Most of the major party focus in the last week has been on interest rates and economic management. The battle for bragging rights about which party is supposedly the best economic manager is faintly ludicrous, given that both sides at various times have made a point of emphasising how similar their basic tax and economic policies are to the other – with the partial exception of workplace relations. The posturing about supposedly conservative good economic management is even more absurd – and indeed somewhat alarming – when one realises that these almost identical economic policies are neither conservative nor even very coherent.
As he often does, George Megalogenis in The Australian has nailed it very clearly.
The twin tax cuts are unique because they return much more than bracket creep in 2008-09. The timing could not be more unhelpful given that inflation is forecast to break through 3 per cent early next year.
Reserve Bank governor Glenn Stevens didn’t mention the tax cuts in his statement explaining Wednesday’s interest rate rise. But surely both sides of politics noticed the following passage: “The world economy is still expected to grow at an above-average pace led by strong growth in China and other parts of Asia. High global commodity prices remain an important source of stimulus to Australian spending and activity.”
At $15.4 billion, the China-sourced personal tax cut will surely feed demand. If Howard, Costello or Rudd believe otherwise, they need a crash course in economics 101.
The task for Australia’s political class is to rediscover the language of moderation. Leadership at this stage of a 17-year growth cycle means telling voters that they can’t have it all.
As Megalogenis says, “there is something more than spin going on here. It is a form of denial.” And seeing we all seem to be happy to be sharing in the denial, I’d suggest there’s more than a touch of the Emperor’s New Clothes about the situation too.