Conventional pundit wisdom suggests that voters are more likely to trust social democratic parties on issues such as health and education, but more likely to trust conservative parties to manage the economy. A month before voters ejected the Howard government from office, the Coalition still led Labor in the economic competence stakes by 53% to 29%. Yet the Labor government’s first term has seen a transformation. In a recent poll asking voters which party they thought was better able to handle the economy, Labor led the Coalition by 44% to 39%.

When it came to recessionbusting, the Coalition bucked the call by the G20 and IMF for “timely, targeted and temporary” fiscal stimulus. On health care, the Coalition rejected a package that would have made private health insurance fairer and more sustainable for the future. On education, the Coalition has blocked youth allowance changes that would have delivered assistance to students in low income families. And on climate change, the Coalition rejected a market-based approach.

Historically, Labor can claim credit for many of Australia’s major economic reforms. Curtin put in place uniform personal income taxation and laid the foundations for a post-war full employment policy. Whitlam
implemented universal health insurance and began lowering Australia’s tariff walls.

Hawke floated the dollar and negotiated the Accord. And Keating introduced the superannuation guarantee and enterprise bargaining.

Today, many of the biggest economic challenges are in areas that might once have been regarded as social policy. The ‘human capital agenda’ is about great early childhood centres, schools and tertiary education.
Reducing welfare traps in central to raising employment rates. And a first-rate health care system is essential to a strong economy. The high rating that voters now give Labor for its economic performance neatly complements the ALP’s traditional strengths.

If evidence from the United States is anything to go by, economic experts have long regarded social democrats as better economic managers than conservatives. In a 2006 survey of US economists, Democrats outnumbered Republicans three to one. From what I know of Australian economists, the same is likely to be true here. The electorate is now coming to realise what economists have long recognised: Labor is the party that’s best-equipped to manage the Australian economy.