Before he became the Labor leader in late 2006, I held in my mind three wildly contradictory images of Kevin Rudd. In the first - derived from the memorably scurrilous portrait in The Latham Diaries - Rudd was a media-obsessed, vaultingly ambitious, duplicitous opportunist. In the second - based mainly on my observation of his near-successful attempt to prove that the foreign minister, Alexander Downer, was lying when he claimed he knew nothing about the bribes paid by the Australian Wheat Board to Saddam Hussein - Rudd was an outstanding parliamentary performer: focused, diligent, courteous but remorseless, quick-witted and intelligent. In the third - which was based on the Dietrich Bonhoeffer article published in this magazine, and which, as we can now see, he used as the launching pad for his bid to lead Labor - Rudd was a true believer in Christian social justice, a politician who identified not with power but with the powerless, who believed that the impending catastrophe of climate change was the overwhelming challenge of our age, who had given his life to politics to try to make the world a better place. The hope that he might actually have meant at least some of what he said in the Bonhoeffer essay was the reason why, even before he was elected Labor's leader, I had become a Ruddite.

In 2007, I was involuntarily drawn into an argument about the likely performance of the Rudd government. Before the election, many people on the Left in Australia were beginning to express misgivings about what was called Kevin Rudd's "me-tooism": his support for the Howard government's Northern Territory intervention; his timidity during the Dr Haneef affair; his basic fiscal conservatism. In this magazine, I argued that the Left should stick with Rudd. His government would, I hoped, restore the tradition of a more independent Australian foreign policy; soften and humanise industrial-relations law; help bring the Culture Wars to an end; strengthen universities; and create a less poisonous atmosphere between the government and the left-liberal intelligentsia. The Australian responded to these modest hopes with a characteristic editorial, ‘Daydreaming Left is in for a Surprise'. It was theoretically possible, it argued, that Rudd "may turn out to be the most convincing actor ever to walk the Australian political stage and once in office might reveal his true identity as a starry-eyed activist waiting to unleash a Whitlamesque program of social reform". It was far more likely, however, that "the agenda of a Rudd government" would be "much closer to the position advocated in the editorial columns of this newspaper than the outdated, soft-left manifesto supported by our broadsheet rivals". For years the Australian had been the most aggressive apologist for the Howard government's neo-conservative foreign policy - support for the Bush doctrine of preventive war and the invasion of Iraq - and for its anti-Kyoto foot-dragging and climate-change denialism. The newspaper had also been the most enthusiastic promoter of the Howard government's version of free-market capitalism and of the Culture War it had waged against the left-wing "elites". In the view I expressed in these pages last year, the Rudd government was likely to change Australia's political direction in a variety of ways. In the view of the editorial writers at the Australian, the Rudd government was likely to continue the fundamental neo-liberal, neo-conservative cultural, economic and foreign-policy trajectory of the Howard years, for which their newspaper had barracked for the past decade.

The Rudd government is approaching its first anniversary. It is not too early to consider its relation to the philosophic and policy disposition of its predecessor, and whether or not, since the last election, under Rudd, the country has begun significantly to change.

Since Gough Whitlam, no prime minister has arrived in office with a greater interest in foreign affairs than Kevin Rudd. Whenever he speaks about his government's international policy he refers to the three pillars: close relations with the United States; strong support for the United Nations; active engagement in the Asia-Pacific region. Although Rudd frequently speaks about strengthening the American alliance - it is one of the most important elements of his government's continuity with the Howard years; another is his praise for the Australian military tradition - it is not at all clear how he thinks this can be achieved. Short of petitioning to join the US, it is hard to imagine how the alliance could become closer than it was under Howard. Under Bush, Australia was forced to choose between the US and the UN. We all know the choice that Howard made. No doubt, Rudd hopes this will not be a choice he will have to face. Rudd has always been highly critical of the Bush doctrine of preventive war. He is a strong supporter of multilateralism in international affairs. Implicitly at least, he has no sympathy for American unilateralism. Since assuming office, Rudd has quietly withdrawn Australian troops from combat duties in Iraq. Even more significantly, he has signalled a determination for an independent Australian voice in shaping the allied military strategy in Afghanistan. Rudd presumably knows that the US is now poised between two foreign-policy eras. Perhaps he has been waiting for Obama, whose foreign policy will be much closer in both content and style to his own than was the Bush policy John Howard so enthusiastically and uncritically embraced.

