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Published 04 July 2013 11:55, Updated 08 July 2013 11:24
Kevin Rudd and Chris Bowen might be all smiles, but their view on their Australian economy is less positive. Photo: Alex Ellinghausen
There’s a fine line between talking down the economy and relaying a message to voters that your party is the best to manage the economy.
In the past week Prime Minister Kevin Rudd and Treasurer Chris Bowen have re-framed Labor’s economic message. It’s now based along the lines of: “Things aren’t looking great, but we can manage it.” That’s a big difference from former leaders Julia Gillard and Wayne Swan, where the message was: “Look how great we are – Australia is the envy of the rest of the world.”
Upon taking the Labor leadership Kevin Rudd, borrowing a line out of the Ross Garnaut phrase book (who previously flagged the end of the mining boom could lead to a recession), signalled the end of “end of the decade-long China resources boom”.
Labor’s new leadership is creating a new game for Tony Abbott and Joe Hockey when it comes to how each party will govern in the best interests of the nation and business.
Rudd and Bowen cast back to the Paul Keating years of economic reform
In his first major press conference since becoming Treasurer, Bowen warned of an uncertain outlook that will require “careful management”.
Asked if he was re-framing Labor’s economic message, he said he was “calling it as I see it”.
“The Australian economy is resilient and the Australian economy has grown well, due in large part to this government’s strong economic management,” he said. “But as I see it there is a transition to manage.”
But he was also careful to ensure he didn’t go too far down the path of trashing the economy, and Labor’s strategy now is to paint a difference between Labor and the Coalition on economic management.
The economy had to be managed “prudently”, but “without massive cuts to jobs and services”, which he says is a trademark of Abbott and Hockey.
“Managing large transitions is what Labor governments do,” he said. “It is what Hawke and Keating did in the 1980s and 1990s, it is what the Rudd government did in the global financial crisis more successfully than any other advanced economy.”
Are Rudd and Bowen being alarmist?
HSBC chief economist Paul Bloxham notes a “distinct change of rhetoric” from the Labor leadership.
In an opinion piece in The Australian this week, Bloxham wrote that while it’s “fashionable to be pessimistic about Australia’s growth prospects, we remain cautiously optimistic”.
He said Asia’s growth is expected to significantly outpace the western economies.
“Being strongly tied to Asia has helped Australia’s economy in recent years and we see no reason why this should change,” he said.
Bloxham points out how Australia is a low-cost producer of a range of commodities, “which should ensure that even if commodity prices fall, export volumes will still rise strongly”.
“Australian mining operations should continue to be profitable, even if less so than when commodity prices were higher,” he said. “This is particularly the case for iron ore and also holds for the bulk of Australia’s coalmines.”
Economist Tim Harcourt agrees that the rest of Asia will still be a great growth opportunity for Australia and is against doomsayers predicting the end of the mining boom. But he says Labor’s new economic narrative is right in warning of tougher times ahead.
“The thing with electorates is they don’t reward you for a good report card; they reward you for performance of future events,” he says.
“Labor has got to say, ‘we did a good job on GFC and in future there could be another GFC and you’ve got to trust us that Australians will have jobs’. That’s got to be part of your narrative. You can’t get up there and say, ‘I did a great job for you, vote for me you bastards’.”
He says regardless of what party is out there talking about economic challenges, politicians need to be reassuring, without being alarmist. That means they cannot “sit back and allow a mining boom to fill our coffers”.
“I would like for leaders to take sensible advice and not deliberately make populist comments. I don’t like how one side of politics talks about debt when debt to income is what matters. I don’t like politicians talking about getting back to surplus, like that’s the be all and end all, and I don’t like talking about politics through the industrial relations prism when it should be about education, human capital and investment.”
Words mean a lot: Reserve Bank governor sends dollar tumbling
To highlight how crucial rhetoric is in the total economic equation, one only needs to look at the words of Reserve Bank governor Glenn Stevens, who yesterday talked about how Australia will face challenges in the next few years as the economy adjusts to possible end to the mining boom.
The Australian dollar fell to its lowest level for nearly three years after those comments.
Stevens also highlighted the importance of the government reaching a budget surplus – an extraordinary comment by the man who sets monetary policy, on the way that politicians set fiscal policy.
He said the importance of a “commitment” from both sides of politics to return to surplus, “will, if anything, be heightened in the future, given that significant challenges exist over the medium term in funding government initiatives that the community appears to want.”
Aside from whether such economic rhetoric is good or bad, Stevens wants politicians to know they need to be careful about making big spending promises (adding to some already hefty ones) in the lead up to the federal election.