Wednesday, October 24, 2007

Let's see, it's about economic credibility, right?

Laughter rang out in dealing rooms across the country at the start of the Treasurer’s press conference after 12.30pm.

A news flash on screens had him saying that Australia’s rate of inflation remained "within the band agreed by the federal government and the central bank”.

He turned out to have really said it, with a straight (if somber) face, and for good measure he plucked from the air the concept of a recession should the other side of politics get elected, a prospect previously not evoked lightly during election campaigns.

The Treasurer’s argument was that headline rate of inflation was well behaved. The fact that the Statistician had devoted 5 pages of yesterday’s 40-page release to explaining that changed arrangements for pricing childcare meant that this time the headline rate couldn’t be taken seriously appeared not to move him. Perhaps he missed it...

And perhaps he forgot his earlier entreaties at press conferences in August, June, April and February for Australians to focus on the underlying rate of inflation, not the headline rate.

Perhaps credibility with people who actually understand these things doesn’t matter, and nor does it matter with journalists who yesterday egged him on by asking how quickly he expected a recession.

His own department’s mid-year review released a week ago said that Australia’s economy remained sound and had strengthened.

His suggestion that if Australia went “back to pattern bargaining and moving wages by awards from profitable to unprofitable sectors of the workplace” there would be a recession is disingenuous.

As a barrister he may know that that is not what Labor is proposing. Labor moved wage setting away from awards at the start of the 1990’s.

When the Government’s deputy whip asked the Reserve Bank Governor at hearing in August about the wisdom of returning to centralised wage fixing, the Governor replied: “is anybody actually proposing that system?”

The Prime Minister is no better. He welcomed the headline 1.9 per cent annual inflation figure, which he must have known was flawed, observing it was “the lowest we’ve had since December of 1999. That’s a fact”.

The most honest, unguarded statement came from the Treasurer when he was asked whether his government could still win.

Instead of answering “yes” he replied that “there is still something like four and a bit weeks to go and a lot can happen in four and a bit weeks.”