The Government is reaping the benefit of good luck and good management.
Inflation turned down in December. GDP growth turned up, to the point where (farmers aside) productivity is growing again, and those (including Henry) who backed the labour market as a more accurate guide have been vindicated.
There are signs that large investments in recent years, especially in mining, will soon bear fruit, producing what Treasurer Costello called “a huge surge in productivity”.
Soon, if the weather forecasters are right the drought will break, it will be a big win for Howard ahead of the election as it was for Bob Hawke after the 1983 election win. With China, India and other developing nations roaring, commodity prices are likely to be stronger for longer. If Australia’s terms of trade rise further, just as export volumes begin to surge, recent budgetary strength will continue, perhaps even magnify.
Yet there are catches. A double-barrelled commodity boom (price plus quantity) would further raise the demand for skilled labour, and wages growth would be likely to accelerate outside the barely tolerable current channel. The price of oil is again on the rise, a development likely to further raise inflation globally and in Australia. And if something silly happens on the Middle East, the price of oil and other raw materials is likely to rocket.
All this is why economics is known as the dismal science. But the bottom line is that the economy now looks as if it will strongly favour the government in this election year. Even IR, which presently seems a plus for the opposition, may swing to neutral as the consensus emerges that the new IR laws are helping to create rapid jobs growth by allowing more efficient pricing for labour.
Finally, a Morgan Poll released today on nuclear energy found that more Victorian and New South Wales residents approve (48%, unchanged since June 2006) of nuclear power plants to replace coal, oil and gas power plants to reduce greenhouse gas emissions than those who disapprove (36%, down 2%).
This poll follows the announcement by the newly appointed chairman of the Australian Nuclear Science and Technology Organisation, Ziggy Switkowski, that he believes the Howard Government will alter its position and agree to put a price on greenhouse gas emissions by energy producers. Switkowski went on to say that when this is done, “then the only alternative…is cost-competitive, clean and safe … nuclear power.”
However, the Morgan Poll also found that, even among the supporters of the use of nuclear energy, safety remains the number one concern. For example, 82% of Victoria and New South Wales residents are concerned about the disposal of nuclear waste if nuclear power plants are introduced, while only 16% are not concerned.
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