Deeper engagement with the Asia-Pacific is by far the most concrete of Rudd's foreign-policy goals. Rudd hopes to make Australia the most "Asia-literate" and "China-literate" country in "the collective West". This is more easily said than done. My own experience suggests that while during the Howard years universities became increasingly financially dependent on attracting Asian students, in the areas of both culture and language interest in Asia faded. Rudd believes that we are entering the century of the Asia-Pacific, in the way the nineteenth and the twentieth were centuries dominated by the countries of the Anglosphere. Sometimes he even speaks as if he believes China and India will replace the United Kingdom and the United States as the world's new hegemons. More usually, he suggests that the US will inexorably move its focus from the Atlantic Ocean to the Pacific. In the coming century, Rudd believes, the Asia-Pacific region will become increasingly militarily unsettled - by the rise of China and India, by old disputes (the two Koreas; China and Taiwan; China and India; India and Pakistan), by an accelerating arms race and by new disputes over resources in a region of steeply rising population and accelerating climate change. This sense of growing Asia-Pacific instability drives Rudd's defence and foreign-policy plans.

Rudd is committed in the international sphere to the Labor ideal, stretching back to Dr Evatt, of Australia as an independent foreign-policy player on the world stage through the deployment of what he invariably calls, in language borrowed from the standard Australian foreign-policy textbooks, "creative middle-power diplomacy". Here Rudd is at his most ambitious or, as some might think, grandiose. It was no accident that Rudd was very keen to address the UN General Assembly at the first opportunity; that he is keen to make Australia a player in the diplomacy leading up to the Copenhagen conference on climate change; that he has signalled for the first time an Australian interest in the international struggle to combat extreme poverty within a generation, the UN Millennium Development Goals; and that he has tried to inject Australia into the current international negotiations over the financial markets' meltdown. Rudd aspires to be the architect of a new Asia-Pacific Community - not a trade bloc nor a political or customs union but a somewhat amorphous regional entity comprising all the major Asia-Pacific powers, from the US through China to Russia, where the habits of peaceful co-operation, conversation and good-neighbourliness will somehow be learnt. He also aspires to establish a process for reviving global disarmament and nuclear non-proliferation. Rarely in the history of Australian diplomacy has the distance between ambition and action been quite so great. To build a new Asia-Pacific Community and to revive the momentum of the nuclear non-proliferation movement, Rudd appears to have done little more than to bring the former departmental secretary, Dick Woolcott, out of his well-deserved retirement and to employ part-time the busy former Australian foreign minister, Gareth Evans.

Howard's foreign policy was dominated by loyal and automatic participation in international causes alongside the US. His government supported American unilateralism, American hostility to the UN and the dangerous post-September-11 international doctrine of American-initiated preventive war. Among the leaders of the G7, Howard's most natural ally was President Bush. In its interest in the Asia-Pacific, his government focused overwhelmingly on considerations of trade. Rudd's foreign-policy orientation is significantly different. He has sought to strike a balance between close relations with the US, and support for the idea of multilateralism and the humanitarian purposes of the UN and the international community. He has sought to refashion Australia's international reputation - from that of an invariably loyal ally of the US to a pro-American but still independent middle power and an active player in the international sphere. Among the leaders of the G7, Rudd's most natural ally is the dour Christian internationalist Gordon Brown, the British prime minister. His interests in Australia's relations with the countries of the Asia-Pacific are dominated as much by questions of culture and strategic architecture as they are by trade. In spirit and in substance, Rudd has already taken Australian foreign policy in a decidedly new direction.

Where does Rudd place his government in fundamental philosophical terms? In two of the more important speeches he delivered since taking office - one delivered to the neo-liberal Centre for Independent Studies, and the other a lecture which, revealingly enough, honoured the "great prime minister" Gough Whitlam - Rudd associated his government with a position on the political spectrum that he called "the reforming centre". What did he mean?

In essence, Rudd's reforming centre represents a position distanced from both the socialist Left and the neo-liberal Right. Unlike the traditional Left, the reforming centre understands and embraces the significance and power of market forces. Unlike the contemporary Right, it understands the limitations of markets and the problem of market failure. The reforming centre understands that there is no need to choose, on the one hand, between the kind of "heavy-handed regulation" associated with Brezhnev and the communist centrally planned economies and, on the other, the belief in "unrestrained market forces" hostile to almost all forms of government intervention, associated in Rudd's mind with the theoretical writings of Friedrich Hayek. According to Rudd, the most interesting and challenging questions of contemporary public policy are found at precisely those points where the need for both government action and market forces intersect. On occasions, Rudd calls the reforming centre "social democracy". Frequently, he calls its contemporary conservative alternative "neo-liberalism".

