Right Pulse

Some background. Prior to the last election Rudd claimed to be an economic conservative, even committing to keeping the budget in surplus and not raising taxes. I’ve previously linked to supporting quotes, even a cursory google search will bring up sufficient detail to satisfy readers. Rudd comes into power, forecasting a massive budget surplus by putting a hold on all new non-election spending proposals in the name of controlling inflation; doing so at the very time the world economy started to collapse. Rudd then back tracks in the space of 3 month and by October 2008 begins the first installment of his cash-o-rama, which by April/May 2009 reaches a whopping $130 billion in new unfunded spending proposals. This will send  Federal debt to over $300 billion and total new contingent liabilities of around $1.5 trillion (not including the $26 billion in liabilities that would have been incurred if Ruddbank had been approved by the Senate). Deputy PM Gillard on her recent trip to the USA even sought credit for following the at-arms ‘progressive’ governments of Brown and Obama in spending up big. The up shot being that the International Bank of Settlements has estimated that Rudd’s cash-o-rama to be the third biggest in the world, even though Australia has not suffered a sub-prime mortgage or housing meltdown, and even though our financial system is the best in the world, with half of all the world’s most highly credit rated banks being Australian. In otherwords, where is the market failure to justify such spending?

Even now the state of the budget deficit remains pure guess work on the part of Treasury, along with the government’s claims that the budget will return to surplus in 6 to 7 years on the back of hoped for record economic growth. An unlikely scenario. This is what was reported in May 2009:

TREASURER Wayne Swan has been unable to say when the Budget will return to surplus, refusing to confirm figures from government sources that Australians would see a balanced budget in 2015-16.

As of yet, no strategy has been laid out to return the budget to surplus. Meanwhile on the other side of the world, German Chancellor Angela Merkel has adopted a very different approach. Back in 2008 it was reported by the London Times:

Germany would not “take part in a competition to outdo one another with an endless list of new proposals”…Nor would she “participate in this senseless race for billions”, she said, exhorting her party to “have the courage to swim against the tide” – a left hook at the Brown jawbone. She has been blunt that America’s orgiastic resort to cheap money and wholesale bailouts could recreate the conditions that led to the current mess, and is likely to look on Barack Obama’s extra spending dry-eyed.

Her position has been the exact opposite of Rudd’s. So at this point you are probably saying, ‘yes, and?’ Well, Rudd is in Germany to meet Merkel and guess what he is now saying about deficit spending:

WORLD leaders needed an exit strategy from the unprecedented spending and government intervention they resorted to during the global economic crisis and should use the G20 to co-ordinate it, Kevin Rudd said last night.

Oh really? Just Rudd spinning it to try and please Merkel. No doubt the message will change when he gets home. It is a tacit admission that Rudd does not have an exit strategy for his own government’s spending habit. And why the G20 should have any role in controlling Federal government spending is beyond belief. Sounds like Rudd outsourcing fiscal management and responsiblity to the G20, just as he tried last year to out source general economic management to the IMF when he realised he’d messed up his fiscal strategy as the world economy started to shrink. Another case of Rudd trying to be all things to all people to cover his own incompetence.

UPDATE I

Rudd’s two faced antics have not gone unnoticed in the press, The Australian:

JUST as Kevin Rudd’s self-proclaimed “fiscal conservative” status was fading into a figment of the past, Kevin Rudd has taken an international lead in constructive, rational economic policy discussion. Reminding world leaders in Berlin that nations need an exit strategy from the spending spree and government intervention precipitated by the global financial crisis, the Prime Minister focused on the post-crisis challenges.

Someone should remind Rudd of his own new found advice. But like I wrote yesterday, when Rudd gets home he will no longer play for the role of the appeasing statesman, and the drive for a surplus budget will be lost in transit.