Turnbull isn't finished
The smartest guy in the class has been brought down a peg, though.
The fact that Rudd is trying a little too hard in going after him, allowing his nerd act to slip and reveal the snarling beast beneath (does anyone still wonder why that hostie burst into tears?) was and is an error.
If this had happened last week, Costello would have smirked and sneered, and still wouldn't have stepped up. He has never missed an opportunity to miss an opportunity, and this would have been no different.
Wayne Swan has gotten away with murder, and it would be really interesting to catch the Member for Hunter in his cups right about now.
It could have been so different: the smartest political operator to come out of Queensland since Red Ted, eviscreated after two budgets because of a bit of parish-pump politics. If Rudd had been Malcolm Fraser, Swan would be out on his ear and Lindsay Tanner would be Treasurer now - imagine how different the narrative would be then, Turnbull having seen off two Cabinet ministers and Costello in the space of a month ...
... but it didn't happen like that, did it. Turnbull overreached himself in going after Rudd ...
... and yet when the story first broke, and Godwin Grech became something other than a Maltese badminton champion, Rudd was rattled. This is not a man who bluffs well. John Hewson always said that Keating had a glass jaw, but he never managed to hit it; Rudd clearly has a glass jaw, but it is intact and set hard against Turnbull now, while Turnbull is left pondering what is nobler in the mind. This is a storm in a teacup, and no real issue will wait long upon this nonsense.
Its only significance is that it is a real setback for Turnbull, and thus a real test. When he took on Costello over tax in 2005, when he lost to Nelson in '07, the sense of inevitability surrounding him was not diminished as it is now: that a force of nature might just be piss and wind, that a little red tape might have brought down a giant.
What Turnbull is learning now are the sorts of lessons that other politicians learn at lower levels, for much lower stakes, usually far from the public eye. Had Turnbull come to politics direct from the law (and had Julie Bishop stood up worthy of a deputy), they could have orchestrated a week's worth of teasing questions to Rudd and Swan - particularly Swan - all build-up and no denoument, until they were both nervous wrecks and no AFP investigation could dispel the perception of some sort of underhandedness.
Swan's slipped the noose this time, and no amount of coursing and baying will bring him back within range. Swan is a smart bloke, but a) he's a political fixer from way back and b) hubris has brought down better men than he. I doubt that he'll want to repeat this treatment any time soon, but it's now established that Swan is vulnerable and can be got - at a time when the Chris Bowens of this world are not yet ready to step into his shoes.
Will Turnbull learn from this? If so, what will he learn - other than that others are less than he? Will he be a bit more strategic and bring out snarly Rudd more often? Turnbull and Rudd are both centrists, closer in policy terms and personality than any leaders since Hawke and Peacock: things got nasty between those two, such that Howard provided clear air (i.e. he took the Liberals backwards in the polls, and far enough to the right that he could be monstered by Joh) for policy debate. So it will prove with Rudd and Turnbull - but first Turnbull must get off the mat and show a bit of contrition, that way when Rudd goes him it is Rudd who'll look the bastard.
Right now, Liberal conservatives undermining Turnbull are courting a perception of niceness in calling for "clear air" (i.e. give Labor a 20-point lead and they'll be patronising toward the Liberals rather than snarly). The air is always clearest in the places where nobody wants to go with you: when you're all at sea, when you're stumbling around the desert, when you're in the middle of nowhere, just take a moment to breathe in all that clear air, mm hmm.
Rudd has no long-standing popular base, not even in Queensland, so the way to bring him down is to make him look rattled at a time of crisis and puncture the image of nerdy competence - and take out a cabinet minister now and then. Such a scenario may seem a million miles from the abyss that the MSM would have you believe Turnbull has stumbled into - but is it really?
If Turnbull gets over himself it will be a mighty achievement, no less than Hawke's in the early '80s. If he can do that, what can't he do with the Murray-Darling, tax reform, and all those other issues that Rudd hasn't yet addressed and may never? If, if, if.