Sunday, October 10, 2004

Now comes the real challenge for John Howard

It appears the hip pocket has spoken. The fear of rising interest rates, according to the pundits, has overcome all other issues including Iraq and climate change to return John Howard with an unprecedented increased margin in his fourth term.

Congratulations to Coalition supporters, and also to the Greens who increased their vote across the board. Sympathies to Labor supporters, who really seemed to be in there with a chance.

But now John Howard faces his biggest challenge. Not one independent economist agrees that a coalition victory would succeed in preventing an interest rate rise. Most see it as inevitable with US rates on the rise and a booming Australian economy. These are the last conditions in which an government should instigate the biggest spending spree in living history.

Both parties promised spending like there was no tomorrow in order to win this election, running down the very surplus which is credited with keeping rates steady. The spending will be highly inflationary and the inevitable interest rate rise will hit Australians hard. Record levels of debt have made us highly vulnerable to even a modest rate rise. The Coalition made much of the high interest rates we saw under Paul Keating but the fact is we are much more highly geared now because we have borrowed far more than we did in those days, and the debt load is not only now greater but there is no relief in sight -- then, interest rates could and did come down. Now, debt just won't go away and interest rates will rise.

If you add in very dangerous current account and trade deficits, John Howard will face treacherous economic ground over the next three years and is locked in to spending any future surpluses if he keeps his election promises. Deprived of his chief economic weapon, there may not be much he can do -- except blame world economic factors.

So the next election will present a very different scenario. Parties will have to present real solutions to real problems in order to gain peoples' votes and spending promises just won't cut the mustard. Meanwhile, don't get too heavily in debt!


Anonymous said...

I thought it may be interesting if the Liberals lost to labor. When interest rates inevitably rise and economic collapse happens the Libs could blame Labor for economic mismanagement.

Because of the debt the banktruptcies will be massive.

Nevertheless as rates must go up a good economic manager must be in government to guide the economy.

Anonymous said...

From Fin Review 11.10.04

The biggest piece of fun about watching the Howard victory is the contortions from the Latham backers. Politicians, editorial writers, Canberra yackers - they can't seem to come to grips with it. It's like watching Whoopi Goldberg wake up and realise she's married to Dick Cheney. And has to make breakfast.

Can we please stop with the "interest rate scare tactics" as the reason for the Howard win? Whenever you hear somebody saying the other side won because of scare tactics, what they're saying is the voters are stupid.

First, they were stupid because they were only voting on one issue, you know, as voters always do. Second, they were stupid because they bought the argument totally. Third, they were stupid because they voted for ... the winner.

By extension, this would have to mean only the smart people voted for the loser.

This is as good a way as any for consoling yourself for being so out of touch with reality that you think it's just a concept.

These people are so smart they're a step ahead of the majority, the problem being they've been a step ahead for four elections now.

They're currently so far ahead that John Howard's margins are getting even bigger. If they get any smarter, Howard will be Prime Minister for life.

I watched an interview program on Sky yesterday that featured a couple of the Canberra media's best and brightest, in other words, Howard haters.

You'd never know it was the day after he'd turned Labor into toast from the rants these two went on. It was like listening to Britney Spears complaining about B.B. King's chord structures. An editorial in a Sunday paper extolled Mark Latham's virtues and went so far as to say that three years from now "Howard may not be the man to beat him". Considering the trashing he gave Latham on Saturday, I'd want to be real careful about Mark's rock-star status.

Look, the election's over and your boy lost. Deal with it. The rest of us don't want to spend the next three years getting bored to death by a pocket of people who are bummed out by the last four elections. If you don't like democracy, take up bungee jumping in Somalia.

Any election victory has its flaws, since most tend to be won by human beings. Howard's made more promises than a teenage boy on a second date and, from a conservative economic point of view, he's been about as successful as Ivana Trump on a long haul in Saks Fifth Avenue. He's squandered a huge surplus on programs that can only blow out in the future (let's not forget Latham wasn't any piker in this area, either). And the one thing this country really needs - across-the-board tax cuts - has never been seriously mentioned.

Funny, though. Those dumb voters keep on getting a kick out of electing Howard.


Anonymous said...

Who wants to take a bet that the above writer is a Howard supporter? He's right (in more ways than one), losing sucks. But it's not just losing, it's astonishment that a guy invades the WRONG COUNTRY and increases his vote. What does it take?

- A Labor supporter