Rudd is toying with our prosperity

The short speech that accompanied Kevin Rudd's shock resignation yesterday will bamboozle many Australian voters, but there is no reason for the business community to fall into line.

There have been some expressions of unabashed glee from Business Spectator readers over the Labor government's apparent implosion in recent days, and there will no doubt be more.

That's entirely understandable given the 'stench' of corruption and dishonesty that Coalition front-benchers have been highlighting in parliament following the Australia Day riot and the ongoing saga of the Craig Thomson affair.

Many readers have also aired their dissatisfaction in past months with the 'Ju-liar' backflip on a carbon 'tax' and the widespread belief that the Fair Work Act has swung the IR pendulum too far back towards greedy unions.

Fair enough. Taken one at a time, each of these problems with the Gillard government are reason to clutch one's cheeks, in the style of Edvard Munch's painting 'The Scream', and pray for a return to Coalition government as soon as possible.

But it is not the job of our nation's best policy minds to take each of these things one at a time. To continue the Munch metaphor, the background to our collective scream can been seen as a hellish sunset of Australia's good fortune, brought about by a corrupt ALP, or the beginnings of a bright sunrise – and this is certainly the view expressed by Treasury secretary Martin Parkinson in comments made during a Senate estimates hearing.

He argued the with growth close to long-term trends and inflation contained, things were "tracking along in a fairly sweet spot", and added that "prospects for Australia over the next period ... are incredibly promising".

In short, the economy under this bunch of ALP crooks is producing a beautiful set of numbers. Any change to the status quo needs to be carefully examined because we have more to lose than just about any nation on earth.

The number of possible scenarios facing the nation has multiplied following Rudd's sudden move to the backbench and the commencement of open hostilities between the Rudd and Gillard camps overnight – too many to explore in detail here.

However, let me pick out just three:

Gillard gets a chance to govern

This would require the ALP to decisively reject Rudd's leadership bid and allow Gillard to govern without further ALP-instigated destabilisation. To my mind, this can only occur if Rudd resigns from the party and the ALP successfully contests a byelection in his seat of Griffith – Rudd just does not have it in him to sit quietly on the backbench until a 2013 election. As noted on Tuesday, it would take somebody of the stature of Peter Beattie to pull off this trick for Labor, but it is far from impossible.

Under this scenario, Australia's economic settings will be largely unchanged until 2014 at the earliest.

That would mean we'd get a chance to see how pragmatic Labor is prepared to be in amending the Fair Work Act to address major concerns voiced by the BCA, ACCI and AiG, amongst others.

Those who argue that Labor won't do enough in this respect are forgetting that Tony Abbott has, to the frustration of many, made IR reform practically a no-go zone for the Coalition. Abbott knows full well the political barriers to rolling back Labor's reinvigoration of an enterprise-level system of collective bargaining.

Carbon pricing and the minerals tax plans would proceed in their existing forms. Labor's intervention in auto manufacturing and the steel industry would continue, as would their numerous skills and education initiatives to assist with what Martin Parkinson called "quite a painful" transformation of the Australian economy.

Importantly, the basic outline of Australia's long-standing political structures would be maintained, whether or not Labor won the next election – that is, with no ALP wipeout, the Greens would not be suddenly elevated several strata higher in the political sphere.

In short, most of what we have would be conserved – a fairly attractive inheritance for either a Labor or Coalition govern to begin re-moulding from late 2013.

Rudd takes the Labor reins

If there is one reason beyond "clinical narcissism", as Chris Wallace put it in a scathing piece in The Australian yesterday, why Rudd wants his old job back, it's to smash factionalism in the Labor party forever.

This, in my view, is utterly unattainable. Rudd might win a caucus ballot – most likely not in the coming week, but some months hence – but he would be leading a government utterly riven by factional animosities. To maintain what Gillard has called "proper cabinet processes" would be almost impossible and, having won the war, it is almost certain that Rudd would oversee a disastrous peace within Labor.

Under his former rule, as Craig Emerson pointed out last night on ABC TV, Rudd's campaigning ally Bruce Hawker had more access to the PM than did cabinet ministers. While it's true that Rudd would receive strong support from the likes of Kim Carr and Martin Ferguson, and that he'd mostly resist the urge to staff his office with what disgruntled colleagues remember as 'teenagers', he would be leading a team seething with personal hatred. At best this would allow a Rudd government to limp towards a 2013 poll. Rudd might have the sense to leave most economic policy settings alone, but as I have suggested before (Why BHP is in Rudd's crosshairs, February 14) he would be sorely tempted to take on at least the mining companies that were so instrumental in his downfall in 2010.

Abbott wins government in the weeks ahead

There is a strong chance in the days ahead of a vote of no-confidence being moved by Tony Abbott, or of a snap House of Reps election being called if Rudd resigns and Labor balks at fighting a by-election in Griffith. Abbott could romp into the lodge via either route.

The problem with this happening now, as opposed to in 2013, is that we currently have the opposition Labor deserves, rather than the opposition the Australian people deserve.

Abbott and Co have been so successful attacking Labor over the carbon tax and the 'stench' of corruption, that they have not had nearly enough scrutiny in the national media. Their economic house is not in order, being at present a dog's breakfast of conflicting policies – a mix of dramatic cost cutting and tax cuts, contradicted by regressive middle-class-welfare vote buying.

The root and branch policy review that has been underway for months is about "90 per cent complete" according to Coalition MPs I've spoken to, but the Coalition is not yet ready to govern.

So which scenario is best for Australia? As I have made clear in my other columns this week, we are fools to wish for sudden policy shifts with the economy looking so robust – albeit at a time of national transformation.

The Coalition needs time to get its house in order. Julia Gillard needs the time and political clear air to show what her negotiating style of government can achieve.

And Kevin Rudd needs to disappear from the Labor party forever.

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