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the economy: a question « Previous | |Next »
August 7, 2006

On the one hand, the Howard Government dishes out $9.5 million in tax cuts. On the other hand, the Reserve Bank raises interest rates because of underlying inflationary pressures. Doesn't the former contribute to the latter? Isn't the Howard Government's tax cuts at odds with the Reserve Bank's tightening monetary stance in the light of strong commodity prices, a tight labour market and rising global inflation.

The Howard Government denies the contradiction. The tax cuts were justified--they help ordinary Australian battlers to afford the increasedl price of petrol says the PM. But the Howard government would not have known the current price of petrol when it handed down the tax cuts package last year at Budget time. The Reserve Bank says that state and commonwealth governments were contributing to demand pressures by running stimulatory budget policies. The states were doing so because of capital spending plands and the commonwealth was doing so with its tax cuts.

I reckon this looks to be a case of bad economic management. The left hand is at odds with the right hand in economic policy.

| Posted by Gary Sauer-Thompson at 3:43 PM | | Comments (0)