Something has happened between Peter Costello and Rupert Murdoch’s local flagship, The Australian.

Anyone who read The Weekend Australian was left in no doubt that the paper is very unhappy with the Treasurer – check out the two anti-Costello editorials
on Saturday which carried the kickers “Reformers required: Peter
Costello is lagging in the essential reform stakes” and “Gerard had to
go: But why did Costello appoint him in the first place?”

If that wasn’t enough, Mike Steketee produced this cover story for Inquirer ripping into Costello’s handling of the Gerard affairs while talking up the PM’s performance. Try these lines for size:

Robert Gerard’s resignation yesterday from the Reserve Bank
of Australia board brings home how poorly the Treasurer has handled
this controversy. It makes Costello’s attempts all week to defend the
appointment look hollow. He is left looking sleazy and sloppy, giving a
job to a very generous Liberal Party donor who had set up a Caribbean
tax haven.

Even Dennis Shanahan weighed in on Saturday with the following:

On the reform front, taxation will be one of the biggest
challenges. There are already tax cuts and changes built into the May
budget, but the internal pressure for further cuts to rates and greater
reform of the system is immense – a challenge for Howard and Peter
Costello. The campaign by millionaire backbencher Malcolm Turnbull for
more tax cuts has undermined the political impact of those the
Treasurer phased in at the last budget.

While Glenn Milne is regarded as the most loyal of Costello backers, his column
this morning was cold comfort for the Treasurer and only served to
paint him as petty for moaning about the PM’s form of words on Insiders yesterday.

Completing the punishment was Steve Lewis this morning, who managed to draw Costello’s faith into the saga, claiming that his reputation as Mr Clean had been damaged.

So what’s going on?

The Christian Kerr theory: There are two things to remember here. Rupert Murdoch founded The Australian
with two goals in mind. The first was for the paper, by its sheer
existence as a national daily, to be a nation builder. The second was
for the paper to shape that nation as a crusader for ideas – like tax
reform. It continues to fulfil these roles admirably.

We’ve got to take this into account when we’re looking at its coverage of the Gerard affair. But there’s something else, too. The Australian has a point. A pretty damned good point.

As
we have said before, hundred of people who would never have otherwise
entertained the idea were persuaded to join the Labor Party in the 80s,
thanks to the drive and vision of Treasurer Keating. Who’s ever joined
the Liberal Party because Peter Costello holds the purse strings?

Peter
Costello has had no ownership of any policy of any real significance.
Paul Keating also had big ambitions. Unlike Costello, he also had big
ideas.

The Stephen Mayne theory: Did Rupert and Cossie have a
falling out during the Sun King’s recent two week visit to Australia?
Is Rupert still annoyed that Cossie didn’t tip him off about John
Malone’s application to FIRB to lift his voting stake in News Corp
three years ago?

The more likely scenario is that The Australian
is dirty with the Treasurer for not grasping the nettle on tax reform –
a campaign that it has taken up with great gusto in recent months.

Rupert
is on the record blasting Australia’s punitive top income tax rate, yet
Cossie has shown no signs of giving ground. The hardline approach on
all the skirmishes between Treasury and The Australian’s FOI editor Michael McKinnon probably hasn’t helped either.