Politics

Wednesday, 19th August 2009

Christian Kerr reviews the week in politics

Liberals were buoyed. Xenophon is seen to be an honest broker. And the government’s attack was noisy but weak. Shadow Treasurer Joe Hockey was emboldened enough to say it straight the next day: interest rates will rise unless the government winds back its stimulus spending. ‘More than $40bn of the government’s over $100bn of extra spending since the 2008 Budget is actually to be spent over the next few years,’ he said. Hockey warned that the stimulus spending was ‘pretty inflexible’ so the government needed to start pulling it back now — otherwise Mr Stevens would intervene with higher rates.

As Hockey says, evidence is emerging that the slowdown Kevin Rudd predicted would be the worst since the Great Depression is in fact nothing like it. It may not even be as bad as the early Nineties recession and yet the government has committed over $100 billion of new spending since 2008. That spending goes over a number of years, with close to half of that — more than $40 billion — to be spent from 1 July next year. Hockey said ‘Start pulling back on the spending. Too much money means too much debt and higher interest rates.’ These are significant issues of judgement — for the government, not just the opposition.