Opposition leader Tony Abbott is not interested in economics and doesn’t like reading press releases so he may not have seen the minutes of the last Reserve Bank meeting. What Abbott would remember from that August 7 meeting was the headline of interest rates kept on hold at 3.50 per cent. The Board said world conditions had declined since February, commodity prices were down and global growth was unspectacular. Australia's terms of trade (the relative prices of Australia’s exports and imports) peaked nearly a year ago, the Bank said, “though they remain historically high”.
The Board offered its judgement on the world and Australia's place in it. China was steady, US growth is modest, Asia was recovering from natural disasters. Europe remains the sick man of the world as policymakers juggle sovereign and bank debt with the need for future growth. The share market was volatile, risk aversion was high while interest rates were historically low. Yet the board noted Australian banks have had no difficulty accessing funding, even on an unsecured basis. This was because Australia was a “highly rated sovereign”. Inflation and unemployment are low and not even the carbon price will change it that much.
This is an extraordinary result given Board Governor Glenn Stevens’ statement to the politicians yesterday, we were “not in anything like normal times”. Stevens was speaking at the House of Representatives standing committee on economics and repeated the good news about the local economy. Resource investment might be declining but export shipments will pick up. The dampening effect of a high dollar was beginning to wane, so other sectors such as construction and tourism may also bounce back.
Liberal member of the committee Steve Ciobo asked if Australia was merely just lucky to near Asia’s boom and far from the toxicity of Europe. Stevens avoided the political connotations of the question but admitted Australia’s geography and resource-rich land was a “blessing”. However he noted there were cultural issues at play too. “We are in the real economy exposed to the strong bit, and our financial economy and our psychology is still quite connected as well to the pessimism from the North Atlantic,” Stevens said.
The Opposition has tapped into this pessimism with great effect since the last election and has taken every opportunity to link bad economic news to the minority government. After two years, Tony Abbott is no longer pretending Australia is in dire straits but still marked Tuesday’s second anniversary of that election with a hope “the Australian people can vote for a better way.” Abbott sought refuge in the past for his promise of renewed hope and a stronger economy. “Sixteen members of my Shadow Cabinet were ministers in the Howard Government,” he said. “We delivered an era of reform and prosperity before, and we are determined to do it again.”
Abbott’s presser made no mention of the change in global conditions since Howard lost the November 2007 election. This week, he repeated claims the carbon and mining taxes were responsible for economic uncertainty in a shambolic performance on ABC’s 7.30. They were among many egregious errors, perhaps chief among them the suggestion Marius Kloppers may have misled investors if he failed to mention the carbon tax as a reason for BHP Billiton’s Olympic Dam postponement.
It wasn’t just Leigh Sales toughening up on Abbott this week. Many in the media have started to ramp up the scrutiny. Michelle Grattan said his credibility was as big a problem as Prime Minister Gillard’s trust. Grattan noted Abbott’s biggest strength, his absolutism, could become his biggest problem when the facts don’t fit his strategy. He is also in danger of losing the advantage over the Government as more people recognise his “one trick tony” behaviour.
Laurie Oakes openly called out Abbott as a liar in his weekly article for News Ltd today. While most people would not find it surprising a politician is less than scrupulously honest, it is a problem for Abbott because, says Oakes, “the central message from Abbott supporters is that the Prime Minister is the liar - Ju-liar.”
With still a year to go before the next election, the advantage remains with the Opposition. But recent polling has seen a narrowing and even in Queensland where Labor has been battered at the last Federal and State election there is improvement. On figures released this week, Poll Bludger reckons only the marginal seat of Moreton might fall and there is still another year of Campbell Newman government cutbacks to factor in.
While leadership tensions in Labor are still not totally behind them (and won’t while Kevin Rudd remains in parliament), Gillard seems almost certain now to last until the next election. But there is no guarantee she will face Tony Abbott. Opposition members not rusted on to Abbott’s take-no-prisoners style (and there are many in the party, as the leadership ballot in 2009 showed), may get increasingly nervous if Labor continues to chip away at their lead, while their own leader goes missing in action.