Triumph and Demise: the story of the Rudd-Gillard-Rudd government

Following his study of the Howard/Keating years of government in Australia, Australian journalist Paul Kelly has produced Triumph and Demise which probes the dynamics of the Rudd-Gillard partnership and dissects what tore them apart. Kevin Rudd and Julia Gillard came together to defeat John Howard, formed a brilliant partnership and raised the hopes of the nation. Yet they fell into tension and then hostility under the pressures of politics and policy. To reflect on some of his book’s most significant disclosures, Paul Kelly addressed The Sydney Institute on Wednesday 24 September 2014.

TRIUMPH AND DEMISE: THE STORY OF THE RUDD-GILLARD-RUDD GOVERNMENT

PAUL KELLY

It’s a great pleasure for me to speak at The Sydney Institute. Gerard and Anne were kind enough to offer me this forum in 2009 when my previous book The March of Patriots, on John Howard and Paul Keating, was published. And I appreciate very much being here again to discuss my new book. I also salute The Sydney Institute as the forum for so much substantial public debate in this country.

My book Triumph and Demise offers an account of the Rudd/Gillard Government, including the decisive events within the Coalition in opposition during this period. The central proposition for the book is that the Rudd/Gillard generation failed to deliver on the expectations they created in both a political and policy sense. I argue this was a disappointing and often chaotic period of Labor government. I attribute this to the different, yet defective, leaderships of Kevin Rudd and Julia Gillard, and to what I believe are systemic problems in Labor as a political institution, problems that remain unresolved and have been apparent since 1996. Finally, I attribute it to what I call a growing crisis in our political system where governing is harder than before and reform is harder still.

This is a contentious book. Though I believe, hopefully, its arguments are persuasive. More than any previous period I’ve written about in book form, I was faced with contested views over the facts, over conversations, events, and policy assessments. All key players spoke to me on the record and some of them spoke to me at considerable length. In particular, Julia Gillard and Kevin Rudd. I did about 60 interviews for the book all up. And this was supplemented by my own research and journalism during the Labor government period.

In this book I’ve tried to be tough but fair. I’ve not hesitated to draw firm conclusions, to be verified or challenged in the future. This is the third Labor government that I’ve covered and this perspective does shape my views. I argue that Rudd and Gillard did not match the standard of Hawke and Keating. Some will say this is a high benchmark, yet I say for Labor it is the benchmark. The Rudd Government proceeded on a journey that took me by surprise at the time. I didn’t predict its course or its character. The account I’ve written obviously is with the benefit of hindsight.

I might start by raising an intriguing issue. It’s whether, in 2006, the Labor Party should have stayed with Kim Beazley as leader or replaced him with Rudd and Gillard – with the Rudd/Gillard team. I still argue in the book that they were right to change the leaders at that time. But many ALP figures contest this: Wayne Swan, Greg Combet, and Chris Evans. A lot of people believe the party should have stayed with Beazley. Stephen Smith told me Kim would have been a solid and cautious prime minister. This afternoon, reading the first couple of chapters of Julia Gillard’s own book, she comes quite close to saying that the party did the wrong thing in 2006 – I should stress she doesn’t say that but she does come close to saying it.

The key to the Rudd/Gillard leadership is that they rolled Kim Beazley as a team. And this is fundamental to what subsequently happened. Gillard was the key agent. While probably enjoying more caucus support than Rudd, she stepped back. She allowed Rudd to become leader and ran on a team with Rudd as Deputy. Rudd, as leader, lacked the power base of a normal ALP leader. Whether we’re talking about Whitlam or Hawke or Keating, Rudd did not win the leadership in his own right.

He could not have been elected leader without the support of Julia Gillard. So, they were a team. They needed each other. Rudd was strong in the country, Gillard was strong in the party. United they looked formidable and I think they were formidable. But divided, the defects of each was on display and exposed vividly.

