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Does good economics mean bad politics?

Peter Switzer
7 December 2009

The Yanks and President Obama got some great news on the jobless front last Friday while our Prime Minister Kevin Rudd will be hoping he comes home from Copenhagen with a Christmas climate change gift. This might be easier said than done with Tony Abbott looming as a festive season Grinch.

The old cliché

There’s an old cliché in the political game which goes “good economics is bad politics and good politics is bad economics” and that can be applied to so many policies in so many countries.

Obama in the US is copping it right now because his US$787 billion stimulus has not created the promised jobs yet. Locally, Prime Minister Rudd is now feeling the heat of a new Opposition leader who is playing hardball politics — no ETS for Tony Abbott who says Labor’s ETS is nothing more than a tax!

Which is which

The old line “good economics is bad politics and good politics is bad economics” remains relevant, but which is which?

Is stimulus spending by concerned governments better than the markets sorting out the mess by itself? Is the ETS intervention another overreaction by vote-chasing politicians? Is it good economics or good politics?

Sure the ETS is couched in the belief that it is what’s needed for our children’s children and so that’s a social and philosophical issue, but it has very real economic implications. If we ignore manmade climate change, if it exists, then we bare a low economic cost. However, future generations will bear a much higher cost when houses fall into the sea, skin cancer escalates, and natural disasters bordering on an unnatural kind come to dominate a future Australia.

Carbon tax

To turn the debate, the anti-Turnbull forces in the Coalition have jumped on the Alan Jones as well as other right-wing radio and other media personalities bandwagon, who have been calling the ETS nothing more than a carbon tax.

The National’s Barnaby Joyce was one of the first politicians to hitch the horses to this cart being a climate change sceptic for ages. Barnaby was helped in the stable by Wilson “Ironbar” Tuckey, whose support did nothing for the cause.

The problem for the climate change supporters has been some revelations that the climate has been actually cooling for nearly the past decade and some scientists haven’t been completely forthcoming about their findings.

This doesn’t pour water on the whole climate change argument — to go for a relevant pun — but it has raised question marks over the science. Now Rudd and his team are going to have to explain why climate change is real and why his policies are good economics.

The Christmas gift

This is why Copenhagen, which will hog the headlines over the next two weeks, is going to be big news, big economics and big politics.

What the world decides about climate change and the need for a global ETS will either be a Christmas gift for Kevin Rudd or for Tony Abbott. Of course, big Tony has already been given a great pre-Chrissie present in being made leader of the Opposition and it will make for some provocative political punch ups next year — an election year.

November jobs

Over in the States on Friday, Obama got some good news and so did the global economy. The latest jobs report showed the unemployment rate had dipped in November to 10 percent from 10.2 percent. And better still the speed of job losses dropped to 11,000 from 111,000 in October!

Clearly, Obama will have a better than expected festive season with this gift from the improving US economy but Kevin Rudd’s present buying is all ahead of them.

One thing is for sure, he will be hoping that he will be singing “Wonderful, Wonderful Copenhagen” while he wings his way back to Australia before Christmas, because if he’s not, he will have to deal with Tony “Bad Santa” Abbott. 

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.


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