Inflation is well above the Reserve Bank’s
target range. There are fears the Bank will up interest rates when it meets
next week. What does it mean politically?

John Howard has “built his entire career as
Prime Minister on voters trusting his ability to deliver prosperity,” Louise
Dodson says in The SMH today.
“That trust is now in jeopardy after the worst inflation figures of his reign
and fears that interest rates could rise a third time since the 2004 election.”

“Australia’s affluent economy has entered
its most troubling phase since the implementation of the GST in the second half
of 2000, when the Reserve Bank was still jacking up interest rates as the real
economy was shrinking,” George Megalogenis says in The Australian.

Yet that self-same economy is dealing with
affluence pretty well, due to the economic reforms of the last 20 years. A
wages breakout, for example, is unlikely under WorkChoices. And while things may get hairy for the
Government – more interest rate rises – the Government and particularly the
Prime Minister may not necessarily lose out.

Peter Costello will be in the front line,
but sitting above it all will be the reassuring figure of the Prime Minister.

All the focus from the 2004 poll onwards has been on the “Who do
you trust to keep interest rates low?” line. The grab that proceeded it
– “Who do you
trust to keep the economy strong and protect family living standards?”
– can
apply in good times and bad.

And the answer isn’t likely to be “Treasurer
Wayne Swan”.