Credit where credit is due: it was very clever of Malcolm Turnbull to ask Wayne Swan that question on the non-accelerating inflation rate of unemployment.
It might have been even funnier if Turnbull had simply invented some economic term and fired that off at the Treasurer. No doubt the answer would have been much the same. Swan wouldn’t have known what it was, but responded: “We aim to get it as low as possible”.
There’s just one problem with all of this. It’s not actually funny.
The non-accelerating inflation rate of unemployment is a concept in economic theory that postulates if unemployment falls below the NAIRU, inflation will take off. It’s sometimes known as the natural rate of unemployment.
The Reserve Bank seems set on softening us up to accept a higher level of unemployment if we are to get inflation under control.
RBA Assistant Governor Malcolm Edey has warned this morning that the inflation rate is likely to head towards the 4% mark next quarter. He also said there is evidence that wages growth is heading up.
All this is a test of Kevin Rudd managerialism. But it’s a much bigger test, too.
Two strong showmen, Paul Keating and Peter Costello, have held the treasury portfolio for most of the time since the opening up of the Australian economy. John Dawkins and Ralph Willis were considered competent. John Kerin wasn’t – but he was only around for such a short period of time it didn’t matter. Kerin was also there in the dying days of a leadership, not at the start of a new government.
Wayne Swan has become Treasurer at a time when it’s not only a political but an economic necessity to have a strong grip on the portfolio.
His Question Time performance not only suggests he hasn’t taken up the reins. It doesn’t just suggest he’s uncomfortable in the saddle. Wayne Swan seems to be sitting the saddle the wrong way round, completely unable to guide us in the right direction.