Why Obama should care about the election Down Under.
Daniel Munoz / Reuters-Landov
http://www.newsweek.com/2010/07/26/the- ... -test.html

Australia has long been a leading indicator for what is to come in U.S. politics. Its former prime minister John Howard, a staunch conservative who would later enthusiastically back the Iraq War, was elected five years before George W. Bush entered the White House. Then their electorates soured on them and veered left. In 2007 Australia’s Labor Party swept to power when its leader, Kevin Rudd, mobilized a young, idealistic, multiethnic coalition just as Barack Obama did a year later.

But if the pattern holds, Obama and the Democrats may now have reason to worry. Last month, with just weeks until the Aug. 21 general election, Rudd was ousted by his deputy Julia Gillard (the equivalent, in shock value, of Obama falling to an 11th-hour Hillary Clinton primary victory). Whole books could be written as to why. But one cause—and a chilling portent for Obama and congressional Democrats—was that a flat-footed Labor mismanaged the perils of deficit politics and feared a stunning election defeat. In particular, Labor was spooked by the sudden rise of Tony Abbott, the leader of the conservative opposition, who had whipped up a ferocious campaign—egged on by radio shock jocks—that involved carpet-bombing all proposed legislation and accusing the government of amassing deficits and debt.

Labor’s temporary stimulus, it is true, has lurched Australia from a small Howard-era budget surplus to a US$35.5 billion deficit in 2010. Gillard promises the surplus will return by 2013. But this is awfully tame in the American context, with two wars, an unending deficit measured in the trillions, and a looming crisis over how to fund Medicare and Social Security. While countries such as Britain and Germany introduce tough austerity measures, Australia’s public-debt-to-GDP ratio of about 6 percent is the lowest in the industrialized world. What’s more, Australia’s unemployment rate is 5.1 percent—a figure the Obama administration would kill for.

Yet Abbott is feasting on paranoia that all debt is, by definition, bad. In this view, government borrowing, even by a relatively minor international capital seeker such as Australia, is responsible for rising mortgage interest rates, thus running a budget surplus is the only responsible economic strategy. Opposition members have even bellowed that Australia represents a sovereign risk to overseas creditors. And as with Obama, Gillard—and, before her, Rudd—have largely allowed such a damaging narrative to go unanswered.

Abbott, for his part, is digging in. So far, he has diverted attention from the headline success of the stimulus by clutching at botched individual elements. He has attacked the government’s US$2.2 billion home-insulation scheme in which shoddy installations have been linked with 189 house fires and four deaths. Another US$14 billion in school-building programs was vital in keeping Australia’s construction industry afloat—yet the opposition has been able to sensationalize the relatively few projects with cost blowouts.

The swashbuckling Abbott, with his mantra of “End the waste and stop the debt,â€