It was all so 1970s — or Labor under Kim Beazley — as the Opposition leader argued at the margins of the economic debate in this country.

There were Brendan Nelson and Malcolm Turnbull defending the alcopop industry and its teenage consumers, all while trying to pander to the hip pocket of motorists and doing their best to collect donations from the private health insurance industry.

Mr Nelson’s address in reply to Wayne Swan’s Federal Budget speech had echoes of the worst populism from the 70s, 80s, 90s and early years of this decade. The Opposition has gone for the cheap appeal to the folk in the gas guzzlers, all the while staying away from the tough stuff: making policy and critiquing the budget.

Perhaps he and Mr Turnbull could have saved us all half an hour of boredom by abandoning their talk and glancing through a speech by Reserve Bank Governor Glenn Stevens at Sydney University last night.

Titled Australia, Then And Now, it was a comparison between the economic debate when Mr Stevens was at university and the reality of what has evolved and how Australia is currently placed. It was about all the hard-won gains that have got us to where we are now.

And while they were at it, they could have glanced across the Tasman to learn something about what the 1970s might look like 30 years on as the Kiwi economy seemingly rushes towards a slump of epic proportions — retail sales fell 1.2% in the March quarter, joining house sales, new home starts, house prices and a growing list of other indicators that are heading lower, with the exception of inflation.

Some commentators have wrongly claimed Australia is heading towards stagflation: in fact the chances are that New Zealand will beat us to that undesirable goal, and might even get there before the tanking UK economy and slowing US economy. The New Zealand Herald paints the picture today:

Yesterday’s weaker than expected retail sales numbers will have done nothing to make Reserve Bank governor Alan Bollard’s dilemma – about when to start easing rates – any easier. The 1.2 per cent drop in real retail sales is the kind of slowdown in consumer spending he has been trying to engineer for a long time.

But it also sent the dollar lower, aggravating short-term inflation pressures and the risk of a wage-price spiral. It is a sign that we are near a turning point in the interest rate cycle that there is a particularly wide spread of views, not about the direction (now clearly down), but about the timing of the bank’s next move.

Malcolm and Brendan have had a confused start to their new careers as Opposition Treasury spokesman and Leader respectively.

They’ve claimed inflation wasn’t a problem, that it was an ogre conjured up by Wayne Swan; they’ve also claimed that the economy wasn’t slowing, that interest rates were too high and that the Reserve Bank’s policies risked creating a two-speed economy.

To educate them and other critics, the RBA yesterday published a detailed look at the regional economic differences in Australia in its latest monthly Bulletin. The paper is a public service that will educate the ignorant who stumble across it. It points out we are a big economy with some, but not major regional variations.

The Governor’s speech last night made a useful rebuttal to the notion that budgets can affect interest rates. He doesn’t believe they do, but he does believe that tight fiscal policy and big surpluses give Australia the “capacity to respond, if need be, to developments in the future”.

He said “there would be very few countries, if any, which would not envy Australia’s fiscal position” and that this is a function of the long years of reforms carried out by the Hawke Keating Governments and by the Howard Government (up until about five years ago that is)

To help educate Messrs Nelson and Turnbull, plus their economic advisers on the Daily Telegraph , including Malcolm Farr, Mr Stevens pointed out that inflation targeting was the best system yet to keep prices down.

“Inflation targeting is not perfect and, on occasion, still leaves policy makers with some quite difficult decisions to make,” he said. “It is, however, the best system that has been devised as yet.”

Mr Stevens said Australia’s price pressure problems now were not as bad as in the 1970s, not “even with the recent surge in consumer prices taking the inflation rate to a bit over four per cent.” It’s something the Opposition should remember when next making a major economic speech.

There are better ways to attack the Rudd Government: the way the Labor states are rolling over on wages; the capacity for a slush fund to be established in these three new infrastructure funds, and a promise to vet every appointment to these multi-billion dollar monsters to stop Labor mates from clambering onto the gravy train, especially from the ambitious industry super fund gangs in Melbourne where there are a lot of carpetbaggers eager to board it.

But the pair of them should thank geology and chance for not giving Australia the same set of circumstances as New Zealand and Britain, where economies really are rushing towards the 1970s.

Peter Fray

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