Rudd's rejection of the "heavy-handed regulation" of the traditional Left is of no real-world importance. There is no party or tendency of any significance in Australian politics that still defends either central economic planning or national ownership of the means of production, distribution and exchange. In contemporary Australia, socialism, as traditionally understood, is dead. Rudd's rejection of "unrestrained market forces", by contrast, matters a great deal. Neo-liberalism in contemporary Australia is very much alive. It is the position advocated, in whole or in part, either consciously or unconsciously, by think-tanks like the Centre for Independent Studies and the Institute of Public Affairs; by right-wing columnists and some business lobbyists; by the editorial team at the Australian; and, most importantly, by many leading members of the contemporary Liberal Party. Sometimes Rudd identifies the position where he stands on the political spectrum as "beyond Left and Right". (He has clearly been influenced not only by the title of the David McKnight book.) But in practice, the position he has adopted can most accurately be described as "beyond neo-liberalism".

There are three main reasons why Rudd has moved beyond neo-liberalism. Rudd is still a defender, both in theory and in practice, of the postwar enterprise called the welfare state. In his lecture to the Centre for Independent Studies, he told his audience that members of the Labor Party "explicitly reject Hayek's view that society has no obligation to others who are unknown to us" and that it is Labor's purpose and unbending commitment "in this country, in our own Australian way, to discover the ancient wisdom of St Francis, that in giving you receive". For Kevin Rudd, the Christian social-justice tradition trumps Hayek and the Chicago school. But there is more to Rudd's rejection of neo-liberal fundamentalism than that. Industrialisation has conjured the deepest crisis human beings now face: catastrophic climate change. In the famous words of Sir Nicholas Stern - which Kevin Rudd fully accepts - global warming represents the greatest case of "market failure" in the history of humankind. Neo-liberalism, for Rudd, systematically underestimates the place of market failure in public life. With its innate suspicion of government action, and its superstitions about the capacity of the invisible hand of the market to solve our problems for us, neo-liberalism acts as a powerful inhibitor of the kind of decisive state intervention which is now needed to combat climate change at the national and international levels, without which we are doomed.

In very recent times, Rudd has also drawn a direct causal connection between the dominance of neo-liberalism and the arrival of the current financial-market disaster that the world must now confront.

We've seen the triumph of greed over integrity ... This culture was never challenged by a political and economic ideology of extreme capitalism. And this crisis bears the fingerprints of the extreme free-market ideologues who influence much of the neo-liberal economic elite. Free-market ideologues who have a naive belief that unrestrained markets are always self-correcting and that markets if left to themselves will achieve optimum outcomes ... Ideologues who believe that government is always the problem, never the solution. Except of course when there is a crash - then the self-same ideologues argue, having privatised their profits, we should socialise their losses ... There is an alternative political and policy narrative to the one that has tended to prevail in recent times.

This was the most savage and revealing speech the prime minister has delivered since assuming office. As a Christian social democrat, Rudd has offered an analysis of the financial crisis that is simultaneously economic, ideological and moral. In his first year, Howard openly condemned what he called the oppression of "political correctness". It was a matter of major significance for the cultural politics of the next ten years. In his first year, Rudd has condemned what he calls the ideology of "extreme capitalism" or "neo-liberalism". This may matter no less.

Harold Macmillan once spoke of politics as being about "events, dear boy, events". For this version of the life of politics Rudd has nothing but contempt. Unlike the Liberal Party, Labor believes in action and reform. There is simply no point in holding power if it does not lead to a commitment to change. Liberal governments, most recently the Howard government, are characterised by "policy inertia". They do not understand that there is no point in simply "being there". Labor is historically the party of reform in Australia. To achieve its purpose it knows it needs "a plan". The only alternative is "drift". In its emphasis on fulfilment of a coherent and comprehensive program of reform, the Rudd government is curiously reminiscent of the Whitlam government, whose transformative achievement the prime minister hopes to emulate. Rudd is also acutely conscious of the danger of chaos, which eventually overwhelmed Whitlam. Earlier this year he told the Victorian branch of the ALP that a reforming government needed "iron discipline".

