Economics 101

Excuse this little foray into the dreary world of politics, economics, and the ABC … but I can’t help noting local lefty chart-blogger Greg Jericho‘s piece on the ABC’s Drum site in which he takes Tony Abbott to task for linking high levels of government debt with interest rates.

I expect that we will see the fanatically surplus-obsessed Julia Gillard criticised with as much ardour for making the same connection:

JULIA Gillard will today make a strong pitch to the Reserve Bank to cut interest rates, declaring the planned budget surplus helps give it room to move.

An interesting Baptists-and-bootleggers coalition is forming against the Government’s push for a surplus in next month’s budget with both Greens and business leaders criticising it as not worth the price at this point in time:

“There is no economics in the discussion of a surplus,” former Reserve Bank of Australia board member Bob Gregory said, according to the AFR. “The Treasurer and the government have hung their credibility on a word that doesn’t mean that much at the moment and is only being used for a political purpose.”

Meanwhile, fellow former RBA board member Warwick McKibbin has repeated his criticism of the need for a surplus.

“When the world subsequently changes, which it inevitably does, the politician is stuck in a politically vulnerable place,” he said, according to the newspaper. “What is worse, the economy is damaged by actually attempting to reach the political goal with no economic rationale.”

We soon resume our regularly scheduled lifestyle programming.

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