MALCOLM Turnbull is wasting his breath, and opportunities to land some punches in question time, by attacking the Rudd Government’s commitment to maintaining its economic stimulus spending.
Put simply, there’s no political gain to be had by taking Turnbull’s advice - or being seen to be taking his advice - and turning off the stimulus tap.
The point is not about whether maintaining the current proposed level of spending is the right thing to do.
(Join The Punch team here at 2pm for live coverage of Question Time).
Considering Australia is the only developed economy to have avoided a recession and remains the best placed country to weather the financial storm, it can be validly argued that taking another look at the level of stimulus spending OS a good idea.
But from a Labor strategist’s perspective, there are three main scenarios to consider, all of which underscore the political capital to be made by maintaining much, of not all of the stimulus spending.
Scenario one involves Labor scaling back the stimulus spending, as suggested by Mr Turnbull.
Subsequent to this, another financial shock hits the world financial markets, tumbling Australia into recession along with its less fortunate counterparts in the U.S. and Europe, and leaving the Government open to attacks that it eased up on spending too soon.
The second scenario is similar - in this situation, the Government continues to spend, but a financial shock pushes us into a recession anyway. In this case, the Government can argue it did the best it could, while pointing to the greater disaster which would have been caused had it bowed to pressure to rein back its spending.
In the third, and most likely scenario, the Government continues to spend as scheduled, artificially boosting Australia’s economic growth and saddling the country with more than $200 billion in public debt by 2013-14.
This will mean Government spending is likely to have to be reduced to pay off this debt, and the large fundraisings by governments all over the world will slowly but surely push up interest rates.
These are all valid arguments, but that doesn’t mean they are relevant politically.
At a time when people are fearing the prospect of higher interest rates and growing unemployment, they are much more concerned about having a job right now, than about an esoteric economic argument about the effect on interest rates in four years’ time.
The timing of the next election also comes into play. Should rates start to begin a sharp upwards trend, it is within reason that the government would simply call an early election while times are good, and the stimulus spending is still sloshing through the economy.
With the Opposition lagging well behind the Government, and Rudd’s popularity sky high, it would be a tough task to make up that ground on the back of what so far, has appeared to be creditable economic management by the Government.
It would also be a hard call to ask voters to punish the Government for the potential for interest rates to rise - responsibility for which the Howard Government denied lay at its feet leading up to the last election, claiming that it had only ever claimed that its performance on interest rates would be better than Labor’s.
There is of course a fourth scenario. In this scenario, the Government scales back the amount of stimulus spending as suggested by the Opposition, and we avoid a recession anyway.
This is a reasonable scenario, but why. as a government, would you countenance the risk inherent in it - that you would be the Government which plunged Australia back into recession for the first time since the early 1990s, saddling Labor with more baggage about its inability to manage the economy.
Should the Government’s stimulus spending succeed in avoiding a recession in Australia, it will ride into the next election with reasonable economic growth and better than expected unemployment rates.
If this strategy does lead to massive cuts in public spending and higher rates for homeowners, it will largely be an issue to be dealt with post the next election - when voters are traditionally used to tough budgets anyway.
Arguing that the Government took the opposition’s advice and spent responsibly, sorry Malcolm, but it just doesn’t have the same zing.
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