We all wait with bated breath, and everyone in my electorate has their fingers crossed.
Jason Clare, Labor backbencher
You only have to watch Wayne Swan sitting on the front benches yesterday waiting to be told what a key plank of his economic policy will be to realise how hollow economic policy in Australia has become. Besides an attempt to turn the classroom into the crucible of the Australian economy, economic policy seems to be about trying to influence the real pullers of the economic levers, the Reserve Bank. What passes for economic debate comes down to who said what when to influence the RBA and whether Swan’s ‘Genie out of the Bottle’ comment was more irresponsible than Nelson’s call for a 50bp cut.
Of course, the RBA doesn’t have any real control over the economy either. The political class’s ‘respect’ for the bank’s independence only came as Keating lost control of monetary policy following the deregulation of the economy, leading to Costello to graciously hand it over to the RBA.
That respect has come in for a battering over the last year as the political class has used the economy to maintain credibility. From the start of the government, Rudd talked up an inflation ‘crisis’ partly as a means of discrediting the Liberals but more as a way of clamping down on any spending ambitions on his own side. To do so, they had to imply that the RBA had failed to keep inflation under control. Since the Budget, it has been the other way round and talking down the need for high interest rates and pre-empting the RBA’s move yesterday. Nelson may have put a number on his call for a cut but Swan was pretty well doing the same thing. On top of that, Labor was blaming the interest rate rises for the slowdown in the economy, which was targeted at the Liberals, but presumably implicates the RBA that decided on them.
While the government and the opposition have been using the RBA in a similar way, the Rudd government is in a much better position in this sham economic debate. What Labor has succeeded in doing is to internationalise it and avoid bearing any real political fall-out from the slowing economy. It shouldn’t have found it too hard since the limited control of government over the national economy was already well accepted and helped Labor last year to exploit Howard’s bogus promise to keep interest rates low.
The Liberals, however, like their acolytes in The Australian, cling to the view that the strong economy over the last decade was up to them. This delusion is not only shown by the current hankering for the World’s Funniest Treasurer but the damage Nelson has just inflicted on himself in the last few days. It is not being that much talked about in the media but his call for a 50bp cut was a bad mistake with his colleagues and is likely to speed up his demise. It highlights just the thing they don’t like about him, his devotion to the New Sensitivity. This may be a political necessity these days but undermines the party’s claim to be superior economic managers. It is easy to understand why they cling to this label, because if they don’t have that, what have they got?