The execution of Kevin Rudd has driven a stake right into the heart of economic reform in Australia.

That statement would have seemed ridiculous two months ago, when we routinely lamented that Kevin Rudd lacked the reform credentials of which he regularly boasted. In the aftermath of the release of the Henry Review, we complained about how cautious Rudd and Swan had been.

God knows where things would be if they’d taken a few risks, eh?

Yesterday Rudd lost his prime ministership, partly over the bad polls to which the prosecution of the case for an ostensibly unambitious set of tax reforms had contributed.

Rudd’s problems were many and varied. So were Morris Iemma’s. But both men, who never looked like setting the world on fire economically, lost their jobs trying to pursue some sensible, overdue reforms. And both at the hands of half-smart machine men and union leaders and vested interests looking after themselves at the expense of the public interest.

Julia Gillard’s first act was to cancel the government’s own, wretched RSPT ads, which were losing more votes than they were winning. But she also signalled a fundamental re-negotiation over the tax. In short, it seems, it’ll be neutered.

The problem with this strategy is that the miners aren’t interested in compromise or genuine negotiation. They simply don’t want to pay any more tax than they pay now. Only a complete abandonment of any additional tax on the mining sector of any kind will be acceptable to the miners, and even then they’ll pump millions into the Coalition’s coffers in order to defeat Labor because the Coalition will bring back some of the ‘workplace flexibility’ that the mining multi-nationals want to use to keep a lid on wage costs.

And according to Gillard an emissions trading scheme is off in the never-never, after a re-elected — or more accurately, elected — Gillard will ‘re-prosecute’ the case for an emissions trading scheme. While Rudd and Wong’s advocacy for the government’s emissions trading scheme was dire, despite their efforts, Newspoll found in February that there was still majority support for the CPRS.

The idea that there had been some community backlash against emissions trading is a furphy run by climate denialists. The CPRS was a complex policy that had been under consistent attack from polluters, the media and the federal opposition for over a year and was being ‘sold’ by one of the few politicians even less effective as a communicator than Kevin Rudd. That it still retained majority support suggests the issue is not one of ‘re-prosecuting’ the case for an ETS, but getting on with putting one in place. No amount of consultation is going to convince the big polluters that they should be paying a carbon price, and no amount of evidence is going to convince climate denialists — most of whom are rusted-on Coalition voters anyway — that climate change exists.

Still, that will be the flavour of this government — heavy on the consultation, light on getting serious reform done, because serious reform offends vested interests and vested interests can harm you politically.

Gillard furiously rejected this characterisation this morning, pointing to the government’s IR reform and the MySchool website that had happened on her watch. It’s true that the removal of Workchoices and the establishment of the new Fair Work IR system was done in the face of opposition from the business sector. But Gillard had the election victory at her back, which left her opponents internally divided as to whether the government had a mandate for its reforms. And the only real opponents of MySchool were teachers’ unions. Indeed in that case, the traditional opponents of Labor — conservative commentators — lined up to sing Gillard’s praises for ‘taking on the unions’.

As Rudd showed, economic reform is fairly easy when everyone agrees with it. But when he undertook the sort of reform that offends powerful interests, via the CPRS, he backed down in the face of an aggressive campaign in response. When he had another go via the RSPT — and with any luck Gillard will abandon Rudd’s habit of condensing major reforms to a meaningless four-letter acronym — it looked like he was going to stick to his guns in the face of an aggressive campaign.

The nature of the deal Wayne Swan and Martin Ferguson — who will meet this afternoon before Swan leaves for the G20 meeting in Canada — will hammer out with the mining sector will tell the tale of whether we’ll see any hard reform from Labor for the next few years. But what was done to Rudd by his party suggests that Labor has lost its will for reform. Or whatever will it had left.

The party of Hawke and Keating, which did the country such great service in pursuing hard reform, looks dead and buried.