In these remarks tonight, I want to highlight five themes of the book – five very different themes. The first two relate to leadership. The June 2010 destruction of Rudd’s prime ministership was the turning point of the whole six years. The government never recovered. I endorse very much the quote that Anthony Albanese gave me when he said, “What happened on that night was that two Labor prime ministers were destroyed.” Kevin Rudd was clearly destroyed as Prime Minister but Julia Gillard, the new Prime Minister, was crippled from the start according to the way she got the job. The interesting thing is that the Cabinet, whether they were Rudd supporters or Gillard supporters in the end, did not want a showdown at the time. This is quite clear from the comments made to me by Wayne Swan, Steven Smith, Simon Crean, Craig Emerson, Chris Evans, John Faulkner, and Martin Ferguson. The overwhelming view of the cabinet was they wanted the status quo. Well, they didn’t get it.

Who is to blame for the events of June 2010? I allocate blame equally between Rudd and Gillard. Rudd is to blame because, in an extraordinary effort, this successful prime minister who defeated John Howard in 2007, in two and a half short years had lost the confidence of the Labor parliamentary party. This is an extraordinary achievement. It testifies to the dysfunctional nature of Rudd’s government. But also problems in Rudd’s character.

There was a character issue in terms of Rudd’s inability to establish effective relations with his colleagues. Gillard is also to blame because, at the end of the day, she signed up to the political execution of Rudd. She didn’t have to. It wasn’t compulsory. It was entirely a voluntary decision. Her choice. And because it was her choice, she had to assume political responsibility for what happened. And everything thereafter. Essentially, the parliamentary party was hijacked. Willingly hijacked, but hijacked nonetheless. The factional leaders, particularly the right-wing factional leaders, wanted to get rid of Rudd. And they were dealing with a caucus. One I call “weak, faithless and panicked”. This was a shoddy event. I felt it was a shoddy event in the building that night. And everything that happened afterward has not led me to revise that opinion.

The tragedy of Julia Gillard, for which she is completely responsible, is that she was unready for the prime ministership. She was unprepared for the prime ministership and the Australian people were unprepared, at that time, to see Julia Gillard as Prime Minister. She was unable, right from the start, to explain to the public why there’d been a change of Prime Minister. The public at that stage, while they were used to Julia Gillard as Deputy Prime Minister and probably saw her as an effective Deputy Prime Minister, were not accustomed to the idea of her being Prime Minister. Of her being in the top job.

Extraordinarily, Gillard operated on the assumption that Rudd would fall into line after his execution, that he would do the right thing and probably leave politics. How convenient. In her own book, which I started to read this afternoon, Gillard talks quite a lot about how difficult the situation was at the time. How difficult for her, of all the problems she had to fix up in terms of the party, in terms of the policies, in terms of the country. Yet, the irony of this, is that Julia Gillard was the architect of all these problems. So I conclude about the June 2010 leadership change that this was a brilliant tactical success in as much as it occurred very quickly. But it was a strategic catastrophe from which the government never recovered.

The second proposition I want to put to you tonight concerns the Liberal leadership struggle of late 2009. I think this event again is absolutely fundamental to the course of the last 5-6 years. This leadership struggle was the making of the opposition.

In the twelve months before this leadership struggle, the Liberal Party had been deeply divided. In fact, convulsed over the issue of climate change. It was not a viable opposition; its rating in the polls was very poor. After transition to Tony Abbott essentially two things happened in particular. The party united and the decision that Abbott took to campaign against carbon pricing, that political decision, was verified in terms of public sentiment.

A great irony of this situation is that Tony Abbott was elected leader by accident. That’s what he said to me when I interviewed him for this book, on the record. There was a poll published on the eve of the contest – the eve of the contest between Joe Hockey, Malcolm Turnbull and Abbott – showing that Abbott was easily the least popular of the three candidates. If the Liberal Party had listened to the polls, the last thing they would have done would have been to make Tony Abbott leader. In fact, when Abbott says he was leader by accident what he actually means is that there was a misunderstanding between Malcolm Turnbull and Joe Hockey. Hockey was under the impression that if the leadership was declared vacant, as it was, then Turnbull would not nominate again as leader. He did. If he hadn’t, the contest would have been Hockey versus Abbott and Hockey would have won.

Abbott’s core insight, at this time, was that after changing his mind quite a lot on the conundrum of climate change, he eventually reached a very firm and important conclusion. That conclusion was the only way the conservative side of politics could be united, the only way the Liberal Party could be united, the only way the Liberal/National Party Coalition could stay together and the only way they could retain the confidence of their supporters in the country was on a platform of opposing carbon pricing. That was a very important insight, and subsequently validated by the course of events.

