A respected business figure rang this morning and opened the conversation with the following prediction: “put a note in your diary for yesterday that says ‘one term wonder'”.

Kevin Rudd is certainly imperilling his government by embarking on an extraordinarily reckless policy prescription which appears to be motivated by the base political considerations of wedging Malcolm Turnbull.

At a time when we need to encourage confidence and project financial strength to the world’s lenders, the PM is out there terrifying the horses with completely over the top rhetoric and spending binges that imperil our AAA credit rating.

Here is little Australia with its $1 trillion foreign debt, hugely indebted households and an enormous current account deficit suddenly surrendering its greatest strength — a relatively small but strong federal balance sheet.

Sign up for a FREE 21-day trial and get Crikey straight to your inbox

By submitting this form you are agreeing to Crikey's Terms and Conditions.

What is equally remarkable is that normally sensible economic commentators like Fairfax’s Ross Gittins are still pedalling the line that we have “completely eliminated the federal government’s debt”.

The Rudd Government inherited about $50 billion in outstanding debts and in May last year Wayne Swan announced this would be increased by $25billion over the next few years. This expansion to the balance sheet was fine because the budget remained strongly in surplus.

However, to suddenly reveal the Feds will be producing deficits of $22billion and $35billion in the current and next financial years respectively, is an almighty shock that was largely avoidable.

By all means try to encourage infrastructure investment but this year’s $22 billion deficit is entirely caused by the $10 billion December welfare hand out and the $12 billion splash proposed for next month.

This money-for-nothing approach is precisely what got the world into this mess in the first place.

Welfare spending was already budgeted to be $103 billion in 2008-09 and will now top $130 billion. The Rudd Government should be trimming the crazy middle class welfare of the Howard years, not building on it.

So, will the credit constrained world lend us the money?

The latest $400 million Federal bond issues was announced on January 21 and it was a success with investors lending 12 year debt at just 4.06% a year.

The Australian Office of Financial Management revealed the scary new borrowing program last night:

“Over the remainder of the current financial year (that is, to end-June 2009), two Treasury Bond tenders will be held most weeks (generally on a Wednesday and a Friday) with the amount offered at each tender normally in the range of $500 million to $700 million.”

How on earth can the government start borrowing more than $1billion a week from private investors when it doesn’t yet have the legislative authority to do it?

Malcolm Turnbull is absolutely right to oppose this spending spree because the end game of what Rudd hysterically calls an “unfolding national and international economic emergency” is that sovereign states will default or need a bailout from the IMF.

We need a detailed analysis of the Federal fiscal position before Labor should be given any authority to spend another dollar, let alone $42billion.

Today’s press should have been all about interest rates hitting record lows and households saving $10billion a year servicing their $1trillion debt. Instead, we just got unnecessary political conflict, frightening headlines and a huge foreign borrowing challenge.

Peter Costello completely nailed the PM in The Age today pointing out the sheer hypocrisy of the self-styled fiscal conservative turning into an unreconstructed Whitlamite.

Come back Peter, all is forgiven.