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Canberra: economic narratives « Previous | |Next »
May 10, 2008

What is the economic narrative of the Rudd Government? It used to be investing in new infrastructure, increased productivity and broad reform. Their argument was that the Howard Government had squandered the proceeds of the boom in mineral exports instead of investing in infrastructure and education and health to enhance and expand the capacity of the economy to generate economic growth. That is their big picture.

Yet that has been undercut by the alternative narrative of addressing inflation through big budget cuts and substantial surpluses so as to help the Reserve Bank's use of monetary policy to squeeze inflation. And yet this alternative narrative is undercut by the big personal income tax cuts that are in opposition to the use of interest rates to squeeze inflationary pressures in the economy and reduce economic growth.

So which is the economic narrative? Do these different narratives cohere in a broader big picture? If so, what is that big picture? It is not clear. Are the conflicting tendencies being thought through? It is not clear.

| Posted by Gary Sauer-Thompson at 9:52 AM | | Comments (9)


In terms of economic expertise the Krudd government is a Keating redux. What you say you will do in opposition doesn't resemble what you actually do once you occupy the Treasury benches.

The person down the bottom needs more cash so we'll give it to them and cut back on govt spending (because Howard was so free with it) so we can afford the tax cuts and handle inflationary pressures.

Does that one work?

It sure does look look that doesnt' it. Maybe we will know more from the budget process.

it's a social justice type argument.I see that Don Russell, Paul Keating's old economic advisor, says that taming inflation leads directly to a major investment in education.

Maybe the budget address will sort it out.

Shaun Carney says in The Age

it's time to reconsider just where the economic and political debates merge — and where they diverge. There are good reasons to do this. The emerging economic conditions are especially challenging: healthy growth and tax receipts underpinned by the resources boom, unemployment sitting near record lows, interest rates sitting at uncomfortable highs, inflation on the rise, a very strong dollar, skyrocketing fuel prices. That's one hell of a jumble of conflicting forces for the Government to straighten out, and if it's to implement its reforms — yet another industrial relations system, a carbon-trading framework, a reappraisal of the tax system, sharper means testing of welfare payments — then it needs to be able to carry the public with it. To do that, voters will have to be able to work out where the politics end and policy begins.

the politics is about "sharing the burden"--- the new rich will be doing all the sharing and the working families none. Increased luxury car tax, a crackdown on tax avoidance by executives and means-testing welfare are all indicative of the "Robin Hood" politics of the budget.

The key exception is that everyone will still get a tax cut with big tax reform promised to help working families.

But the Rudd Government double speak continues. Swan is going to squeeze inflation though budget cuts but he's not going to reduce economic growth. Squeezing inflation means constraining economic growth.Swan and Co are trying to slow the economy down and job creation. That means unemployment rises.

there does seem to be a flaw on cutting expenditure on welfare that highlights the Robin Hood spin. Upper and Middle class welfare is to be left untouched in terms of mean testing in the name of equity.

Paul Kelly in The Australian acknowledges the need for a narrative. He says that:

Australia under Rudd faces slower economic growth for three years, high interest rates and ongoing spending restraint...In this climate, 24-hour spin will not suffice. The Labor Government needs a story to explain the slowdown and a story that reveals a long-run vision...Rudd is passionate about burying what he calls short-termism. He wants to project a long-term narrative.

he doessn't say what that narrative is or could be though. All he says is that Rudd will introduce reform as part of a new narrative.

Big insight!

The economic narrative that has been constructed is that Tuesday, when Swan delives the budget, has been built up into an unprecedented political and economic turning point on which hang the fortunes of the nation and the five and a half month old Rudd Government.

It is not a very plausible narrative.