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2009-05-02

Both highest incompetent companions need to lift their games

Comments on “Swan walks a credit tightrope”, in Current Account Blog, by Michael Stutchbury, The Australian’s economic editor, 2/05/2009, on http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/swan_walks_a_credit_tightrope/

Undoubtedly we are going into an extremely difficult period in terms of government budgeting, both at the State and the federal levels. Revenues will fall through the bottom as the fortune of both the property and mining booms have turned, together with a slowing economy. Government expenditures will rise as the numbers unemployed balloon. While not all of them are Australian governments doing, State governments have largely squandered the fortunes of the past booming years, leaving little to cover the busting years.

Tough decisions have to be made and they must be made wisely. At the federal level both the government and the opposition have shown remarkable incompetency in terms of policy responses to the current financial and economic crisis over the past months. The government exhibited extremely poor anticipations/expectations of the ongoing crisis and engaged reckless cash handouts in the hope that a recession could be avoided by increased demand from consumers as a result of the cash handouts. That has proven to be futile and the government’s pretension of economic conservatism has been shattered. The opposition under in an experienced leader, on the other hand, has been ineffectual and impotent in presenting credible potential alternatives. Its main arguments of permanent income cuts would be much better than government’s cash handouts in stimulating demand.

Unfortunately for the Australia, they are unlikely to be the end of poor policies or policies alternatives from both sides of politics at the federal level. Now they are competing for even worse performances. The government’s face-saving escalation of its public funding for constructing a broad band network from its election pledge of about $4 billion to a potentially over $43 billion debacle with little prior economic and business study continues its mismanagement of the taxpayers money. The just announced policy stance by the opposition to oppose the Chinalco’s proposed investment in Rio at a time of world wide credit crunch and businesses facing severe financing difficulties, on the other hand, perpetuates the coalition’s ineffectiveness as a credible alternative government.

Australia’s fortune will await badly the emergence or re-emergence of competence in economic management by at least one side of the political divide at the federal level.

The government has yet to show it is at least not too low below the mark that it self claimed to be in managing the economy and its budget during the last election. Australian electors gave the benefit of doubt at a time of long economic boom. Now there is not much time left for you to lose them completely.

For the coalition opposition, it needs to recall its better economic wisdoms of the Howard-Costello era not long ago and present an effective alternative. You will be remembered at the coming elections if you have demonstrated that you really have held the government accountable and contributed to better governance.

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