Parliament’s back, but forget the FTA. Where’s Whinging Wendy when we need her?
Wasn’t Bob McMullan interesting yesterday? While the Prime
Minister fulminated on the FTA, the shadow finance minister was on
Sunday Sunrise telling how Labor had identified “significantly more”
than $8 billion in savings it could make.

Sunday Sunrise – Interview: Shadow Finance Minister Bob McMullan

McMullan, however, couldn’t put his finger on a final figure. Why?

Because, he said, “The Government keeps making decisions that change
the budget bottom line and to which we have to respond. So when
the election is announced and 10 days later there’s the pre-election
fiscal outlook released by the Treasury and Department of Finance, then
we’ll know the full budget implications of some announcements that the
government has made recently where they’ve only announced some part of
the budget picture and we need all of the details. For example,
on vaccines where they’ve only announced two years of costings to the
budget and we need to know what the next two years are. So we
need to know what that fixed position is and then we can announce the
detail of our all of our propositions, some of which are contingent on
the nature of that bottom line.”

Not a bad answer. Not a bad answer at all. Still, it wasn’t
enough for the Government. The Treasurer turned up on Sunday
saying that Labor was treating voters “with contempt” by not releasing
its policy.

But McMullan has a point. One of the reasons why yours truly was
so strong on August 7 as an election date was that the spending
commitments were outlined in the Budget.

With no surprise visits to Yarralumla over the weekend, it now looks as if we won’t go to the polls until October.

Despite all the rumours at the end of last week, September 4 was
already being ruled out as an election date because it came three days
after the release of national accounts figures that could potentially
upset budget calculations.

However, the longer we wait, the dimmer the memory of May’s Budget
largesse will become. The Government will need more goodies –
begging the question of how they will all be paid for, what they will
do to those accounts.

All of which is reason to read Ross Garnaut’s excellent piece from The Australian last week once again – Ross Garnaut: Prosperity is on the wane

“The 2004 election contest is premised confidently on continued
prosperity,” he said. “But a harder reality is likely to intrude
before the next parliament has finished its work.”

Yup. And there’s still the Whinging Wendy question. Where’s all the money coming from, Mr Howard?

There’s bound to be a whole new set of spending commitments between now
and the election at the end of October, yet the Government seems to be
ducking this question.

Once again, it’s getting away with murder as it’s letting Labor, the
minor parties, the Gallery and the media-spindustrial complex squabble,
this time over the FTA.

Look at Garnaut:

“There has been a gradual corrosion of support for and less and less
action on productivity-raising reform during the past decade…

“There is now little political interest in removing remaining barriers to Australian economic efficiency…

“The decline in support for productivity-raising reform in Australia
has already contributed to less efficient resource allocation. It would
compound the costs of any economic downturn in the period ahead.

“The problems from excessive demand expansion are already acute. For
several years, real private consumption and total domestic demand have
risen more strongly than over any comparably long earlier period, and
real public expenditure has not been held back to offset them. Private
consumption has been driven by one of the strongest sustained real
expansions of bank lending.

“The real domestic demand expansion of recent years is at least as
virulent as that which precipitated the extreme monetary tightening of
the late ’80s…”

And remember that line from Paul Kelly? “Howard is a ‘two steps forward and one step back’ reformer”?

Look at the one big-ticket economic idea Howard’s had – tax
reform. How did it come about? Because the 1997 Budget was
a fizzer and because trouble was brewing over the propriety of his
ministers and their actions. Because he was on his uppers.

Howard is a wimp. He’s flubbed reform and he’s too gutless to call an election.

He’s simply sitting around waiting for something to happen – for his opponents to fall apart over the FTA at the moment.

It’s simply Micawberism. Something’s bound to turn up – a wedge he can hammer in to divide the ALP.

Howard waits for them to come along, but otherwise sits back.

He got called “The Rodent” because of the way he gnawed slowly away at
his opponents – but he doesn’t even do that anymore. He just lets
them gnaw at themselves. He lets them grind themselves down,
exhaust themselves with their own exertions.

And that’s about it, as far as a game plan is concerned – with the exception of two points.

The first is awkward to state without straying into Mike Moore
territory – but it probably would be useful if a couple of bombs went
off at Central or Flinders Street between now and election day.

I hope they don’t – and in case they don’t the Government has been
keeping Plan B ticking over nicely and tossing cash a-plenty at the
punters.

They’re spending it down at Harvey Norman or putting it through the pokies, so that’s OK for now. But…

Look at the economic stats that came out of the United States last
week. Overall growth slowed. The punters there had spent
their tax cuts, the pointy-heads said. And home sales surged to a
record rate as buyers rushed to lock in their deals before mortgage
rates went higher.

Look at Garnaut again:

“Domestic demand has to be reduced significantly from its present
trajectory for a start to be made on correcting the dangerous
imbalances in the economy. The anticipated correction in the housing
market can deliver only part of the adjustment that is required.

“The necessary policy adjustment would be less damaging to long-term
growth the earlier it came. It would be least disruptive if it were led
by a tightening of fiscal policy. But this is hardly likely in the
febrile depths of a year-long election campaign – or soon after a
campaign has been won by one party or the other by promising that the
easy times will continue forever.

“If budget surpluses were increased for the duration of the excessive
domestic demand, monetary tightening would still be necessary, but
would not have to go so far. The increases in interest rates would be
less the earlier they came. Leave it too late and the markets will
impose their own sudden and disruptive solution. But judiciously timed
monetary policy, too, is constrained by the year-long election.”

And look at Whinging Wendy’s question again, too:

Where’s the money coming from, Mr Howard?

How are we going to fund the current splurge, let alone all the election promises to come?

The Government made much of the $8 billion Beazley black hole it discovered when it came into power in 1996.

Now, eight years later, the man who would be Beazley’s successor as
Labor’s finance minister, Bob McMullan, says “significantly more” than
$8 billion in savings could be made.

Why are John Howard and Peter Costello wasting this money?

That’s the economic debate the Government doesn’t want us to have.

Christian Kerr can be contacted at christian @crikey.com.au