Wednesday, October 15, 2008

On the QT: You say bi-partisan, I say fence sitter

Malcolm Turnbull is in full support of the Government's economic stimulus package. He just questions the reasons why it was done, the specific spending aspects involved, and whether it will have any benefit. Other than that he's all for it. Bipartisan all the way you see.

So first up today Turnbull queried how the government came up with the idea to spend $10b - suggesting he thought the figure was plucked out of the air (which isn't surprising, given that was standard operating procedure under Howard).

Julie Bishop followed up by asking the same question to Swan. Swan muttered "I thought they supported the package, but obviously not".

Bishop then asked Swan whether he had been given advice from either Treasury or the Reserve Bank on whether the package will increase inflation or lead to interest rate increases. This was a continuation of Turnbull's position yesterday wherein he:

backed the strategy and said it would help cash-strapped pensioners but noted it was fiscal concerns, not compassion, that had prompted the government to act.

He also questioned whether existing homeowners might end up bearing the brunt of the bonus for low-income Australians.

"We trust that the government has taken into account advice from Treasury and considered the impact that this stimulus may have on the Reserve Bank's ability to continue reducing interest rates," Mr Turnbull said.

"But nonetheless we're not going to argue about the composition of the package or quibble about it. It has our support."

So good, no quibbles, he just thinks it will stop interest rates from going down, and that probably the Government hasn't taken into the advice of Treasury.

It's the usual Turnbull shite: impossible to disprove. If interest rates next month go down by 0.25% he'll say they would've gone down by 0.5% and there is no way to say they would or wouldn't have. It's straight out of the Howard play book - eg his 'interest rates will be always lower under a Liberal Government" pledge. Impossible to disprove, because a Labor and Liberal Party will never be in Government at the same time in the same economic situation, and that is the only way you can truly compare.

Next up was the avuncular one, Joe Hockey asking Tanner about housing prices. This was a tad odd, firstly because it was unclear why he was asking Tanner and not the Minister for Housing, Tanya Plibersek. But Hockey had a cunning plan.

Tanner basically told Hockey he was a dill and said housing prices were falling, demand for housing was dropping, so the first home buyer grant would help strengthen the market (I must say I have some issue with the increase in the grant - I think it should only have been increased for purchases of new homes).

Hockey then sprung his "trap". Looking for rather pissed off for some reason (perhaps like someone who after 11 months still hasn't got used to being a powerless nothing on the opposition front bench...), he asked Tanner whether he still agreed with what he said last year on Lateline, when he said of the first home buyer grant that:
"simply throwing subsidies at people - like increasing the first-home owners grant - would tend to feed straight into prices and be counterproductive."

Tanner started smiling halfway through Hockey's question - (just about everyone on the Government side does) - and Rudd, pondering the Lib's line of attack, muttered to those behind him that "gee I wonder what they'll do when they oppose something".

When Tanner got up he said "Listen dopey" (ok he didn't, but I would have). What he actually said was that if he had been asked on Lateline last year whether the Government should inject $10.4b into the economy he also would have said it should not. He then ripped Hockey a new one during which the camera cut to show Costello mouthing off. That would be Peter Costello who said today that he:
criticised the plan, saying it is not the right measure to avoid an economic downturn.
"If the purpose of this is to avoid recession, this is not the dimension required at all," he told Fairfax radio.
"If you were really worried about averting a severe downturn or a recession, dramatic and aggressive interest rate cuts is the prescription."


Which just proves what an economic fool he is. Now look, I'm not saying Costello couldn't find his arse with both hands, a flashlight and a map drawn by a proctologist, but let's just say that taking advice on interest rates from the guy who presided over 10 interest rates in a row, and who during those rates rises kept dolling out tax breaks and one-off bonus at a time of pretty much full-employment would be a supremely dumb thing to do.

The equally dumb things about the Liberals 'concern' about housing prices going up due to this package is they contradict Turnbull's view from yesterday where he said:
he thought it "very unlikely" the supersized grants would overheat the housing market.

But still the fence-sitting suits Turnbull and the Liberals. If the package doesn't help and we go into a recession, Turnbull will be ecstatic. If the package works, he'll say that it was a good thing he told the Government what to be wary of to ensure it didn't happen.

Truly the man is an economic genius. In his right of reply speech (God knows why he was given one), he says the Government should have acted sooner, and that it missed the signs of the crisis. Yep Malcolm, you know it all.

But lets get the view of others in the economic world:
Fran Kelly on Radio National this morning interviewed economist Nicholas Gruen. She (ever the fan of Malcolm Turnbull) asked about the risk of the package being inflationary. Gruen responded:
"I'm not too worried. I actually think that's one of the things that is very impressive... I was more doubtful that the Government would be as nimble as it has been... it seems to be doing a sort of September 11 response to events of the last three weeks and I think that makes sense.. we've been racking up surpluses in the tens of billions of dollars for years, and what's the point of that if you're not going to spend that money when it looks like a sensible thing to do. I think this rhetorical line that everything's changed is basically right."

Kelly then asked "Have we seen the last of the interest rate cuts?"
Gruen replied: "No, I think we'll get more"
Kelly: "And this won't be likely to dampen that prospect?" (I guess no, doesn't mean no to Kelly)
Gruen: "Oh in a small way of course it does, but I think we'll be working both sides of the street for a while [i.e both fiscal and monetary policy working together]".

Ok, Gruen used to work for Keating. Let's get someone from the more Liberal Party side of the economy - like say banks!

What does the NAB Chief Economist, Alan Oster, think?
"We have a budget surplus of around $7 billion and the next financial year it goes into a deficit of $10 billion,” he said.
"And I don't have any problem with that. The bottom line is that you have surplus in good times and in tough times you use them.”
Mr Oster said he would also support the government borrowing money to fund infrastructure projects to stimulate the economy in such an environment.
"That's exactly what you should do in some ways. Yesterday was a short helicopter drop of money. Next year is going to be a very good time to do infrastructure programs that are productivity enhancing."

Ok, I'm convinced - even more so because Barnaby Joyce has again come out against it. Chris Bowen in a Dorothy pointed out that this morning Joyce said

"We had to look after the pensioners, but $10 billion, we could have put in the desalination plants for Adelaide ... we could have put an inland rail (in) but it seems we've bought Christmas presents,"
"I'm worried about when big chunks of money turn up in one fell swoop just before Christmas, because a couple of weeks later you see a lot of Australia's $10 billion scattered around the floor with 'Made in China' on the back."


Again I say if the pensioners spend the money on Christmas presents - GOOD! The Government should just about send out the cheques on 8 December with a Harvey Norman catalogue attached.

Joyce would have had a point if it was 12 months ago, 18 months ago, 2 years ago. But when demand is going down the toilet, the job of the Government is to do what it can to give it a boost. The Howard policy was to give demand a boost to stop his polls from going down the toilet. But a desalination plant to help a financial crisis? Please Barnaby, don't make it too easy for the Government.

1 comment:

big cuz said...

Credit must go to Julia Gillard, the fact she has been able to occasionally act as prime minister whilst at the same star in the movie Burn after reading co-starring with Brad Pitt & George Clooney is a great effort