Liberal — even neoliberal (whatever that is) economic policies are correct, and have been followed by Labor and Liberal governments in Australia for 30 years.
This is the message of one of Australia’s finest economists, Professor Ross Garnaut, in his new book about the Great Crash of 2008.
The Australian’s Michael Stutchbury reports Garnaut as saying Kevin Rudd’s attacks on neoliberalism “risk an expansion of government that could damage the economy and even erode Australia’s democratic values”.
By further fuelling excess spending, the Rudd government’s budget stimulus ‘will have to be followed by “hard times” and lower living standards that the government has ‘barely begun to contemplate’.”
This is powerful stuff, whose main message is sharply underlined by yesterday’s unexpected (to most) increase in jobs and marginal decline in the “official” rate of unemployment.
This increase may be misleading (as ABS employment data is famously dodgy) but the far more reliable jobs data compiled by Roy Morgan and released last week foreshadowed the ABS result. If taken seriously, the Roy Morgan data would have made a brave bond trader as big a fortune as his courage would have allowed. But I digress.
The apparent surge in jobs was also foreshadowed by the two months of sharp increases in job ads, and there are several other important bits of data pointing to the same conclusion – the resilience of Australia’s housing market, the rebound in retail sales and the upward revision of investment intentions.
The good jobs data (following the RBA’s rate increase) caused stock prices to surge yesterday. Wall Street rose again overnight and today should see new asset inflation here.
It is looking increasingly likely that the neoliberal (whatever that is) paradise that is Australia’s economy is powering through the Great Crash with hardly a lost beat.
Lots of egg on lots of faces, of course. Treasury’s prediction of a peak rate of unemployment of 8.5 % is looking a bit sick, as is its enthusiastic support of massive fiscal stimulus. “Seriously misguided” Dr Henry?
This should be music to Malcolm Turnbull’s ears since, after a slow start, he has banged on about excess stimulus and wasted spending. But Rudd is massively ahead on the issue of best economic manager.
The economic strength supports Henry’s call for bold 50 basis point interest rate hikes as recovery builds, starting on the day next month when the Melbourne Cup is contested.
And the strength of Australia’s economy will be worrying Glenn Stevens, who may be honest enough to ask himself if he is again moving too little, too late in removing the punchbowl of emergency low interest rates.