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Canberra watch: economic reality « Previous | |Next »
July 27, 2007

The Howard Government's economic credentials are looking shaky with the surprise rise in headline and underlying inflation and the increased possibility that interest rates will be increased by the Reserve Bank of Australia. The weight of evidence is that underlying inflation is now close to the top of the Bank's 2-3 per cent target range.

tanks.jpg
Bill Leak

Labor has made successful inroads into the Costello economic management in recent months by raising the issue of housing affordability and household budgets and saying that the Government is out of touch. The inflation rate opens up a space to point the finger at the big election spending --buying the voters with lots of Xmas gifts.

So, though we have boom times and low unemployment, the Howard Government looks shaky, even if the the polls are overestimating the Labor's vote. If Howard and Costello are in denial about battlers doing it hard in struggle street or the need for an interest rate rise, then Labor says that it is a safe pair of economic hands. If Kevin Rudd doesn't play ---there are no differences apart from IR--then the states have to set up (wall-to-wall Labor governments) and then bashed (incompetent). Howard is trying to create conflict and antagonism to get some poll traction. Tim Dunlop has more on this strategy

So will the Howard Government bite the bullet and recognize economic reality and the need for tightening monetary policy? An increase in interest rates will be unpopular among the Howard battlers and cash strapped households. What then?

Peter Brent from Mumble.com argues in The Australian that this increase could work in favour of Howard and Costello. He asks: 'So what might happen if interest rates move up before the election?' His answer:

For one thing, it will turn people's minds to, well, interest rates. Australians are in hock as never before and the thought of further rises can be stressful. Perhaps - you never know - John Howard and Peter Costello will take the opportunity to cite Labor's 17 per cent from the late 1980s. Fear can be paralysing, and people who are scared don't like to take chances. If rising interest rates induce stomach-churning about the prospect of further hikes, then the status quo option - the Government - will look more attractive. In this way a rise in interest rates may help the Government.

Maybe. A lot of people are drawing down on the equity in their houses to buy things they need. There is a large group of people who aren't interested in economic issues as they've never experienced a recession.

So the Howard government needs to undermine Rudd's economic conservative credentials and that he stands for a safe pair of hands. Can they do so?

| Posted by Gary Sauer-Thompson at 8:07 AM | | Comments (6)
Comments

Comments

Gary,
re your comments about Howard's bash the states strategy. Peter Hartcher in the Sydney Morning Herald has an op-ed on this. He says:

Howard sees clashing noisily with the states as a winning strategy, whether he wins the individual arguments or not. If he wins, he gets his way and prevails. He is seen as a strong, effective leader. If he does not win, he is still seen as energetic and full of fight, which is very handy for a Prime Minister whose opponents are portraying him as old and stale.

Hartcher adds that by being seen to stand up to the states, Howard helps frame one of the big questions looming for voters in the federal election - are you prepared to put every government in the land into the hands of the Labor Party?

Nan,
The Hartcher piece is good--I should have linked to it in the post. He is spot on when with his account of the conservatives fear strategy:

wall-to-wall Labor governments, giving the unions untrammelled power, and no one to stand up to them.... Howard would like us to see very clearly that he is the last bulwark against unchecked Labor power, and to think about the possibilities that may follow. He wants us to fear the consequences of "colouring the map red".

It's all fear fear fear fear fear these days isn't it. A strong leader to the rescue--Napoleon on his white charger?

wall-to-wall Labor governments

They will flip though if a Labor Government gets in at the federal level. NSW would have last election if there was a credible opposition. Most of the Labor governments at the state level are as tired and long in the tooth as the Liberal Government is at the federal level. I expect there will be some electoral bloodbathing in future state elections if Labor win the federal election.

Cam,
It is hard to disagree with your account.

I would argue that the NSW Liberals are swinging to the hardline conservative religious right, thereby narrowing their electoral appeal.

Under their leader, Dave Clarke, a member of Opus Dei, they command a majority in the state executive on most issues. They are concerned with homosexuality, abortion, same-sex marriage and contraception, and are strongly backed by the Lebanese Maronite Catholics.

Tony Abbott and Senator Concetta Fierravanti-Wells are close allies who share Clarke's conservative moral views.

Gary, Yeh. That is the issue. Must have a credible opposition. The NSW and Qld Labor Governments are getting too easy a run atm for that reason. Elections should be far more competitive. Carr got run out of town by ICAC, the Liberals should have been all over an Iemma government going up for election.

It is also one of the reasons why I prefer a separate executive. A just outcome in the last NSW election would have been to leave the executive in Labor's hands but give the Liberals the legislative. That would have put the system in tension while not having a Debnam executive.

Cam,
well we suffer greatly in Adelaide: a dominate ALP government a weak divided Liberal opposition and a Murdoch tabloid (The Advertiser) that is defintely the Government Gazette for the state.

There is little online opposition-- a space exists for Fairfax but they have been slow.