FED:Gillard escaped rate rise horror

AAP General News (Australia)
08-20-2010
FED:Gillard escaped rate rise horror

By Stephen Johnson

CANBERRA, Aug 20 AAP - Labor may be struggling in the opinion polls, but at least Julia
Gillard escaped the political humiliation of an election rate rise.

The Reserve Bank's decision to leave the cash rate on hold at 4.5 per cent was a relief
to more than just home borrowers battling $2000 monthly repayments.

The prime minister was also rejoicing on August 3, and exploited the occasion to belatedly
declare the economy would be the centrepiece of Labor's re-election bid.

Campaigning on the NSW central coast, Gillard used the halfway mark of the 35-day campaign
to call for another debate with Opposition Leader Tony Abbott.

Two weeks on, Abbott has declined to share the stage with Gillard for a formal debate
on the economy.

But the messages haven't changed.

Labor says its $52 billion worth of stimulus measures in 2008 and 2009 saved Australia
from the horrors of the global financial crisis.

Four days before the election, a group of 50 economists signed a letter saying Labor
saved Australia from a deep recession.

Still, the endorsements have failed to allay electoral perceptions of taxpayer money
being squandered.

The coalition has relentlessly hammered away at cost blow-outs in the school building
and home insulation schemes.

While Australia's jobless rate shot up to 5.3 per cent in July, it is still way below
the US level of 9.5 per cent.

Australia may also have the lowest debt in the developed world - less than six per
cent of gross domestic product - but coalition cries of Labor debt, waste and mismanagement
have gained political traction.

Labor has responded by promising to have the budget in surplus by 2013.

The coalition is also promising a surplus within three years, and released its costings
on Wednesday showing a $6.2 billion balance - nearly double the $3.5 billion forecast
by Labor.

They have vowed to get the budget back in the black by selling Medibank Private and
scrapping the $43 billion national broadband network.

The opposition is also determined to block Labor's 30 per cent minerals resource rent
tax, which Treasury estimates will generate $10.5 billion in its first two years from
July 2012, depending on commodity price fluctuations.

Even before the election, the coalition argued that Labor spending was putting pressure
on interest rates.

But releasing the minutes of its August meeting, the Reserve Bank expected inflation
to remain within the two to three per cent target band during the next year, before economic
growth surged to "above average" levels of four per cent.

Economists saw this as a sign that rates would remain on hold in the short term.

Monthly repayments on an average $300,000 home loan are $500 less than they were at
the 2007 election, when a rate rise turned voters against former prime minister John Howard.

Cost-of-living pressures may have eased, but the polls show many swinging voters still
see Labor as the party that can't manage the economy.

AAP saj/rl/psm/jlw

KEYWORD: POLL10 ECONOMY (AAP BACKGROUNDER) RPT

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