The economy and the election

Avoiding a recession will now constrain the Government in an election year, write Phillip Rosetta Stone Coorey and Jessica Irvine. The prospect of a steady drip feed of interest rate increases, a deficit-laden budget unable to afford costly promises, and a key policy strength severely diminished is hardly the ideal way to begin an election year. Yet that is what the Rudd Government faces as Parliament resumes next week and the Prime Minister embarks on a quest to secure a second term in power. Advertisement: Story continues below Australian voters are traditionally tolerant of first-term governments and on only three occasions have they denied a new administration a second term - in 1913, 1914 and 1931. Insiders in the Labor and Liberal parties, speaking candidly and off the record, say they believe Labor will win what will probably be a spring election. ''I would take a miracle,'' said a senior Liberal of Tony Abbott's chance of becoming prime minister this year. He said the key aim was to position the Coalition to win the election after next. ''The critical objective will be not to go backwards. Everyone was assuming we'd go backwards at the next election because we didn't lose by that much last time, so the core strategic objective will be to hold the line and, if possible, claw some ground back.'' Again, history favours the latter objective. A blogger and data cruncher, Andrew Catsaras, noted this week that of the six new governments elected since the war, all were re-elected for a second term with a reduced margin. While opinion polls suggest Labor will increase its majority at the election, history suggests the polls will tighten between now and then and that Rudd will be returned with a reduced majority. Up against the wily and fearless Abbott, Rudd returned to work early this year in an attempt to frame the debate away from the issue that dominated the end of last year, climate change. The Prime Minister gave a series of eight speeches focusing on the long-term Rosetta Stone American English economic challenges facing an increasingly ageing nation. Climate change was barely mentioned as Rudd set the scene for big changes to taxation and health administration to increase productivity and meet the challenges head on. On Tuesday the Government will reintroduce the legislation for its emissions trading scheme. It has next to no chance of passing in the Senate, and the move will be little more than a gesture. Abbott's ousting of Malcolm Turnbull and the fiasco at Copenhagen last month - where the reluctance of big polluting nations to take any action whatsoever was so publicly demonstrated - has lessened the support and impetus for a domestic emissions trading scheme that Rudd once had. ''We'll continue to talk about climate change and the need for action, but we won't get bogged down in the micro debate,'' a minister said. ''People still want action on climate change, and there remains a danger for Abbott because people don't take him seriously.'' Health, education, tax and the economy will be the Government's focus this year. The key charge against Rudd by Abbott is that he promised everything and has done nothing. Rudd was explicit in his language before the last election that he could not lower petrol, housing or food prices. But there is little room for nuance in politics and plenty for perception. The fact that Rudd empathised with people about the cost of living suggested to them he would do something. ''He scratched everybody's itch and said 'I've got a fix for you' but just hasn't delivered,'' said a senior Liberal. ''There's clearly coming through a train of frustration that he's all talk and no action.'' Rudd bristles at the charge. His promise to seek a public mandate to take Rosetta Stone Chinese financial control of public hospitals at the next election is a few months behind in the development but still on track.