Nov 272008

Listening to Question Time today, I simply could not believe the continual attacks on the government by an opportunistic Opposition, over the all too obvious, but until yesterday unspoken probability of Australia’s budget position going into deficit.

Question after question. "What is a Temporary Deficit?" "How long is Temporary?". Julie Bishop, of all the opportunists on the Opposition front bench spruiked away about Rudd’s lack of conservative economic credentials, during her tirade masquerading as a Matter of Public Importance, while presumably former Rudd buddy, Joe Hockey, urged the PM to "put aside his natural nastiness". It’s historical record that conservatism while in government spent public monies like there was no tomorrow, and not on infrastructure for the public benefit. Ironically, having been so profligate, and transparently so, it turned out there was no tomorrow for the Howardian conservatives.

I find the conservative approach to this issue extraordinary, especially while economic commentators across the nation, inclusive of the Governor of the RBA, are openly accepting of the fact that a trip into deficit for Australia’s economy may well be unavoidable, indeed desirable and acceptable, if the Rudd government is to avoid recession, or worst, full blown depression. At the moment, and I heard it said in the House today, conservatism claims that the government should wait. Wait for what? Sit on it’s collective hands and wait for growth to fall into the negative before suddenly accepting that government spending is the only way to encourage growth and avoid the inevitable consequence of doing nothing?

Of course this is all grandstanding and political point-scoring, from both sides of the House. It’s clear that Keynesian economic methodology must now come into play as growth falls away. Nation after nation around the globe are experiencing slides into recession and all are employing governmental spending strategies. Doing so is the only viable option, in order to stave off a repeat of 1929.

Alan Kohler summed up the opposition attitude quite well in this column.

The collapse in resource company profits in 2009 will definitely mean the budget will, and should, go into deficit. Yet because Rudd and Swan have fumbled the politics of the financial crisis from the start, and because Turnbull and his team have maintained a kind of “talk to the hand” disciplined vacuousness, the Opposition has got itself into a position to benefit hugely when the deficit is eventually announced. No other political opposition in the world has managed to achieve this. In every other country, fiscal stimulus and widening deficits are seen as a necessary response to the crisis and a sign of a government that is doing something, with the opposition having to tag along. So congratulations, Malcolm, for being an economic idiot but a political genius.

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