What, then, is Rudd's plan? It begins with the economy. In macroeconomic matters, the government is "conservative" and "responsible". Until the current crisis, it had hoped to achieve a $22-billion surplus in this financial year. In its fiscal conservatism, the trajectory of the Rudd government is consciously continuous with the Howard years. In microeconomic matters it is, however, different: creative and activist. The Howard government, Rudd argues, was responsible for Eleven Wasted Years, where the mining boom was squandered in consumption. In the mid 1990s, under Labor, Australia was experiencing an annual productivity growth of 3.3%. By the time Howard left office, such growth, the key to rising living standards, had declined to 1.1%. To restore productivity growth will require a return to what Rudd calls, in traditional Australian and Labor language, "nation building" - of the kind once seen in the 1940s in the Snowy Mountains Scheme and, less grandly, with Whitlam in the 1970s, in the laying down of the outer-suburban sewers and streets. There are five pillars to strengthen in Rudd's project of nation building: roads; transport, energy, water; national broadband; health and hospitals; education. To fulfil the vision, the government needs money. While maintaining budget surpluses, Rudd will find it by diverting some of the Costello Future Fund. Some $76 billion has already been committed. Unlike previous Labor nation builders, much of this work will be undertaken in the form of public-private partnerships, the preferred model of the Labor states in recent years.

Since the time of Chifley, no Australian prime minister has been as enthusiastic about the government project of nation building as is Rudd. There is even in Rudd an instinctive Keynesianism reminiscent of these earlier times. As the financial crisis deepened, the capital markets froze and recession threatened, last month Rudd decided to pump-prime the economy with $10 billion of his surplus and to bring forward his plans for large infrastructure projects, so that significant public spending could begin earlier than had been anticipated.

Under the influence of neo-liberalism and the market fundamentalists, "nation building" was not the only descriptor of state action in the economy that was banished from the respectable political lexicon during the Howard years. Also banished was the idea of "industry policy". Governments, we were told, could not "pick winners". All forms of assistance to industry would be exploited by "rent seekers". Industry policy was nothing but a euphemism for protectionism. The market was the only rational allocator of resources.

The Rudd government has broken with this way of thinking with a cleanness and a clarity that has surprised. When he was in Japan, negotiating the deal to bring Toyota to Australia to produce a new hybrid car, Rudd declared: "We believe in innovation policy; we believe in industry policy." For Rudd, industry policy is neither backward-looking nor a form of disguised protectionism. "The government," he has argued time and again, "is building a twenty-first century innovation-driven industry policy - not the old industry policy based on protection and resisting change." Rudd has given his energetic minister for innovation and industry, Senator Kim Carr, very strong support. Since taking office, Carr has initiated major reviews of Cooperative Research Centres (led by Mary O'Kane), innovation (Terry Cutler), automobiles (Steve Bracks) and textiles, clothing and footwear (Roy Green). He has already promised considerable resources to what is called Enterprise Connect ($250 million), whose purpose is the dissemination of cutting-edge information to Australian industry, and to the Green Car Innovation Fund ($500 million), although whether the Rudd government will be able to revive the fortunes of the automobile industry, which is already suffering very badly, only time will tell. Carr is an industry-policy enthusiast. He argued on one occasion that the periods of "darkness" in the history of the Australian political economy (Fraser and Howard) could be distinguished from the period of "light" (Hawke-Keating) by the presence at the centre of the state of "two words - industry policy". Carr's mentor and political hero is John Button, the Hawke and Keating governments' industry minister. He looks to Germany as a model of what our clothing and textile industry might become if it focused exclusively on the high end of the market, and to Israel, which devotes over 4% of its national wealth to research and development, as a reminder of the failure of policy during the Howard years when, despite the vast minerals wealth, the proportion of income devoted to industrial R&D went backwards. Although during the Howard years Carr bore the insults of the neo-liberals (for example, Richard Alston's oft-repeated joke about Kim Il Carr) with exemplary calmness, it is hardly surprising that he is acutely aware of the power and ideological nature of the resistance to all forms of industry policy posed by the group he calls the "economics club". "It's time," he argued on one occasion, "we got some balance back into the policy-development process, which has been distorted by neo-liberal orthodoxy for too long." Although he supports all sectors of industry, it is clear from his speeches that he has a special eye to the future of manufacturing. "When Kevin Rudd said he wanted Australia to remain ‘a country that actually makes things'," Carr told a group of manufacturers who met in Geelong earlier this year, "I cheered."

During the period of his prime ministership, John Howard famously declared the problem of finding the balance between the demands of work and family "a barbecue stopper". Until the end of the Howard years, however, barbecues continued to be stopped. Australia was the only country in the OECD other than the US without some scheme of state-paid maternity or parental leave for those with newborn babies.

