Poor old Bomber. By all accounts and Henry’s personal experience the Bomber is a very decent bloke, but to quote one of Henry’s ALP mates from a discussion yesterday “he’s just not getting it done”. More in the morning rags about mooted challenges, denials that a challenge is in the air and a range of speculation from scribes that it might not be a Merry Christmas in the Bomber household.

Federal Labor’s unassisted implosion enables the Government to slay other dragons and, as Steve Burrell writes in today’s Age, in the run-up to next year’s Federal Election, those dragons are likely to be the Labor State Governments.

The battle-lines have been drawn for quite some time now. Treasurer Peter Costello has long been spouting about the “GST windfall” that the States have continually squandered. However, Costello’s own figures highlight that the net benefit of the GST last year to the states was just $1.2 billion, or 0.1% of our output. Not exactly a “windfall”.

The Feds have also been parroting about how the Victorian Labor Government has been fiscally extravagant for running budget deficits when infrastructure spending is included. But if infrastructure was included in the bottom line, then almost every Government would be in deficit. Costello doesn’t do this for the Federal budget, so why would the States do it? Obviously this is a tactic to push the blame for interest rate hikes to the States, but it’s an economically flawed argument. This is made doubly astonishing given this year’s Federal tax cuts made during a time of inflationary pressure.

Henry gets the distinct feeling that this is all politicking — not economics. What is likely, however, to have a distinct impact upon the State economies is the strong movement away from the major parties.

Yesterday’s Morgan Poll of the Victorian Upper House, released exclusively for the Nine Network, showed that the Greens are likely to win between three and six Upper House seats, the Nationals two and Family First one. This would result in the minor parties holding the balance of power, which has many running scared.

Much has been made about the Greens economic policies, but it is difficult to know the extent to which the minor parties could impact legislation given that the major parties vote together so often. They are considered to be fiscally irresponsible and overly-socially progressive — but to what extent can they be still considered leftist wackos when nearly everyone is proposing serious action on climate change?

Clearly the issue with the Greens that scares most people is that they will prioritise the environment over the economy — but in reality it is not a trade-off. With their increasing strength, the Greens need to engage business, not penalise.

Read more at Henry Thornton.