As was widely predicted, the RBA
today announced that interest rates would remain unchanged at

Henry has long argued that a tougher
monetary policy in recent years would have limited the growth of domestic costs,
kept imports under better control and limited the growth of Australia’s
international debt. This approach would have made our economy even stronger,
with less risk of a debt induced collapse. But it would not have created faster
real growth. Real, sustainable growth is created by reforms that encourage hard
work, extra saving and investment (both by individuals and businesses) and
additional entrepreneurial activity.

Will we see such reforms in the near
future? It is doubtful. A “comfy”, unpressured government is a recipe for
complacency. Furthermore, it is questionable whether the gummint hears (or more
likely, acknowledges) the beeping of the “Debt Truck” this time

private sector is spending more than it earns and borrowing (and
selling assets) to enable this to continue. The point is that these
trends are sustainable only for as long as international investors
think they are sustainable.

Real reform, as symbolised by a
serious cut in the top marginal rate of tax to 30%, would, if done all at once,
add to domestic demand and raise the chances of a debt induced collapse. If it
were announced to be implemented gradually over several years, it would buttress
the confidence of international investors to the point that Australia might
very well be able to remain on its current strong economic

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