In coming to office, promisingly, the Rudd government established an inquiry into maternity leave. Less promisingly, it chose one of the redoubts of narrow neo-liberal orthodoxy, the Productivity Commission, to conduct the investigation. Recently the commission offered some interim conclusions: 18 weeks of paid maternal leave at minimum-wage levels; two weeks of paid paternal leave; continuation of the Howard baby bonus for "stay at home" mothers, although with a means test added; a required employer contribution of guaranteed positions and continued superannuation payments. Both Kevin Rudd and Maxine McKew pledged in-principle support for something of this kind. The proposals were better than many had anticipated. They could, though, only be construed as generous if measured against Australian historical standards or the miserable example of the US: three months of unpaid leave. In the UK, new parents are offered nine months of paid leave. The government hopes to lift this in 2010 to one year, something Canada already has achieved. In Sweden, Norway and Finland, parents of babies are offered much more: two or even three years of paid leave.

In the advanced-capitalist democracies there are now two ideal types of welfare state: the minimalist neo-liberal model, as seen in the US, and the maximalist social-democratic model, as seen in the countries of North-West Europe. Parental leave is one of the areas where the differences between these ideal types are most stark. For the Rudd government, maternity or parental leave will prove an interesting test case, one where its instincts are likely to be torn. My guess is that in the short term, especially as the implications of the global recession become clear, its fiscal conservatism and the continuing influence of old-style feminists, who are still fighting battles of an earlier era about women's right to work, will combine to determine a choice of fewer than six months of maternity leave. In the longer term, the Rudd government's belief in evidence-based policy, and the influence of the new coalition that has formed between the New South Wales trade-union movement, the expert group National Investment for the Early Years and the NSW Commission for Children and Young People, which argues the need for a longer time with children before mothers or fathers are compelled to return to work, may push it along the same parental-leave trajectory as the one previously travelled by Tony Blair, from neo-liberalism to social democracy.

Education is, of course, at the heart of the Rudd agenda - its twin concern for economic productivity and for social equity. Although its influence has yet to be felt - universities are still bleeding - Rudd's program for university-research expansion is ambitious. At its centre is a plan to double both the number of positions available to mid-level researchers and the number of postgraduate scholarships. These reforms will have an enormous and, if properly overseen and funded, entirely beneficial effect. One of the most pleasing features of the university reform is the government's guarantee that it will never interfere in the allocation of research funding on political grounds, in the way the previous government threatened seriously to do. Even more pleasing - to me, at least ­- were the words spoken by the minister in charge of research, Kim Carr, at the National Press Club in September this year.

I believe the creative arts - and the humanities and the social sciences - make a terrible mistake when they claim support on the basis of their commercial value. Whatever they may be worth in the marketplace, it is their intrinsic worth we should treasure them for. We should support these disciplines because they give us pleasure, knowledge, meaning and inspiration. No other pay-off is required.

Perhaps I have not been concentrating. But I cannot recall a minister of higher education since the era of John Dawkins speaking in this timbre.

Even more important than the expansion of university research are the school reforms outlined by the prime minister in late August. Rudd's emphasis is now precisely where it ought to be - on the quality of teaching. His aim is to do what has not been done for a generation or longer - attracting the brightest university graduates back to schools. This will be done through improving the salary prospects of outstanding teachers, through rational promotions procedures but also, less tangibly but no less importantly, through restoring to the vocation of teacher the social esteem it once possessed then lost during a time when teachers came increasingly to be looked down upon. Rudd knows that there is no greater gift that can be offered to a bright and inquisitive young mind than the presence of an inspiring teacher. He also knows that improvements in the quality of teaching will not be easy. Principals must be given greater autonomy. Mediocre principals must be replaced. Performance at schools must be measured, not against some general abstract measure, but against the standards of schools of similar socio-economic status. Results must be published. Schools that are performing poorly will receive special funding. If their performance does not improve, they may be merged or even closed. By this means, resources will be gradually and seamlessly directed away from relatively wealthy private schools and back to government and impoverished Catholic schools, where they have always needed to go. To achieve all this, Rudd will use a constitutional mechanism previously pioneered by Menzies for universities and then systematised by Whitlam: the assertion of commonwealth control over the states in areas beyond its constitutional authority, through the use of conditional grants.

