majority of Australians now find themselves.

No ordinary Australian believes that one hour of work a week constitutes a job, but this is how employment is measured by the statisticians. No ordinary Australian believes that the introduction of the GST made the tax system fairer or simpler, but this is the conventional wisdom of economists. No ordinary Australian believes that taxes and charges of all types should take up to half of an average income, but for a decade Canberra has gorged itself on the proceeds of bracket creep. 

No ordinary Australian believes that young people should lose penalty rates in the interests of the “greater labour market flexibility” so adored by business leaders. No ordinary Australian believes that the sale of Qantas to “private equity” will greatly benefit the travelling public, reduce prices or improve services, yet this was nodded through by the Howard government. No ordinary Australian contemplated in 1996 that their children would incur large HECS debts as the price of pursuing tertiary education, yet in 2007 the price of some courses now exceeds $100,000.

In the eastern suburbs of Sydney and Melbourne, house prices and incomes have never been so high. But in the western suburbs, house prices are falling. Real household disposable incomes are being savagely squeezed by a lethal combination of rising interest rates and petrol prices, increased job insecurity, the abolition of penalty rates under WorkChoices, confiscatory rates of income and other taxation, and rapidly rising government taxes and charges for basic services and utilities. On top of all this, a crisis in water supply has emerged in every Australian city and with great ferocity in Brisbane and Melbourne.

The Australian people are now holding Howard to both his 1996 promise that he would make them “relaxed and comfortable” and his implicit 2004 promise that interest rates would not rise. (This was not, of course, the wording of the actual commitment, but it was certainly the “take home” message of Howard’s 2004 campaign.)

The obvious message being conveyed in the opinion polls is that the Australian economy of 2007 has not made the Australian people either relaxed or comfortable. Each interest rate rise is, for them, a reminder of the broken promises of the Howard government – from the “never, ever” GST to the destruction of workplace security and the high real increase in income taxation. It is this “felt economy” that is shaping the political environment of 2007.

If the government is to overcome the burden of the “felt economy,” it must offer new hope, a significant reduction in the squeeze on real household disposable incomes and the restoration of some degree of job security.

The 2007 opinion polls demonstrate that a broad and deep anti-government coalition has emerged. The sheer size of this coalition has astonished even the hard-heads in the Labor Party, although not, perhaps, Kevin Rudd. Under the pressure of the coming campaign, this coalition may splinter, but as of April 2007 it is composed of four main elements:

• disillusioned Howard battlers driven back to Labor by worsening economic conditions in the real economy;

• former Greens voters who refused to vote for Beazley in 2001 over Tampa or for Latham in 2004 but who have now shifted decisively to Rudd over climate change and the environment;

• Queensland voters delighted at the prospect of both a Queensland-based prime minister and treasurer; 

• lastly, and most ominously for the government, hundreds of thousands of small-l liberal voters who have finally decided to abandon the most conservative government in Australian post-war history.

These small-l liberal voters have been dismayed by Howard’s embrace of Bush’s America, and in particular by the decision to invade Iraq and the abuses of human rights associated with the detention of David Hicks at Guantánamo Bay. They are aghast at Howard’s rejection of the need to reduce greenhouse gas emissions, to sign up to Kyoto or to embrace the issue of climate change. They reject Howard’s de facto alliance with hard-line religious sects and groups and his intolerance of social diversity and change. Simply put, they believe that Howard has gone “too far.”

For nearly twenty years, Howard and his party allies have conducted a jihad against Liberal moderates. Howard succeeded in purging the party of its moderate wing and in bringing the Australian Democrats to ruination, but he made a grave error in believing that the community political base of small-l liberalism would also evaporate. It has not.

The shape of the coalition that at the next election might remove Howard and Howardism is now clear. As of April 2007, the polls indicate that a majority of the Australian people is at least willing to contemplate pocketing the largesse of economic good times and then obliterating a government that it considers to be out of time, and out of touch. That the Howard government should be in this position only months before an election is extraordinary. The stakes are now immense for both sides. If Howard remains as prime minister until the election, and then secures one last victory, he will have established his primacy in the Australian political pantheon. If he wins, the ideology of Howardism will be cemented in place. 

But if he loses, Howardism itself goes with him. If Rudd Labor wins, the prospect of a re-organisation of the Australian Federation beckons – perhaps by referral of powers between Labor governments rather than by referendum. In these buoyant economic times, a decade or more of a Rudd Labor government seems inevitable.

Rudd’s challenge is to consolidate the new coalition that has emerged to support him. Quite properly, the government will do everything that it can to rip apart the elements of this coalition, and to expose Kevin Rudd to both microscope and blowtorch. But it is hard to escape the conclusion that the great necromancer Howard has morphed into the Wizard of Oz, pulling lever after lever behind a tatty curtain, mystified why nothing seems to work as well as it once did.

Bill Bowtell was senior political adviser to the Prime Minister of Australia between 1994 and 1996. As senior adviser to the federal health minister, he played a significant role in the introduction of the Medicare health insurance system and was an architect of Australia’s successful and well-regarded response to HIV/AIDS.