Quoting Abbott, Nick Minchin, Julie Bishop and Liberal Party Director Brian Loughnane, I believe that the events of 2009 constituted one of the most serious crises in the history of the Liberal Party since it was formed by Menzies. In particular, what these people say is that if the status quo had prevailed and Malcolm Turnbull had remained leader and carbon pricing had remained Liberal Party policy then it’s quite likely that the Coalition would have been severed, that there would have been the greatest crossing of the floor by Liberals probably in the history of the Liberal Party. The Party would have been chronically divided all the way through to the next election.

In summary, the Liberal leadership change was a success unlike the Labor leadership change. The Labor leadership change led to permanent division between Rudd and Gillard. The Liberal leadership change established the conditions for unity and a populist campaign against carbon pricing.

The third issue I want to go through, at my own risk, is this vexed conundrum of climate change. The climate change issue has been extraordinary in this country. It has been one of the most amazing political sagas in the last 50 years. And Australia, probably more than any other Western democracy, has seen a convulsing political debate about climate change which has led to the execution of quite a significant number of leaders. And we’ve seen public opinion on this issue vary quite substantially. The Labor government’s political ineptitude on the question for climate change was quite staggering.

I identify three critical benchmarks in this debate. I hold Kevin Rudd responsible for most of these failures. The first failure is that Rudd, as Prime Minister wanting to legislate his Carbon Pollution Reduction Scheme, had a wonderful chance to do this. He had a wonderful opportunity because opposition leader Malcolm Turnbull also wanted to legislate the Carbon Pollution Reduction Scheme or be it an amended scheme. But it’s not bad for a prime minister when the major item of legislation he wants to get through is essentially supported by the Opposition leader.

Rudd, however, failed to seize the day. Julia Gillard told me that Labor should have embraced Malcolm Turnbull, and pulled him towards it. I argue in the book that Rudd should have personally negotiated this issue with Turnbull. That’s what Turnbull wanted. But Rudd had two objectives and they were contradictory objectives. One objective was to legislate the scheme but another objective was to use the climate change issue to wedge the Coalition to keep them divided and keep depicting them as deniers and sceptics. A number of Labor people told me how brilliant Kevin Rudd was in using the climate change issue to wedge the Coalition. But at the end of the day Rudd was too smart, and while he did a lot of damage to the Liberal Party, eventually his campaign contributed to Turnbull’s defeat and the arrival of Abbott and the defeat of Rudd’s Carbon Pollution Reduction Scheme.

In other words, he misjudged the issue, misread the tactics and lost his own scheme when I think it was achievable. The second mistake was when Abbott took the Liberal leadership, defeated the scheme, humiliated Rudd and dared Rudd to call an election on the issue that Rudd had said was the great moral challenge of the age. Malcolm Turnbull had argued the entire time that he’d been Opposition leader that the problem for the Coalition was if they sank Rudd’s scheme and he called an election. The idea being that there would be a double dissolution election and Labor would win easily. But Rudd didn’t. He backed off. He turned Tony Abbott – at his point of maximum vulnerability in his first few months – into a giant killer. And he left Malcolm Turnbull shaking his head. There was a significant debate inside the Labor Party at the time. Some backed calling an election. But Rudd never had any interest in it and he didn’t do it. I think he would have defeated Abbott at that time.

I quote Brian Loughnane the Liberal Party director on the record saying there’s no doubt the Labor government would have been re-elected at an early 2010 election on this issue. Certainly, the Liberal Party under Abbott, at that point, was not ready for an election. This led to the third stage in the process, the third mistake. Rudd backed off and abandoned his scheme. Gillard eventually became leader and went to the 2010 election on quite a sensible policy saying she believed in the principle of carbon pricing. But she would not legislate a policy until there was a political consensus. She also made it clear that she opposed to carbon tax. All up, a flexible and fairly sensible position.

Of course, Gillard’s problem and her tragedy was that after the election she was in a different situation. This led her to a deal with the Greens to ensure that she was able to form a minority government and become a minority government prime minister. One of the conditions of that deal was to legislate a carbon pricing arrangement. And that was always going to be a carbon pricing arrangement with a fixed priced initially, in other words a de facto carbon tax and contrary to what she said in the election campaign.

