Big spending promises as Australia's election campaign kicks off
The traditional bit of the magic show is when the magician pulls a rabbit out of the hat. And John Howard kicked off Australia's national election with his version of a big surprise - pulling a billion dollar bunny out of the budget pot.

If re-elected, the Howard Government says it will deliver income tax cuts worth $AUD34 billion over the next three years. And over five years, changes in the tax regime, so 98 percent of Australians would pay no more tax than 35 cents in the dollar tax.

The big bang on the first full day of the campaign was the act of a government trailing disastrously in the polls. The Labor opposition thought about the opening bid all week, and on Friday replied - essentially - we'll match most of the tax cuts promised, and by the way we'll give Australians a tax rebate to buy a computer. So from Labor, tax cuts and a computer.

The spending promises come courtesy of an extraordinary stream of tax revenue courtesy of a booming economy - an economy zooming so well that Treasury keeps under-estimating its strength.

Fresh figures issued last week show that that in the financial year to next June, the Australian economy should grow by 4.5 per cent - that is a half a percentage point higher than Treasury predicted back in May.

The United States economy may be stuttering, but China's demand for Australian minerals and energy means that Treasury is confident Australia's broad-based growth will continue.

Part of the Howard government's problem is that perhaps the voters no longer see the government as being responsible for much of those good times.

The reforms that have seen Australia's economy enjoy its longest ever period of unbroken growth have been under way for more than 20 years - dating back to the floating of the Australian dollar in 1983, when Canberra stopped setting the currency value, and left it to the market.

That is why Australia pops up as something of a showcase economy in the memoir just published by the king of central bankers, Alan Greenspan. The long time head of the US Federal Reserve writes that Australia is an interesting example of an ossified economy opening up to the outside world, embarking on significant but painful reforms.

Greenspan points to the actions of the Hawke Labor government in the 1980s - reforming the labour market and cutting tariffs. As you'd expect from a central banker, he praises the Howard government for one of its first actions - giving full independence to the Reserve Bank of Australia. That means the Reserve, not the Howard government, sets interest rates.

Alan Greenspan writes of Australia as a "vibrant market economy" and expresses his fascination with Australia as a microcosm of many of the issues that confront the United States.

Praise indeed, but the Greenspan account of two decades of change in Australia, also hints at one of the problems confronting the Howard government in the election. Australians may be starting to take the good times as merely the proper repayment for years of reform, led by both sides of politics.

Certainly, Australians have come to expect tax cuts - they've been offered fresh tax cuts annually for the last five years. Are the voters ready to thank John Howard again - as he reaches for election victory number five - or will they throw him out, expecting the vibrant economy to keep on vibrating, no matter who is in power?

< back