Kevin Rudd probably knows the original Mandarin version of “may you live in interesting times”. Presumably he wouldn’t have picked them to coincide with his Prime Ministership. But it’s his fate to have to deal with the negative impacts of globalisation in the Australian economy. And there’s not a lot that he and his government can do.

The resources boom is sending domestic demand crazy. The Reserve Bank – its independence carefully reinforced by the new Government – had no alternative but to nudge up interest rates. And we’d only just got over rate hikes caused by the subprime mess in the US.

Meanwhile, Mitsubishi executives in Tokyo have decided to pull the plug on local operations. The Prime Minister says that Mitsubishi executives assured him that there was nothing he could do to affect the decision. Times must be tough when not even yet another handout can save a car plant.

In contrast to Mitsubishi, however, Chinalco is plunging into Australia, buying a stake in Rio Tinto to secure a place at the table when it comes to access to our mineral wealth. The president of Chinalco is making nice by popping by to tell us everything is fine, but, whether it’s economic xenophobia or not, it’s hard to be relaxed about a company owned by one of the most corrupt and immoral regimes on the planet. A substantial acquisition in Australia would trigger the Foreign Acquisitions and Takeovers Act – but Chinalco bought the shares in London.

Welcome to the 21st century Australian economy, where politicians don’t have a lot of say in what’s going on, no matter how much they – and we – like to pretend they do.

In discussing yesterday’s rate hike, Rudd correctly avoided pretending he had any control over events. Rather, he did what more and more politicians are doing in the face of market forces they can’t or won’t control – he felt our pain. “This one will really hurt,” he earnestly declared, and repeated that inquiries as to responsibility for that hurt should be directed to a certain Coalition backbencher.

The Government also has a five-point plan, of course. In fact, it has an entire reform agenda. But what they haven’t got, and quickly need to acquire, is a story. Paul Keating, for all his bullsh-t, understood this better than anyone. Faced with economic conditions that make our current situation look idyllic, Keating didn’t lament the impact of market forces. He made sure the Fraser Government copped the blame for the dire circumstances of 1983, but more importantly he created a narrative, one based on but not solely about economics, a clear if complex story of the need for reform, and why short-term transitional costs – like lost manufacturing jobs – were more than offset by long-term benefits. And he brought Australians with him, educating them as he went, through years of reform.

It was a talent that John Howard, for all his political skills, and Peter Costello, for all his ill-founded self-confidence, never had in any way, and it was Keating’s great contribution to modern Australia.

Without a story, without a salesman, the Government’s reform agenda will be much tougher politically. Nodding sympathetically and blaming Peter Costello won’t work for long in the face of continuing high inflation numbers. They need to explain where they’re going and what we can expect along the way.

Problem is, neither Swan nor Rudd have Keating’s gift of explaining complex issues in simple terms. But it’s a talent they need to acquire, and fast. They don’t have too many other tools at their disposal.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey