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February 12th, 2008

Liberals wedged… by Howard

By Mark Bahnisch

The 42nd Parliament has sat for the first time, with MPs and Senators welcomed to country by an Indigenous ceremony. While the Sorry state of the opposition’s stance on the apology to the Stolen Generation has pre-occupied political observers, a lot more will be on the agenda this week. 24 bills are slated for introduction, including the first tranche of WorkChoices repeal, on which issue the Coalition have seized the chance to entrench further their unpopularity. But, while there’s been much comment on the importance of new Ministers getting off to a good start in Question Time, there’s been less attention paid to what’s likely to be the substance of these high profile clashes - the economy. It’s here the senior Libs have severe problems - the current evidence of rising inflation is drawn from the December quarter last year, a period indisputably the responsibility of the Howard government. So what have the Libs been saying? Here’s Dennis Atkins in the Courier Mail:

And on ABC 1’s Insiders Malcolm Turnbull’s claims came with built-in animal traps.He tried to demonstrate he was the smartest guy in the room by saying he knew more about the causes and statistical make-up of inflation, and that Rudd and Wayne Swan wouldn’t know an economic indicator if it came on a yum cha trolley in Fortitude Valley.

But in doing these things he might have hit two brick walls. First, his assertion that the Reserve Bank doesn’t give a toss about “underlying” inflation isn’t going to pass the pointy-headed test as just about every economic commentator has made this point in recent weeks.

Ditto for his claim that the 3.6 per cent annual figure doesn’t exist – at one point he was sounding like Swan during his “$600 family payments are not real” phase of 2004.

Also, anyone who can read the latest Economist magazine knows Australia’s inflation is higher than most OECD countries (this is presuming we continue to leave Argentina, China and Indonesia out of the OECD). The economic commentariat don’t like errors of detail.

At the same time, Turnbull actually argued that inflation is not as bad as Rudd and Swan – and, dare we suggest, the Reserve Bank – says it is. Now this just doesn’t pass that great John Howard test – the one which needed nodding agreement around the front bar.

Brendan Nelson’s leadership may be looking shaky, but his rival Turnbull is being too clever by half. He seems to want to simultaneously maintain that inflation is not serious (because blind Freddy would know where to pin the blame - on Howard and Costello) and that it’s worse than it could be because Wayne Swan has allegedly been “talking it up”. Let’s stop and pause.

There is no inflation problem (because the Howard government were “good economic managers”) but the terrible inflation problem is the fault of the Labor government (because Wayne Swan is inexperienced - unlike the silvertail MP of precisely one term and three months standing presumably).

It was clear as day that one of the many catastrophes of the Coalition campaign was a complete inability to come up with messages on the economy that were consistent and made sense. Now we see it again. Turnbull might have done better to have made some alternative policy suggestions - although, maybe not. He’s either suggested that aiming for a higher surplus of 1.5% is piddly and insignificant stuff and the Coalition would have done that anyway (unlikely), or that Labor should forget about fiscal policy as an anti-inflationary stabiliser and follow the Libs’ pattern of big tax cuts - something every economist will tell you fuels inflation.

It will be very difficult to string these soundbites together under the full fire of parliamentary debate - and I wouldn’t be at all surprised if there is an opportunity for a full blown debate on the economy. It may come on Lindsay Tanner’s appropriation bills - where the Libs and Nats will have the chance to defend masses of porkbarrelling if they so choose. One way or another, they’re going to be hoist on a petard of John Howard’s making. The contest in the first session of parliament is a high stakes one politically - it’s all about destroying the Coalition’s standing on economic management and entrenching Labor as the prudent fiscal party. Economic troubles don’t necessarily lead to election losses - and if the Coalition cooperate in immolating their own record on economic management, they will have gone a very long way towards ensuring their chances of a return to office in the short term are very slim indeed.

Cross-posted at Larvatus Prodeo.