Wednesday, February 4, 2009

On the QT: Free Kick Day

Today Malcolm Turnbull, in one go, bet his entire political life on wining the 2010 election. In my opinion he has won it for Kevin Rudd

It's not often a beleaguered opposition decides to give the Government a helping hand; but today, Malcolm Turnbull in a massive misreading of the public's feelings decided to oppose the $42 billion stimulus package announced yesterday.

Just before we get to that, here's some of the commentary on the package in this morning's papers:

Ross Gittins in The Age:
...don't take much notice when people say nothing the Government has done so far to combat the downturn has worked. They're talking through their hats.

I guess the silliness we are hearing is an inevitable consequence of it being so long since the last recession that many people have forgotten how recessions work.

Worrying about the budget going into deficit is like being told a friend has been killed in a car crash and then inquiring about the fate of the car. At such times there are more important things to worry about. National government budgets are a means to an end, not an end in themselves. They're intended to act as a kind of shock absorber. When the economy turns down because businesses and households cut back their spending, the budget is intended to move into deficit automatically because this has the effect of cushioning the economy's fall.
To measure accurately the effect of the measures, you have to know something we'll never know: what would have happened in the economy had the authorities not done what they did. So all we can say is that cuts in interest rates and government spending and tax cuts have worked in the past — eventually — so they should work this time, too.

Economics Joshua Gans:

Overall, despite appearances, the stimulus is strikingly economically conservative. Ignoring those one-off investments, the Government has not created a structural deficit. Structural deficits are hard to get rid of. In contrast, one-off items can be paid back over time and the pain smoothed accordingly. This insulates us from an adverse private economic response.

The Coalition has proposed an alternative plan based on tax cuts. But the rhetoric of that proposal (which differs from its actuality) is not fiscally conservative. It is to give tax cuts that raise permanent income. To do that, the tax cuts must be permanent and a deficit based on those would be structural and something that we would not necessarily grow our way out of.

The Australian's editorial (usually pretty anti-ALP spending) comes up with this:

Even with this spending, the Treasurer's estimates show unemployment increasing by 300,000. And some Australians may even lose sight of the fact that the private sector, not the state, generates economic growth. But it is hard to see what choice Mr Rudd had to a big hit yesterday. Tax cuts take time to work through the economy and it would have made no sense to defer spending to protect a budget surplus being destroyed by the decline in corporate tax income.

I could pretty much take any other bit of commentary and it would be positive - Chris Richardson from Access Economics on the 7:30 Report last night described the package this way:

It certainly makes sense... and I think historians will look back and say that today is the day that Australia started to turn the corner. You're seeing the Reserve Bank stomp on the accelerator, you're seeing the Government stomp on the accelerator to an even greater extent. And we do need it. We need it both from the Bank and from the Government because what's happening international is diabolical.

So this morning after hearing all that, Turnbull comes out, opposes the packages, and is about to learn a big lesson in political irrelevancy.

Now I could possibly understand him opposing the $950 cash handouts - he could keep saying that tax cuts would be better, but, nope, he opposes all of it. What even the funding for schools? Yep:

The Opposition also opposes the $14.7 billion which will be spent upgrading schools infrastructure.

Mr Turnbull has proposed that only $3 billion over three years be spent on school buildings.
"We have to ask this question, is the most urgent infrastructure deficiency requirement in Australia primary school assembly halls and libraries?" he said.

Yes, Turnbull thinks opposing funding for school and handouts to the public will win him votes (don't believe for one second he is doing this out of any "greater economic good" belief). The problem for him however, is that he has totally misread the mood of the public, and also totally misread the economic times.

When Kevin Rudd in the 2007 campaign demanded an end to all the mad spending, he caught the mood of the times. By now upping the spending, he is also catching the mood of the times. That is because Rudd is a cunning politician (perhaps as cuning as has ever been - after all he outwitted Howard), and Turnbull is a political dill.

By taking this stance the Libs are now out of the loop. Sure the Greens, Fielding, and Xenophon will want to look at the package closer, and will send it to a Senate committee for a couple days. They'll try and get a few things... but in the end they will vote for it. There is no way on God's earth that they will vote against giving low and middle income earners $950. There is no way in Hell that they will vote against $28.8 billion in funding for schools and infrastructure.

And so it will pass, and all Malcolm Turnbull will have to show for it is people thinking he is just being anti the package for the sake of being anti; and worse, that he is an economic illiterate.

Bernard Keane in Crikey puts it perfectly:

Turnbull is saying what he has done isn't popular, but the right thing to do. Commendable. He actually offered some sensible suggestions this morning for alternatives, particularly in relation to reducing small business costs. But he can't begin to understand how unpopular this will be, and the way in which it will erode his party's support among voters. Remember the bollocking Kim Beazley copped when he tried to amend the Howard Government’s tax cuts in 2005? This is like that -- multiplied a hundred-fold, because it's not about handouts so much as economic survival.

You fools. You utter fools.

Which brings us to Question Time.

Rarely have so many dumb questions been asked; and rarely has a Government had so much fun.

Turnbull for example referred to the fact that retail sales in December increased by 'only' $700 million over the sales in November. Where he asked had the other $8.9 billion gone?

At this point you could hear Lindsay Tanner remark "The stupidity of the question".

Rudd shook his head in disbelief (no doubt wondering why he had been at all worried about Turnbull taking over the leadership).

After QT, Turnbull kept sprouting this bull. He somehow he believes that a 3.8% increase in retail sales in December - the biggest ever monthly jump since 2001 - means nothing. What a complete economic idiot. By his logic, without the stimulus package, sales would have stayed flat. He does not grasp that without the stimulus package, sales would have most likely fallen, and fallen sharply, therefore a $700,000 rise in sales is not the only sign of impact.

The Commonwealth Bank believes "about 40-45%" of the cash was spent - more than what was expected.

Now there was a Dorothy Dixer to Swan which allowed him to reel off these figures - pretty substantial proof that the stimulus package worked (especially when compared with how retail spending everywhere else in the world tanked), and yet then the Lib's Tony Smith got up and asked Swan to "point to a country where one-off payments have worked".

Gee now, what is the name of that big, brown, flat country, known for kangaroos, skin cancer, Ramsey Street, and a formally great cricket team?... Hmmmm oh yeah - Australia!

By the time Swan had got to the dispatch box the entire Government benches well yelling "Australia!". Swan was able to say "The liberals are so out of touch they don't know what country they're living in."

The questions just got worse and worse. My favourite was Warren Truss asking Swan about the fact that "newspaper reports suggest $18 million of the stimulus package went to people on social security living overseas", and he wondered how this helped the Australian economy"

Swan got up and pointed out that Australia has reciprocal social security arrangements with other countries (ie Australian pensioners living in Italy get the Australian pension, and Italian pensioners living in Australia get the Italian pension), and he was surprised that Truss as a former Minister for Social Security didn't know this, because Swan was sure Truss would have negotiated some of the arrangements himself.

It was just one hit after another. Truly the mercy rule should have been brought in - especially as the entire thing went for over 2 hours. But for those on the Liberal front bench it must have felt like 20 hours.

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