By now it’s becoming clear that the Prime Minister and the Treasurer are having a better financial crisis than the Opposition.

Rudd and Swan are playing a conservative, percentage game. Deferring to the regulators, avoiding populism, calmly emphasising the strength of the economy and the financial sector. Even if the stability of the Australian economy is nothing much to do with them, they’ll benefit from the impression that we’re on top of things while the rest of the world goes to hell in a financially-innovative but heavily-leveraged handcart.

The only choice for Turnbull and Bishop — who still doesn’t look convincing in the job — is to fall into line or quibble round the edges. The debate over how much of the interest rate cut banks pass on will provide some easy points, but they’ll be cancelled out if — and likely when — the banks pass on falling costs outside the RBA cycle. You can bet Wayne Swan will be in their faces about that until they do.

But the stability of the Australian economy does have a bit to do with Rudd and Swan.

The big debate in the lead-up to the Budget was how much the government should slash spending. To be fair, it was initiated by the Government itself, with Rudd talking about meat axes, Lindsay Tanner decrying waste and Swan talking about the need to curb the profligacy of the Howard-Costello years. Rugged small government types (like me) were demanding real reductions in outlays. Access Economics was calling for a fiscal bloodbath, with Chris Richardson claiming every $3b equating to a 0.25 interest rate cut. Others thought the tax cuts were the height of irresponsibility and that the government should accept whatever political pain was necessary to ditch them.

Swan kept the tax cuts and reduced outlays, but they still grew in real terms at 1.1%. When challenged on why he had not lived up to the meat axe rhetoric in his Budget press conference, he said “if we’d cut them any further, we’d have run the economy into a wall.” Malcolm Turnbull, wrong-footed, had to inelegantly change his rhetoric about the Budget and was caught out.

It turns out Swan and Rudd had done their job well. They’d consulted in detail with Australian and overseas regulators and economists about what was going to happen across the global economy. While most of us were worrying about the economy growing too fast, they were worrying about a global recession.

Turns out they were right, and their good judgement about the Budget — simultaneously increasing the surplus significantly while not slashing and burning outlays — is now standing us in good stead. Some recognition, then, is due to Wayne Swan. There’s a constant complaint about this government doing nothing and being obsessed with spin. Well, Swan avoided both pitfalls with the Budget.

As Laurie Oakes noted, the crisis has also cleared up the Prime Minister’s rhetoric. His speech to the Federal Labor Business Forum last Friday was a clear, engaging analysis of the origins of the crisis and what should be done to address the systemic faults behind it when the emergency has passed. The Australian wisely reprinted excerpts from it today. Rudd’s wonkish persona, which was starting to look like a liability when dealing with bread-and-butter issues like groceries and petrol, suddenly seems to be just what is required while the rest of the world panics about bank failures and credit crises.

Peter Fray

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