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Wayne cops a pass

Budget week can get a lot of people excited about important long-term goals such as improving hospitals, education and roads. However, the hip-pocket test is the crucial one.
In easier times how you fared is generally the important test but not this year. The vital exam that new boy Treasurer Wayne Swan had to pass was did he add pressure to interest rates?
The simple answer is yes and it came about because he did the honourably political thing and kept electoral promises. History has shown good politics is bad economics and good economics is bad politics.
So he gets a pass on Politics 101 but, wait for it, a pass on Economics 101. It was not a failure - I give it a reasonable pass.
You see this was one of the most challenging economic environments for a Treasurer.
The US went close to causing a global depression, there’s a credit crunch, the stock market lost 25 per recently and the Reserve Bank has been jacking up interest rates with the other banks.
The biggest joke of the week was when ex-Treasurer Peter Costello came out of hibernation on Budget day and proclaimed no new Treasurer has ever got it so good as Swan. That’s crap and I am surprised some of my Canberra colleagues didn’t let him have it.
(I’ve been a Costello fan on economics but his last Budget was an election giveaway effort, which added to inflation and the recent interest rate rises.)
Back to Wayne’s World.
The Treasurer could have reduced tax cuts, chopped more spending and not gone for the change to the Medicare levy surcharge.
This latter one will give money to those who opt out of private health coverage but it will add to demand and inflation. Private health premiums will rise and add to inflation.
So, how did Wayne cop a pass?
Well, the economy he inherited, which now he will be responsible for, was set to slow down. Our economic growth is to fall from 3.5 per cent, which is OK, to 2.5 per cent and this is a slowdown, meaning unemployment rises.
But these are not the scariest numbers. The Reserve Bank forecasts our non-farm economic growth will be a low 1.75 per cent. This was a strong 4 per cent number in the year to December.
And these have strong mining, WA and Queensland growth figures in them. I reckon there are many regions and industries in recession and the national figures paper over the cracks.

That’s why I’m not too tough on Wayne. He might be doing the right thing by not being too responsible. 

Published on: Saturday, May 17, 2008

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