Sunday, October 10, 2004

Election News: Howard Trumps In

There were grim faces among most of my Australian work mates: John Howard gets his fourth election victory. Most, I said. "S", a woman close to my mother's age was quite happy about it, but as she admits, she's from rural W.A. Most of the others tend to be younger and loathe Howard instinctively. But the real reason that Howard won was economics, rather than "values" or "mores": a nice economic climate makes you stick with The Devil You Know. Iraq got hardly a mention. Instead, the punters think that Howard (and by extension, the Liberals) are better economic managers than the Latham Labor crowd.

But are they right? Troppo Armadillo thinks not:

The irony is that Howard's reputation as a good economic manager is at the very least dubious and extremely vulnerable to attack.

Apart from the GST and initial "first wave" IR policies, Howard has tackled little in the way of meaningful economic reform during his 8 years in power, contenting himself with piggybacking on the economic reform hard yards previously gained by Hawke and Keating. He's allowed dangerously high private debt levels and a distorting housing "price bubble" to develop; done nothing to prevent manufacturing industry from stagnating; and failed to foster education, training, industry R & D or capital investment, or productive public infrastructure (except the Darwin-Alice Springs railway). Meanwhile, Howard spent up big during the election campaign on an orgy of cynical, wasteful, economically stupid pork-barrelling promises.

The problem is that people with mortgages can live with high debt levels if the interest rates are low. Interest rates go up, and the credit cards are going to be seriously burnt. As John Quiggin points out:

As for the Liberals, they'll have an interesting time of it, I think. They've made expensive promises, which will be hard to keep and costly to repudiate. And their credibility is now completely tied to low interest rates, something over which they have no real control.

I expect a backlash against the Coalition if this happens. Then again, I expected a slight Labor victory, so what would I know?

I heard that George W. Bush rang Howard to support him. I guess that Howard will return the favour and ring Dubya. However, I wonder if Howard is secretly praying for a John Kerry victory. If Bush wins again, expect large increases in government deficit and private debt over the next four years to bite the U.S on the ass. We would probably see a nasty recession flowing from the U.S. to Australia - Howard's greatest fear. Kerry may not do better than Bush, but he cannot do worse.