It’s been a rough week at the office for Joe Hockey.
The shadow Treasurer has grown in stature this year, as apparently one of the few senior figures in the Coalition to understand the magnitude of the task the opposition has set itself in promising personal tax cuts while repealing two significant taxes but keeping many of the associated spending initiatives. Once ridiculed as a buffoon by business, he increasingly looks like the hope for commonsense and discipline in a government led by the economically irrational Tony Abbott and the lunatic from St George who’ll likely be deputy prime minister.
This week, like many commentators and analysts, he’s been caught out by two contradictory pieces of economic news that are both good for the government, a product of our weird economy, which is apparently going gangbusters but that needs some monetary stimulus.
On Tuesday afternoon he had to deal with the problem that an interest rate cut is, at last in the media playbook, an unalloyed good. How to spin it? Well it wasn’t too hard — the cut was evidence of a weak economy, ideal for the Coalition line du jour, that now isn’t the time to introduce a carbon tax.
Alas, Hockey was (inexplicably) joined at that press conference by Abbott, which reduced the average economic IQ of the room by 20 points. Abbott proceeded to lay out his understanding of the rate cut. Abbott thought the RBA had cut rates because “economic conditions are soft. The stock market is down. Profits are weak. Retail sales are weak. The property market is down.” Glenn Stevens’ statement that the bank had cut rates because of “modest” domestic growth, a weakening international environment and low inflation was politely ignored.
Amid some less-than-robust questioning from journalists — one asked Abbott a question based on what his cab driver had said on the way over — Abbott went on to suggest the government was making things worse, and therefore increasing the justification for an interest rate cut, with its “carbon tax, with its mining tax, with its failure to address productivity issues in our economy and with the monumental increase in red tape”. By that logic, the more red tape there is, the more the RBA will cut interest rates. The Coalition’s plan to “slash” red tape (red tape is always “slashed”) therefore looms as a key source of upward pressure on interest rates.
With each word about the weak economy — which was Labor’s fault — Abbott was unknowingly making life more and more difficult for his shadow Treasurer, who yesterday had to come out and “welcome” — the sort of welcome you give your in-laws arriving to stay for a week — a strong GDP result.
There was a way out for Hockey — he could have said the GDP number was for the start of the year and the RBA was evidently concerned about a weak economy over the next 12-18 months. Or he could have run the line offered by a desperate Daily Telegraph today, pretending the restructuring going on in the retail sector is reflective of a “real” economy that is weak. But instead he appeared shellshocked, repeating “extraordinary” eight times. “The numbers are the numbers” he said at one point. “I totally accept that the numbers are the numbers.”
When he resorted to saying “imagine how well our country could do if we had a good government”, you had to have some sympathy for the bloke. We can’t imagine, Joe, because pretty much it doesn’t get any better than this in the developed world — a strong economy with no inflation, low unemployment and falling interest rates. And we’ll politely overlook that a weak economy was Wayne Swan’s fault on Tuesday but a strong economy had been achieved despite Swan on Wednesday.
And the entire rationale from Tuesday — that it was a weak economy that couldn’t take a carbon tax — had vanished. This is the particularly problematic aspect for the Coalition, since this is a key element of its current attack on the carbon price, along with cost of living issues.
Things didn’t improve this morning. Unemployment figures showed a rise back to 5.1%, but the best sort of rise, one driven by a big lift in our participation rate, which has been the one black spot on the government’s employment record. Nearly 40,000 jobs were created in May, but they just weren’t enough to soak up all the job seekers who’d re-entered the employment market.
Joe’s week from hell just got longer.
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