These are radical, practical and admirable reforms. They will be costly. They will most likely meet with fierce resistance from vested interests and from state governments. But they deserve, in my opinion, very strong support.

On the fiftieth anniversary of Quadrant magazine, John Howard proclaimed formal victory in the Culture War he had waged on the side of the "common sense" of the "ordinary people" against the "political correctness" of the "elites". Among the leading members of the Beazley shadow cabinet, only Kevin Rudd thought it necessary to reply. What, then, since the election of the Rudd government, has happened on the fields of battle in the Culture War?

If the Howard government is eventually judged harshly, one of the reasons will be the astonishment future generations will come to feel about the brutal ways in which it treated those asylum seekers fleeing from Saddam Hussein, the Taliban and the Iranian theocracy. In his Bonhoeffer essay, Kevin Rudd expressed moral objection to the Howard government's asylum-seeker policy. In general, policy has followed what the sentiments in this article might have led people to hope. Since Labor arrived in power, a great deal of the former government's policy has been quietly dismantled. The Pacific Solution has been abandoned. There are no more temporary-protection visas. All new asylum seekers will at first be detained only for a brief period. Adults will be detained for prolonged periods only if the government can prove to an independent authority that, in the public interest, it is necessary. The only major part of the old system that will be kept is the excision of large parts of northern Australia from the operation of the Migration Act. If any asylum seekers arrive on the Australian coastline, they will be detained not on Nauru but on Christmas Island and will be allowed access to legal advice.

In truth, this new policy is logically nonsensical. If asylum seekers reach Christmas Island and are found to be refugees, Australia will have no alternative but to settle them. It is inconceivable that other countries will offer homes to refugees already on Australian territory. The hope of the government is, however, that because of the success of the Howard government's brutal deterrence policy, people smugglers will continue to give Australia a wide berth. The new humanitarianism of the Rudd government's asylum-seeker policy is free-riding on the "success" of the Howard government's inhumanity. The Rudd government is gambling on the fact that the shaky logical and moral foundations of its asylum-seeker policy will not be tested. Last month two boats arrived.

Concerning reconciliation, the picture is more straightforward. The Indigenous policy of the Howard government was based on an astonishingly empty supposed choice: either practical action to attend to the dreadful problems of existence haunting the lives of Indigenous Australians, or symbolic action, at whose heart there would be a national apology delivered by the prime minister in which the non-Indigenous part of the nation would express its acceptance of the profound injustice that attended the nation's foundation, and the Indigenous part of the nation would be asked to find it in its heart to forgive. It was always clear that the reason supplied by the government for its unwillingness to apologise was bogus. The prime minister told us repeatedly that contemporaries could not apologise for the deeds of earlier generations. No one believed that he really thought the present German government was unable to apologise for the Holocaust.

By more or less universal agreement, the finest moment in the short history of the Rudd government was the apology delivered to the Stolen Generations at the opening of the parliament earlier this year, where Kevin Rudd delivered the only memorable speech of his prime ministership so far. If there was a false note in the speech it was in the suggestion that we could all now "move on". The depth of the Dispossession necessarily resists this facile hope. But what is true is this. Far from imperilling practical action, the apology created a moral basis that government programs like the Northern Territory intervention, which the Rudd government has essentially continued, had always needed. That the apology will not ensure the success of the practical tasks is obvious. Nothing can do that. That it has somehow imperilled their likely success, one of the premises of the former prime minister's refusal to apologise, has come to be seen for what it always was - absolutely daft.

One of the most difficult social issues that arose during the second half of the Howard years was the rise of anti-Muslim sentiment. The success story of Australian postwar migration is usually told in the following way. When a new group of migrants arrives it confronts some hostility and suspicion. Through acquaintance, the hostility and suspicion for this group fades. When the next new group arrives the pattern is repeated. And so on. With Muslim migration, the story lacks the normal happy ending. Mass Muslim migration from Turkey, Lebanon and elsewhere began in the 1970s. Empirical studies suggest that the suspicions and hostilities surrounding Muslim Australians have been rather resistant to change. Even more, these underlying patterns of feeling have risen to the surface during the War on Terror.

It is obvious that the vast majority of Australia's Muslims bear no responsibility whatever for the rise in tensions. It is also obvious that no matter what any Australian government might have done following September 11, some increased tension between Muslims and non-Muslims was inevitable. From such tension no Western society has been altogether immune. However, it also seems plain that by its post-September-11 words and actions the previous government made things worse. Several ministers, especially after the London bombings, lectured Muslims on the question of their loyalty to Australia. Blatant racism in speech and writing by government supporters went unresisted and even undiscussed. Twice before the last election - in the detention of Dr Haneef and the attack on Sudanese refugees - the desperate government even sought to gain some electoral advantage by exciting anti-Muslim feelings.

