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Canberra Gaze: political convergence « Previous | |Next »
February 16, 2010

George Megalogenis makes a good point on his blog about Rudd and Abbott. He says that the ascendency of Abbott as Liberal leader has brought a combative new political polarisation. However, on one crucial question, the role of government, both sides converge

Each leader is offering voters a version of greater federal government intervention in the economy during recovery. Who has the bigger health package, the most dollars for the environment, the largest cheque for families? Yet they also insist Australia’s record budget deficit should be wound back as soon as possible. The main parties can only walk both sides of the fiscal street if they find more revenue and force expenditure restraint elsewhere to pay for their promises.

The conversation breaks down here because neither side will spell out the clawbacks to go with the carrots for fear of stoking the other’s scare campaign. So there is no talk about trade-offs. It's all blue sky.

This account is spot on. There is little talk about spending cuts or belt tightening. Austerity doesn't sell. It's bad. So the talk is about expanding the reach of government rather than curtailing government spending even though the recession is behind us.

An overly austere budget could well crunch the economic recovery that has been driven by the stimulus package. Surely the extent of economic growth/recovery needs to be factored into Megalogenis' scenario. The optimist's scenario currently circulating is 'the go go China one': --- a second mineral boom buoyed by a resurgent Chinese economy with the boom automatically reducing budget deficits and so reducing the need for the harsh budget cuts advocated by the conservative economists.

| Posted by Gary Sauer-Thompson at 8:43 AM | | Comments (8)
Comments

Comments

It's going to be a long year.

I suspect both sides remember that the Howard Governments managed to get things back into surplus without having to inflict any significant pain on anyone, and they are hoping the same magic pudding will help them do the same. And they may well be right, if China and India keep powering along.

Wait till AFTER the election.
Then we'll see and my feeling is that with the frustrated, ideologicised public service and politicions, irked by that pre election inability to inflict "pain", will ensure that the first budget back will be a brute, full of what they call "reform" (welfare bashing, for the amusement of the mortgage belt voters.

Ken,
Labor has promised to keep spending within certain limits. A target of keeping spending to 2% a year after inflation has been mentioned. Will Tanner be able to deliver?

Jessica Irvine in the SMH suggests another growth option:

The most difficult outcome for the government would be if economic growth returns quickly to trend, but then stagnates, strong enough to force it to keep to its promise to keep real spending growth to 2 per cent, but not high enough to significantly reduce budget deficits by itself. If I had to hazard a guess, it is this last scenario that looks most likely.

Glenn Stevens, the RBA Governor says in his Opening Statement to House of Representatives Standing Committee on Economics that the strength of the Asian economy, not the ailing health of Europe, would be the dominant force affecting the Australian economy. He says that demand for resources would cause tensions, with high exchange rates hurting industries such as manufacturing and tourism, while skilled staff would be lost to the mining industry.

We are back to the two speed economy scenario.

Paul,
that first post election budget may not be a brute if economic growth picks up--- if China and India keep powering along. That is Ken's magic pudding scenario.

It is a possibility.

"the ascendency of Abbott as Liberal leader has brought a combative new political polarisation."

Abbott is a political warrior who will fire arrows at anything to gain a political advantage and play to Liberal convictions. He wants to fight the 2007 battle all over again. Shaun Carney in The Age says that in his book Battlelines

Abbott's analysis of the 2007 defeat is that the electorate was simply a bit tired of the Howard government - not John Howard, but the government itself. The public sought change for change's sake. He does not accept that a majority of voters were attracted to any of Labor's policy ideas. The Coalition's faults were of marketing and communication, not substance.

That strategy will consolidate, unify and energise the Coalition base but it won't win over the electoral middle ground.

The trouble is, Nan, it does become dangerous when Labor in turn refuses to differentiate itself, by following the same policies as the previous lot.
People voted for Labor because it differentiated itself and offered an alternative.
When people discover that Labor tells as big fibs as the Howardists and largely follows the same destructive policies, the disappointment at being deceived could lead to a resentment-driven backlash.
At the mo, Labor hopes to keep the mortgage belt and if it alienates lefties to the Greens, well and good.
But Abbott may appeal to the worst unconscious impulses of the mortgage belt Hansonists in a way that a centrist like Turnbull, appealing to rationality, never could.
Abbott understands "victimhood entitlement" as a politician, as Howard did.
It doesn't matter how fake the fear and loathing "tax" on greenhouse issue is.
It speaks to victimhood/ entitlement and the mortgage belt needs its alibis, when faced with changes it might find unpalatable. Very tempting to to agree that gloabl warming is just a fake excuse for "them" to tax "us" more. Or, we'll get rid of "them" for good ol' Tony, who at least is a Laura Norder man.