So the great irony for Julia Gillard was that she legislated her scheme but the Australian public was no longer interested. They were no longer prepared to support carbon pricing; the political window for carbon pricing in 2008, 2009 and early 2010 had now shut.

The fourth point I want to highlight to you about the book is that there is general agreement right through the country and certainly in the Labor Party that the leadership crisis was the central problem afflicting the former Labor government. I think that’s correct but I argue that this was a government of sustained policy failure.

Now this is a contentious proposition which is virtually universally rejected by the Labor Party itself. The default position of both Kevin Rudd and Julia Gillard was, at the end of the day, in favour of government intervention and faith in state power. This was a very pervasive default philosophy. Rudd and Gillard looked young and modern, yet in their policy content they were often quite old-fashioned. Both came into parliament in 1998 and neither was there when either Hawke or Keating was in the caucus. While they paid lip service to the Hawke/Keating period I don’t think that either Rudd or Gillard had a deep understanding or deep commitment to the Hawke/Keating policies.

I quote Paul Keating in the book saying, “What we did in the 1980s and 1990s in the Labor Party with our economic reforms was we created a new aspirational class and it’s the job of the Labor Party to champion this new aspirational class. I don’t think Rudd or Gillard did that.”

Let me run through what I think were the policy mistakes. First, the global financial crisis. They did very well with the crisis. The fiscal stimulus was effective and Australia did not go into recession. Rudd’s management of this had a high degree of success. The problem is the stimulus was too great, it ran on for too long and some of the programs were fatally flawed such as roof insulation. At the end of the day, the micro aspects of the program undermined the macro success.

Second mistake, fiscal policy. Wayne Swan said at the time that the government would be Keynesian on the way down and Keynesian on the way back as the economy recovered. That was his justification at the time for the size of the stimulus. The facts suggest that the government didn’t honour that commitment. They weren’t Keynesian on the way back and they never recovered a surplus position. Labor governed for six years and never produced a budget surplus, although this was its declared commitment. This was a significant failure. The third policy problem was climate change, and I’ve covered that.

Fourth policy problem, the mining tax. I argue that the mining tax represents probably the breaking of every single rule in the book about how to do tax reform. It was an episode of extraordinary ineptitude which highlighted both a dysfunctional government and a government which was consumed in a very amateurish way by the search for political advantage without having a deeper understanding about what it was doing. The Rudd Government believed that the ambushing of the mining industry with this tax would be a political plus at the 2010 election. In fact, it turned out to be a disaster.

Next policy problem, hospitals policy. I go through this is great detail in the book. It was followed by the fiasco over asylum seeker boat arrivals policy, again an enormous blunder by the Rudd Government. Finally, we had the re-regulation of the Labor market.

Many of the policies that I’ve outlined typify the underlying philosophy of an enormous faith in state power and a belief in government intervention which was reflected in Rudd’s famous essay on neo-liberalism when he demonstrated his belief that the onset of the global financial crisis represented a turning point in global politics that would henceforth usher in a new age of social democratic nirvana and belief in government intervention. In fact, the legacy was exactly the opposite.

There were severe policy defects with their origin in the failure of the Labor Party to think seriously about policy after it was defeated at the 1996 election.

The final point I want to make is the point which was addressed by Tony Abbott when he launched the book. Our political system now is in a state of crisis. I define that as being a very substantial gulf between politics on the one hand and national interest outcomes on the other. Our political system is simply not producing the national interest outcomes that we need. There are many factors involved in this – the speed of government, the power of the negative, the power of the special interest and sectional interest groups. The fact that the system rewards the negative.

The policy differences between the two major parties are very pronounced at the moment. The experience of the Rudd/Gillard years can be explained not just in terms of the individual failures of Kevin Rudd and Julia Gillard, but by looking at the system itself. There is a problem within the system and we see this as a result of the first year of the Abbott Government as well. If we can’t get better outcomes from our political system, we’re going to increasingly be an unhappy country. This issue, at the end of the day, is only likely to be addressed by some form of crunch or crisis or recession.