On all these matters Rudd Labor conspicuously failed to oppose. I once believed that its silences were tactical and even justified, as part of a fierce determination to avoid another pre-election Tampa. Unfortunately, since it took power nothing much on this front seems to have changed. While there is no reason to believe that the Rudd government would be tempted to exploit Muslims for electoral advantage in the ways its predecessor did, I cannot recall an occasion when the prime minister has used his authority and moral suasion to help build trust between Muslim and non-Muslim Australians. The new government has followed the previous one in abandoning the language of multiculturalism as an official descriptor of desired interethnic equality, and as an aspiration for Australian society in the long term. Commitment to the ideal of multiculturalism was most powerful when it seemed scarcely needed. At the time of probably the most serious ethnic tension experienced on the ground in Australia in the past 30 years, the Rudd government has allowed the language of multiculturalism to lapse. Following the policy eras of assimilation, integration and multiculturalism, for the first time since the beginning of the postwar non-Anglomorph mass migration both settlement and ethnic policy are being pursued without the guidance of any philosophy or abstract noun.

Kevin Rudd's relations with the left-leaning intelligentsia began famously at the 2020 Summit, where he was treated as hero and national saviour. This atmosphere did not last long. When he first became acquainted with Bill Henson's beautiful photograph of a naked, nubile girl, he described it as "revolting". The Left was appalled. No issue could reveal more precisely the gulf in values that divides this group from ordinary people. (It is precisely because the gulf is real and not a construct that Howard was so easily able to exploit it over Aborigines, asylum seekers and Muslims.) For the Left, the attempt to prosecute Henson was a sickening outrage, both an attack on Art, the only sacred in a secular world, and a sign that the philistinism of the recent puritanical past was making a return. For ordinary people, in the age of sexual freedom and the internet, the Henson affair sounded a warning that the final sexual taboo, directed against paedophilia - the taboo that protected their children - might prove less solid than supposed. In this cultural controversy, neither side was wrong. It was rather that the values the different sides were willing to defend to the death, as it were, were basic but also incommensurable and irreconcilable. There is no reason to believe that Rudd adopted his position on the Henson photograph for populist reasons. In a conflict between the claims of artistic freedom and the protection of children, for him the choice was not in doubt. The prime minister is a Christian and a social democrat. He is not an aesthete or a libertarian.

There is one issue where the performance of the Rudd government has disappointed me deeply, although the disappointment has been no surprise.

Several decades ago a scientific consensus began to form, which made it clear that the carbon dioxide released into the atmosphere by the burning of fossil fuels, which had taken hundreds of millions of years to produce, in combination with the release of other greenhouse gases, was causing the temperature of the Earth to rise. Since the industrial revolution, average temperatures have risen by 0.7°C. Already another 0.6° is inevitable. The CO₂eq measure in the atmosphere is already higher than it has been in 650,000 years. Unless it is stabilised soon, average temperatures will rise by 2° or 3° or 4°. Models suggest that on a business-as-usual scenario, by the end of this century a rise of 6° is possible. Long before this, we will have passed the point of no return for the kind of Earth human beings have always known. Nonetheless, in the past three decades, despite the near-unanimous scientific consensus, especially as the industrialisation of China and India has gathered pace, CO₂ levels have continued to rise steeply. The ice in the Arctic Ocean is retreating in summer at a pace no one even a few years ago imagined possible. For the first time in several thousand years there is now a North-West Passage. About what is happening what we lack is not knowledge or understanding but the courage to face what we know, and the energy and capacity to act.

Concerning global warming the performance of the Howard government was a complete disgrace. The Rudd government came into office supposedly to repair the damage. In the speeches he has delivered this year, the prime minister has returned time and again to two lines. With regard to climate change his government inherited "a decade of denial and neglect". And: "Climate change is the greatest moral, economic and social challenge of our time."

