Opposition leader Malcolm Turnbull is taking a stand of sorts, but in reality is just being politically expedient.
No politician is brave – or foolish – enough in the current climate to promise a definitive way out of the economic crisis which has engulfed the world.
There are no easy solutions for any national government caught in the credit crunch and collapsing asset values.
The only genuine promise which can be made is to attempt to do something similar to that being attempted by other countries.
Doing nothing is political suicide.
Kevin Rudd’s decision to “do something” that was bold, big and popular has won him accolades from most of the political commentariat and from many voters.
The majority of Reserve Bank and Treasury economists, private bankers and business leaders are urging those in power to pursue a strategy of easy monetary policy (the slashing of interest rates) and spending more taxpayers’ money to stimulate the economy, even if this means going deep into debt to do so.
The federal Opposition, during a recent party-room meeting, decided in a rush of blood to oppose Mr Rudd’s $42 billion package.
The Coalition is gambling that the immediate political backlash of voters being denied payments of up to several thousand dollars per family will eventually be overtaken by events as the stimulus package fails to achieve its desired result.
A large slab of the voting public, if opinion polls are any guide, also appear to remain sceptical or concerned about the consequences of wiping out the surplus and diving $22 billion into debt in one hit.
Former Treasurer Peter Costello, now a mere backbencher, albeit an influential one, is said to have helped steel the resolve of Opposition MPs to take a stand over the package.
Queensland Nationals Senator Barnaby Joyce, who is assuming a greater leadership profile among conservative regional MPs of both a National and Liberal persuasion, also played a role.
Senator Joyce has warned that the Rudd package is merely staving off the inevitable day of reckoning and was scathing of the offer of $4 billion worth of free pink “batts” to insulate every Australian home.
Opposition leader Malcolm Turnbull also argues that the stimulus is a “sugar hit” for the economy, one that may prove effective in the short-term, but ineffectual over the long term.
Mr Turnbull says the better alternative to hand-outs would have been tax cuts, spreading the benefits over a longer period of time and over a broader cross-section of the economy.
Yet most economists have pointed out that there is negligible difference between the alternative proposals and that tax cuts are most likely to benefit the wealthy who would be more likely to save than spend them.
What Mr Turnbull is failing to say is that the situation is so bad that, without an economic stimulus, Australia will suffer an immediate shock to the system which will worsen the situation.
We have become totally dependent on foreign debt and expanding credit.
Doing nothing in the current climate would mean retail spending drying up, unemployment rising very sharply, and bank foreclosures being enforced, leading to declines in property values.
Turning off the spending tap would feed into a downward spiral of no confidence and further cutbacks in spending.
Respected economist Saul Eslake, attending the Senate inquiry into the package as a private citizen, rather than as the ANZ Bank’s chief economist, warned that the $42 billion could lead to higher interest rates further down the track.
Mr Eslake also warned that governments were no longer blessed with rich assets which could be privatised to pay off the debt quickly.
“It may well be that servicing or repaying the debt incurred now will ultimately require higher taxes,” he said.
“That would be… regrettable, but it may also reflect the fact that the tax cuts implemented in the middle years of this decade were only sustainable to the extent that the commodities boom which largely paid for them continued (which it hasn’t).”
Nevertheless, Mr Eslake said that going into debt now was the only realistic course for governments to follow in the short term.
“I would also argue that a modest increase in debt now and (if necessary) taxes later is preferable to much larger increases in debt and taxes (to say nothing of other policies that could be characterised as frankly, bad) which might eventually prove unavoidable if the economic downturn were to become much worse as a result of policy inertia.”
Mr Turnbull has taken a stand of sorts, but in reality is just being politically expedient.
If he really wanted to show leadership he would concede that Australia should finally take stock of its indebtedness to the world and begin to find alternative sources of wealth to being a farm and a quarry subject to the vagaries of commodity prices, a tourist destination and a nation of imprudent property speculators.