Two governments continents apart face defeat despite booms

By Balazs Koranyi and Rob Taylor

OSLO/CANBERRA (Reuters) – Two centre-left governments on opposite sides of the globe are likely to lose power this month, despite both presiding over commodity-fuelled booms while other economies sank into crisis.

Voters in Australia and Norway are almost certain to boot out their governments within a couple of days of each other, fed up with blunders and scandals, and worried that wealth created by high minerals and oil prices has not been spent wisely.

Opinion polls indicate sound defeats for Australian Prime Minister Kevin Rudd in parliamentary elections on Sept 7 and his Norwegian Labour counterpart Jens Stoltenberg on Sept 9.

In both countries a weariness with parties that have served relatively long terms is mixed with concern that the economic miracles are fading, leaving the countries badly prepared for life after the resources boom.

Oslo lawyer Peter Isaksen gives Stoltenberg no credit for Norway’s good times. “The government doesn’t set the oil price, so that’s not their merit, and we have become dangerously dependent on oil,” said Isaksen, who describes himself as a swing voter. “And I’m really tired of them.”

“It’s a comfortable life now but I’m not so sure about the future,” Isaksen added.

Australia’s dusty outback and the frigid seas off Norway are worlds apart, but wealth from there has helped both economies to prosper over the past decade. An unprecedented commodities boom made them among the richest countries in the world, insulated from years of international economic crisis after the 2008 financial crash.

Australia has enjoyed 22 years without a recession, thanks to appetite for its iron ore and coal, while Norway’s per capita GDP hit $100,000 this year on booming oil and gas exports. The United Nations have ranked the two as the best places to live.

While some similarities are striking, so are the differences. Rudd’s Labor party has been beset by a long-running leadership struggle, while the wider election campaign has sunk at times into smear. Rupert Murdoch’s Sydney tabloid newspaper, for instance, has depicted Rudd as a bumbling Nazi running a “mob”.

By contrast Nordic civility has characterised the Norwegian campaign. The government’s handling of Norway’s darkest post-war day two years ago – when Anders Behring Breivik slaughtered 77 people, most of them young members of Stoltenberg’s Labour party – has been a taboo issue.

But the outcomes are likely to be similar. The latest Norwegian opinion poll showed a four-party conservative opposition bloc on course to win 95 seats in parliament, 10 more than it needs for a majority. In Australia, polls give the opposition conservatives 53 percent support to Labor’s 47 percent, enough to sweep Rudd’s minority government aside.

WASTED BOOM?

Australia’s bull run, propelled by China’s until recently insatiable demand for natural resources, lifted household net wealth by over a quarter in the past decade to $728,000 while keeping unemployment at a relatively low 5.7 percent – a level undreamed of throughout most of Europe, outside Norway.

But with the good times have come rising living costs and a soaring Australian dollar, hurting other sectors of the economy such as manufacturing and retail. Mining wages are now the second highest in the world, trailing only those in Norway’s energy industry, creating huge pressure for other industries competing for workers.

Car manufacturing has been hit particularly hard while consumers have started saving much more and borrowing a lot less, a poisonous mixture for the retail sector.

Aside from the economy, Rudd’s government has struggled to handle asylum seekers trying to head for the country and to stop human trafficking.

“Voters want governments that do two things: manage the economy and national security. People think they have done neither,” Nick Economou, a political scientist at Monash University in Melbourne said.

The federal or “Commonwealth” government has raised the mining tax, citing Norway’s 78 percent levy on oil income as an example, while easing the burden on the low-paid. Overall it has failed to rein in a budget shortfall in a country where surpluses are normal and deficit is a dirty word.

“The Commonwealth Government has not saved enough of the proceeds of the boom. Tax decreases and spending increases have been larger than Australia can afford in the long run,” the Grattan Institute, a think tank funded mostly by the government said. “Underlying budget deficits now need to be repaired in more difficult times.”

Growth in both countries remains high compared with most other developed economies but shows signs that more difficult times do lie ahead.

Australia’s economy grew 3.1 percent in 2012 but in the first quarter this year the annual rate slipped to 2.5 percent, and is forecast to have stayed at that level in the second as demand and prices for its commodities cool.

Norway has followed an eerily similar path, as record investments in the offshore oil sector pushed wages and the currency sharply higher, leaving traditional industries unable to compete on their already struggling overseas markets.

Growth is also expected to slow this year to 2.5 percent, according to the central bank, from 3.4 percent in 2012. Even this may prove overoptimistic; second quarter GDP was much weaker than forecast as the industries outside the energy sector suffer and households cut spending sharply.

The oil sector, which accounts for a fifth of the economy, is working to capacity and keeping unemployment below 3 percent, but bankruptcies in traditional industries were up 46 percent in the second quarter from a year earlier while productivity growth stagnated.

The Norwegian state is saving oil wealth, amassing $750 billion or $150,000 per man, woman and child. But the opposition accuses the government of wasteful spending, saying it should plough more into infrastructure, health and care of the elderly.

“The state has become a lot bigger but not any better, a lot of people will argue, and there’s a lot of credibility in that argument,” Johannes Bergh, a political analyst at the Institute for Social Research in Oslo said. “People will argue they didn’t do enough to prepare for Norway after the oil.”

More than anything, many Australians and Norwegians just want a change. For Rudd, the biggest problem is voters’ anger about a de-stabilising leadership fight that has lasted for much of Labor’s six years in power. In 2010 Rudd was ousted by Julia Gillard, only for Rudd to stage a counter-coup this year after much bitter and very public infighting.

“What they did to Rudd, they should never have done. That’s played so badly with people, and they’ve never forgiven them for what happened,” says Sydney voter Trish McCudden, 66, a lifelong Labor supporter now considering a switch to the Greens.

Ruling without a parliamentary majority for three years only added to the trouble as the government was often forced into messy compromises and policy flip-flops, infuriating voters.

DARK SHADOW

For Stoltenberg, the fight is with history and a dark shadow that has hung over Norway since Breivik attacked the government building and a Labour Party youth camp.

“Talking about the attack is a taboo in the campaign, not least because the attack was on Labour itself,” Terje Knutsen, a political science professor at the University of Bergen said.

However, a government commission determined that the Stoltenberg administration, the police and security services had made several blunders and Breivik’s attack may have been preventable. “That report created a strong feeling they are not fit to govern,” Knutsen said.

Stoltenberg, who won elections in 2005 and 2009, also seems at odds with a Norwegian political culture that does not favour long-serving leaders.

On top of a brief first term more than a decade ago, he has been in office for the past eight years, the longest stint for any leader in half a century. He is now bidding for a third straight term, something no Norwegian prime minister has achieved.

(Additional reporting by Wayne Cole and Michael Sin in Sydney and Joachim Dagenborg in Oslo; editing by David Stamp)

Two governments continents apart face defeat despite booms