May 7, 2007
It's budget week. Christmas time for voters who are disgruntled and battling. That's the appearance of the budget's strategic assaults on a Rudd-led ALP. If what counts in politics is winning, then Howard and Costello will spend big dollars to buy their way out of the Coalition's current position of trailing a resurgent Labor Party. They have around $10 billion and $15 billion to play with. Will the Howard Government act as if the resources boom will last forever?

Bill Leak
No doubt the message will be simple: a raft of election-year goodies in one hand ; in the other hand an argument that Labor cannot be trusted with the keys to the Treasury. The 2007 budget's wooing the electorate (low and middle income earners) will not succeed in re-electing the Howard Government by itself: it is but one brick in the repositioning. The recent changes to Work Choices are another brick.
No doubt the budget will be sold as 'investing in Australia's economy for the future' through the spending on infrastructure. Does that mean addressing climate change other than in the form of government advertising or subsidies to the coal industry? Will it begin to take action or continue to do nothing?
What limits the big spend is that an expansionary fiscal policy (lots of tax cuts) puts upward pressure on prices, interest rates and the Australian dollar. Australia's unemployment rate is very close to being as low as it can go without wages growth beginning to accelerate. Australia is also as close to the full employment of its resources of land and labour and capital as it has been in 30 years. So major spending could overheat an economy operating at full capacity.
What we have developing is workforce constraints: the growth of the work force as a whole will slow as the number of young workers entering the work force dwindles to barely match the number of older employees leaving it.That will limit economic growth. Will Costello address that situation in the 2007 Budget? Or the failure to make the shift from domestic drivers of growth to export demand. Export growth has been low--- around 2.5%, even with a resources boom.
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the budget will be a cynical attempt to keep power at any cost and I for one hope that people will see past it. The liberals deserve to lose and I hope they will.