What, then, has the government done to reverse the decade of denial and to meet the greatest challenge of the age? It ratified the Kyoto Protocol. This was costless. It began work on a modest emissions-trading scheme. As it began its work, it suggested that the scheme would compensate the worst emitters: the trade-exposed emissions-intensive industries and even the coal-fired electricity plants. Ross Garnaut was last year given the task of reporting to the government. Even though he understands fully the implications of climate science, even though he believes future generations will deplore "until the end of time" our incapacity to take decisive action, Garnaut has advocated a paltry target of 10% emission cuts by 2020 if the Copenhagen negotiation is successful and of 5% if it is not, although he would accept a 25% cut if at Copenhagen a presently inconceivable global agreement to a reduction of this size was agreed. It is almost certain that the Rudd government's target will resemble Garnaut's, or be even more modest. Those who think this irresponsible will be written out of the national conversation, in the language of the new official orthodoxy, as "deep greens".

Recently, the American climate scientist James Hansen, of NASA, wrote to Kevin Rudd suggesting that we close down our coal industry. Coal is by far the most important source of atmospheric CO₂. We are the world's largest exporter of coal. Our per-capita CO₂ emissions are close to the highest in the world because of our near-exclusive reliance on coal for the production of electricity. Hansen's suggestion was not, of course, taken seriously. Rudd has told us that he is "a big believer in coal". The response of the Rudd government to our national coal addiction is to promise miserly amounts of money for the conduct of research into "clean coal" technologies, especially geosequestration. The search for clean coal is Australia's new Lasseter's Reef. The mirage, however, has a purpose. It operates as a permanent alibi, as an excuse for not changing our ways.

Humanity's main chance now for avoiding catastrophe is for individual nations to take unilateral action on carbon-dioxide and other greenhouse-gas emissions, in the hope that their actions will have what I have called a benign domino effect on other nations and help lead toward a successful international agreement. It would actually be too optimistic to say that this hope is very slim. Climate change demands more of politics and international relations than I think they can deliver: the end of politics as the art of the possible and of compromise between interest groups; the negotiation of an international agreement of an unprecedentedly altruistic kind; the creation of an atmosphere of wartime emergency in the absence of an enemy. Despite the prime minister rightly regarding climate change as the greatest moral and political challenge of our era, on present indications Australia's contribution to the struggle to meet the challenge will be negligible. Kevin Rudd has failed as much and as little as would every imaginable Australian prime minister. Even more than Rudd would find it comfortable to acknowledge, it is the crystal spirit and the wisdom and the courage of Dietrich Bonhoeffer that we now need.

In its first year, the Rudd government has begun upon an impressive, far-reaching and practical program of reform. It has been widely criticised for preferring investigations to actions. But that is rather unfair. For reforming governments, inquiries are not alternatives to deeds but their mode of preparation. Whitlam led the most active reforming government in Australian history. He also established close to a hundred commissions of inquiry to report on almost every aspect of national life. Rudd has set out on a similar path. Already, in one area after another, his government has broken with the neo-liberal and neo-conservative trajectory of its predecessor. For me, the Howard years already seem like ancient history, leaving little but the memory of a strangely unsettling dream.

History has often been unkind to the Australian Labor Party. After 13 years in the wilderness, James Scullin was elected in the month of the great 1929 Wall Street crash. After two years of permanent political crisis - during which Joseph Lyons defected to the conservatives and the New South Wales Langites staged a mutiny on the Left - Labor collapsed, first losing its majority in the parliament and then suffering an unprecedented electoral catastrophe. After 23 years in the wilderness, Whitlam - at the midpoint of his prime ministership, with the unanticipated arrival of general stagflation - faced the worst global recession since World War II. After 18 months of economic turmoil and political comedy, the Labor government was dismissed by the governor-general and then rejected overwhelmingly by the people. And now, within its first year, after almost 12 years of Howard, Rudd Labor confronts the second great Wall Street crash. Although the circumstance is eerily familiar, no one can know what will be the government's fate.

So far, Kevin Rudd's response to the financial meltdown and the impending global recession has been extremely impressive: decisive, good-humoured and calm. He has been blessed by an entirely disciplined party, something neither Scullin nor Whitlam had, and also, after the brief episode of Nelsonian populist tomfoolery, by the arrival of an Opposition leader at once responsible, intelligent and mature. We cannot yet know whether the Rudd government will be able to weather the coming storm and continue with its ambitious plans; or whether it will become preoccupied in its second and third years by little more than crisis management; or even whether, like the governments of Scullin and Whitlam, it will be overwhelmed and then destroyed by economic turmoil.

Machiavelli knew that in the end the Prince relied on Fortune. If he is lucky, Rudd may turn out to be one of Australia's more impressive leaders. If he is unlucky, he may come to be seen as a great prime minister we never really had.

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