Wednesday, November 14, 2007

Howard's lament: "Don't wish too hard..."

John Howard wanted Labor to break ranks. He’s got it.

After $50 billion of matching Mr Howard promise for promise, bribe for bribe, inflationary tax cut for inflationary tax cut - even as interest rates were climbing - the Labor leader yesterday declared time out.

“I have no intention today of repeating Mr Howard’s irresponsible spending spree,” he declared, to the relief of those of us who feared that that was all he could do...

Unlike Mr Howard, I will heed the warnings of the Reserve Bank. Unlike Mr Howard, I will not place in jeopardy households already struggling with mortgages. Unlike Mr Howard, I don’t stand before you with a bag full of irresponsible promises that could put upward pressure on inflation.”

Not yesterday. Kevin Rudd said “loud and clear that this sort of reckless spending must stop”.

He would promise away only one-quarter of what Mr Howard had in his campaign launch and in a way less likely to be inflationary.

At last! But the bidding had gone on for so long that it looked as if it would never stop. In the 2004 campaign each side stopped at $13.5 billion. This time the Coalition exceeded $60 billion (arguably breaking its commitment to leave enough unspent to maintain a 1 per cent budget surplus) and Labor stopped at around $50 billion.

Should we be grateful? Yes we should, especially as it is likely that Labor will form the government.

The difference between Labor’s $50-odd billion and the Coalition’s $60 plus billion isn’t big when spread over the four-year period in which these things are measured. The government will spend about $1,000 billion in those four years. But it’s a sign – the first in the campaign - that Mr Rudd, to use his own words, “gets it”.

He now understands that a “feeding frenzy of expenditure would actually make inflationary pressures worse”.

He showed no sign of that before, parroting for months the Coalition’s impossible-to-believe line that it didn’t matter how much extra money the government flung at a supercharged economy so long as its budget surplus stayed at a certain level.

John Howard now has his point of difference with Kevin Rudd on economic policy. Kevin Rudd understands where the pressures on interest rates come from. He has 10 days in which to keep pointing that out.