Mr Banker

The Rudd Government may soon need to reveal that the last government left the country in a pretty bad way. Now, which promise was ‘non-core’?…


Banker of Last Retort

No doubt inspired by this blog last year in which I bravely predicted that there either would or wouldn’t be a recession in 2008, my charming editor and visionary publisher have asked for some more predictions for the new year.

Intrigued by a press conference in which Treasurer Swan explained that inflationary pressures might lead to inflationary pressures, I obtained a copy of his speech to the Australian Industry Group in December. On a careful reading I came to the (probably reassuring) conclusion that the Treasurer was not exploring existentialist economics but had been misquoted – albeit by himself.

If we strip the platitudes and motherhood statements we can reduce the 3500 word speech to read as follows:

  • “Inflation is a major threat to sustained Australian prosperity.” [Hooray – he gets it]
  • “The tax plan will also encourage many people… to work more hours.” [Hmm – the tax cuts stay]
  • “Our child care policies will… boost workforce participation.” [The expensive childcare program stays]
  • “We need to act on a long term plan for national infrastructure.” [Uh-oh. Infrastructure is very expensive, will further stimulate the most over-heated regional economies, and takes so long to build that the bubble will probably burst before the projects are finished]
  • “…investments in education and health… will boost productivity and participation…” [Very expensive]

Since then, Prime Minister Rudd announced that the Government will target wasteful expenditure. Of course this is much better than the alternative, but it is easier said than done and one hopes that that insight does not demonstrate our leader at his most visionary.

Striding purposefully to implement the new cut-wasteful-expenditure initiative, the Government announced that the DFAT budget would be reduced by $60 million. Well, $60 million is significant sum if deposited to my bank account, but it is the metaphorical change from the back of the DFAT sofa. Other department heads must be chortling that the Government took the offer seriously and are no doubt formulating offers involving paperclips, two-for-one Pizza Hut vouchers and a half packet of Juicy Fruit.

Speculating wildly, one guesses that the recent well-publicised meeting between the Reserve Bank, Prime Minister Rudd and Treasurer Swan involved Glenn Stevens explaining that the Reserve Bank truly was independent and that if the Government kept all of its increased spending and lower tax promises there would be another four or five interest rate increases – this year.

Presumably chastened by the prospect of leading a one-term government, Prime Minister Rudd has announcing that the Government has targeted spending cuts of $8 billion. Hopefully Messrs Rudd and Swan are now addressing serious questions such as:

  1. Just how big does Centrelink need to be when everyone who wants a job has one?
  2. How much immigration is necessary to ease labour shortages?
  3. Why are our health policies predicated on ensuring that GPs can always afford this year’s Mercedes?
  4. Which of our election promises are non-core?”

Questions 1 to 3 will prove politically difficult, so my next brave prediction is this: The Government will announce that after a careful review it has surprisingly discovered that the last government has actually left things in a pretty bad way, and it has no alternative but to break some of its election promises.


To read more Mr Banker blogs, click here.



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