Mungo MacCallum- Political Corrections

Sharpening his pencil for first test

And now for the good news.

Having spent the last few months warning us of the blood and toil, tears and sweat which lay ahead of us as he strove to repair the economic profligacy of his predecessors, Treasurer Wayne Swan now informs us that the budget will actually leave us all better off.

Admittedly some will be better off than others: working mothers stand to collect an extra $6000 a year each, what with tax cuts and child care payments. But even childless unemployed males will not suffer unduly. Kevinism will certainly involve some austerity, but it will be tempered with moments of generosity. Firm but fair.

This at least is the message Swan is rather belatedly trying to send, and not just to the punters. There is an increasing feeling among social and economic commentators that the blunt weapon of interest rates, the only one the Reserve Bank has in its arsenal, might be just a bit too blunt to handle the increasingly complex situation which is developing in the Australian economy.

As the United States, representing more than a quarter of the worlds economic production, gets crooker by the day (restrictions on the sale of rice, for heavens sake food rationing in the richest country in human history!) there are fears that the infection must spread. Australia has at least partial protection through the commodities boom and trade with China, but it would be nave to think we can escape unscathed. A few wrong calls could easily push us into a recession one which we dont have, according to most of the experts.

On the other hand, the Reserve Bank is confronted with undeniable evidence of inflation well out of its comfort zone and apparently still on the rise. Under normal circumstances it would be very strongly inclined to raise interest rates again next week. What Swan and the commentators are now trying to do is to convince the bank that these are not normal circumstances: that there are other constraints on economic activity emerging which will bring things under control and the bank should hold off for another month.

Or perhaps even that, for the moment at least, we can live with a slightly higher rate of inflation (Blasphemy! Sacrilege!) because the only available cure of slamming the brakes on would actually produce results worse than the disease.

Swans first budget is turning into a serious ordeal; what the self-appointed gurus in the Murdoch press will undoubtedly label a Major Test. It is probably too much to hope that it will be popular; too many interest groups are going to suffer cuts for that. But if it is accepted as responsible by the people who matter, that will do for the time being. The contrast with the Howard years, and the inaction of pusillanimous Peter Costello (who now turns out to be too lazy even to write his own memoirs) will be more than enough.

Meanwhile we have had a taste of the kind of social policy we can expect under Kevinism: the tax on pre-mixed alcoholic drinks has been raised to bring it in line with the tax on spirits.

The aim, we are told, is not to raise money (and admittedly Canberra hardly needs the extra $2 billion) but to discourage binge drinking among the young. Well, it might; an extra $1.30 per pop has got to have some effect. But it also begs the question: if we really believe that the so-called alcopops are causing serious health and social problems, why not ban them altogether?

There is no real doubt that alcopops are a marketing ploy designed to lure teenagers and young adults into making a seamless transition between soft drinks and alcohol: they look and taste like the sweet, soft stuff while packing the kick of a double whisky. They would be no loss: those attracted to the style could mix their own, thus realising what they were really getting, and the rest of us would not be affected.

But to ban them would raise cries of nanny state, wowser, denier of choice; it is apparently politically preferable to make consumers pay more for them, thus discriminating against the poor (who will either give them up or spend more than they can afford) while having no real impact on the rich.

Predictably the move has led to demands for a similar rise in tobacco excise: the same arguments apply. There is no real doubt that the overall decrease in smoking has been caused not by increased cost but by turning smokers into social pariahs.

To do the same for consumers of a particular kind of drink would be more difficult, and of course any government which tried it with drinking as a whole would not survive 20 minutes. A simple ban on alcopops (as applies to confectionery cigarettes, a similar marketing gimmick) remains the best idea.

The announcement that the Chinese government has agreed to talk with representatives of the Dalai Lama should be treated with some caution; similar talks in the past have led nowhere and there is an obvious suspicion that the present move has more to do with taking the heat off the Beijing Olympics than with any real concessions on Tibetan autonomy.

Nonetheless any movement in that direction has to be good news, and the pro-Tibetan campaigners on every level deserve congratulations. These of course include our own Kevin Rudd, whose forthright comments in both English and Mandarin, inside and outside China, undoubtedly contributed. In politics as in sport, when youre hot youre hot, and when youre not, youre well, hello Brendan.

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