Amidst all the shadowboxing between Kevin Rudd and John Howard about Hayek before Christmas, one obvious fact seemed to disappear from view. Howard is a not a neoliberal but a big government conservative.

The Howard government has rarely met a regulation it doesn’t like, or a middle class welfare benefit it can’t use to advance its social engineering objectives, or a rort for the “bush” it doesn’t want to trumpet from the rooftops. In fact, many economists have spilled much ink arguing that many of the government’s policies fundamentally distort markets and market signals for behaviour. The government still shows no sign whatsoever of embracing markets as a solution to climate change.

Andrew Norton made the argument in the Weekend Australian that there are good reasons for Howard’s political pragmatism when it comes to high levels of government spending and market distorting programmes.

Howard may be undergoing a forced conversion to fiscal discipline late in the electoral cycle, but only if he needs to do so to make a case on interest rates. Peter Costello must be wary of the spendometer being wheeled out again for the next campaign launch.

The irony is that Labor MPs such as Lindsay Tanner, Craig Emerson and Bob McMullan have been among those most prominently pointing to Howard’s multiple departures from economic orthodoxy. But will this critique need to be downplayed lest the “market fundamentalist” charge rebound on Labor?

It would probably be possible to fudge it, but there are risks in portraying Howard as a market fundamentalist. It’s perfectly possible to argue that Howard’s governing strategy favours already powerful interest groups and employers over “all of us”, without getting into the finer details of neoliberal political economy.

Howard would see his advantage as lying in the realm of values. This is the ground Labor now seems to want to fight on.

But the Latham/Howard contest was in many ways an argument between values and the economy. Howard ran on his economic record, while Latham wanted to talk about the fruits of prosperity. It looks like these positions will be reversed in 2007. Have Rudd Labor forgotten the consensus among Labor MPs and commentators from the Latham wash-up that ceding ground on the economy was deadly?