Politics

Wednesday, 19th August 2009

Christian Kerr reviews the week in politics

Swan hit the airwaves on Tuesday morning, saying stimulus spending had kept the country out of recession. ‘Stimulus has been absolutely imperative to sustaining growth in the March quarter and it would be a mistake if we were to withdraw that stimulus prematurely,’ he told ABC Radio. ‘The second stimulus has been absolutely critical to confidence and employment in this economy and if that were pulled out prematurely, then that would have the impact of undermining the recovery.’

We heard for the first time that day how Turnbull had been guilty of ‘monumental misjudgement’ for opposing the second stimulus. But Swan had some reassurance too. He said the government was committed to slowing spending when growth returns. ‘When growth returns to trend we will apply a real cap of 2 per cent to new spending,’ he said, ‘but the most important point to understand is this: we are not out of the woods yet. It is very important that we continue to support our economy particularly given the reductions in business investment that are flowing through the economy and the reductions in trade.’ Spending would stop, he insisted. ‘This government is absolutely determined to implement its medium-term fiscal strategy so when growth returns to trend we will apply that spending cap.’

Turnbull rejected this argument. He said that the terms of trade and a strong economy when the slowdown struck were the real reasons Australia was weathering the economic storm better than other OECD countries. Opposition MPs backed him up with claims that there were growing fears about the scope of the stimulus. Eric Abetz told journalists that he wanted to see expenditure ‘more appropriately targeted’. Shadow attorney-general George Brandis added that ‘the government panicked last year and earlier this year by spending much more than it needed to have done, directing that spending into the wrong areas. But then independent Nick Xenophon had something similar to say. ‘If the job’s done, stop the extra spending, otherwise you’ll end up over cooking the goose.’