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.
5 comments:
I am shocked, but very impressed, by Rudd's new-found respect for Glenn Stevens and Ken Henry.
Could this go some way to breaking the historic hold the Coalition has on the 'best economic manager' tag?
Absolutely music to my ears.
OK so if 3 interest rate rises over a year will take $9.1 billion out of the economy is it a fair claim to say (rather crudely I must admit) that the $10 billion difference in commitments is worth roughly 0.75% in interest rates?
I guess even if that is semi accurate you wouldn't want to run with that line if you were Labor because of the other $50 billion of spending and tax cuts Labor has committed to.
Also Peter, have you done a piece on the impact of each of the major party's 'housing affordability' policies? I'm concerned that they will feed directly into prices as there are only limited supply side measures, especially Howard's promise to 'top up' first home owners savings accounts with budget surpluses.
Perhaps a better policy would be to quarantine any money that is contributed by the government only to be used if purchasing a NEW home or apartment rather than existing stock, with it returning to the government if the savings account is not used on a new home.
Actually Howard knows he is finished and his Monday "launch" was about trying to sucker "Kevin" into matching him $ 4 $. All so in XX months time the Libs can say how "irresponsible" the Labor Govt was with their promises when things go belly up. As usual this is about game playing by "le rodente".
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