MALCOLM Turnbull has managed an impressive trifecta today, getting boxed around the ears by not just Wayne Swan, but also Treasury secretary Ken Henry and Reserve Bank governor Glenn Stevens.
The first bloke, Swan, has not proved an overly strong match to date for Turnbull’s intelligence, drive and burning ambition.
The second and third players, Henry and Stevens, may prove more difficult to rumble. And that’s good news for Swan, who is still finding his feet as Treasurer and now has some powerful ammunition to tackle his opponent’s claimed economic credentials.
For Henry and Stevens, today was the day they decided to hold a little Economics 101 tutorial for Turnbull, without naming him, whether he likes it or not.
First up, Turnbull was pulled into line over his repeated claims in parliament that cabinet ignored Treasury advice to nominate a specific increase to the minimum wage in its submission to the Fair Pay Commission.
“Everyone in Canberra knows the Treasury made a recommendation,’’ Turnbull sad.
“It was $18 a week, which was lower than the ACTU’s recommendation although higher than the business groups had recommended. And Kevin Rudd doesn’t have the compassion, he doesn’t have the courage, he doesn’t have the integrity to make any recommendation to the Fair Pay Commission.”
No, said Treasury boss Henry, in an unusual break with keeping his public silence on such issues.
``I refer to recent claims that the Treasury recommended to the Government that it nominate a specific dollar figure in the Government’s submission to the Australian Fair Pay Commission (AFPC) on minimum wages,’’ Henry said in a statement.
``These claims are false.
``Rather, the Treasury recommended that the Australian government submission to the AFPC support an increase in minimum wages without recommending a specific quantum of minimum wage increase.’’
Earlier, someone had helpfully released selected excerpts of the Treasury advice, repudiating Turnbull’s claims about the cabinet submission on the minimum wage increase to Sky News.
Turnbull argued that if the Government wanted to argue the case, it should release the advice in full.
But the fun wasn’t over for the day, with Reserve Bank governor Stevens also releasing a copy of a speech he made on Wednesday that tackles head-on Turnbull’s claims – and others – that the inflation problem isn’t that much of a problem and that interest rates could be the wrong tool alone to tackle the problem.
“One argument which has been around is that there isn’t much inflation,’’ he said.
“On the face of it, this is not an unreasonable starting point. The latest CPI headline rate is, after all, only 3 per cent. If that is as high as it gets and it comes down at some point before long, then presumably there is not that much of a problem. It would, in fact, be quite consistent with the inflation targeting framework we have been operating on for well over a decade now. The average inflation rate over a run of years would still be ‘two point something’.
“Unfortunately, the situation at present is not quite as benign as that. The headline figure owes quite a bit to the unusually low result in the March quarter of 2007, which was affected by some unusual and temporary effects. When we get the March 2008 figures towards the end of April, we will most likely find that the rise over the four quarters is more like 4 per cent.
“So accepting a rise in trend inflation because of the short term moderation in demand growth needed to contain a pick up in prices would be a very short sighted policy. It would very likely condemn us to a repeat of the problems of the late 1960s and 1970s, when we mistakenly thought we could live with a bit more inflation, and all the attendant difficulty we had in the 1980s in fixing the inflation problem, all over again. It is far better to resist rising inflation now.”
Turnbull is a big player, with big ideas, who has a big future in politics. But there are some other big boys in the economic sandpit, and today two of them – Henry and Stevens – taught him a lesson.
Over to you…
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