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A Maggie Thatcher needed to sort out the mess

By Paul Kerin - posted Tuesday, 12 May 2009


If the Government had slashed middle-class welfare last May, then even if it had been funnelling half of the savings to lower-income households, the 2009-10 deficit would only be $25 billion - perfectly reasonable in a downturn - rather than $55 billion-plus. And net debt in mid-2013 would be an acceptable 7.2 per cent of GDP ($100 billion), rather than an all-time high 17.4 per cent.

And this ignores other budgetary "fat" like industry welfare, which was $6.5 billion in 2006-07 and has mushroomed through initiatives like the $6.2 billion car plan.

Yet Rudd criticised the Coalition last week for saying they would "halve" his borrowing. He said $100 billion less borrowing is "equivalent to defunding for four years all payments to the states for health and hospitals in one fell swoop". We don't have to do that. Cutting middle-class welfare would also save more than $100 billion.

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Labor blames its financial mess on the "global financial crisis". Yes, downturns call for budget deficits. But Labor was not proactive in cutting fat and added more.

Then, in panic, it wasted much more.

While Labor is riding high in the polls, voters will become increasingly aware of its mess. Unfortunately the damage that this Government will do to Labor's economic management credentials and voter trust will keep future Labor leaders in opposition for years.

While I can't bring myself to vote Labor at the next election, I can't vote for the Coalition either. Unless one side finds a Thatcher type prepared to clean up the mess and just say no to vested interests, I'll vote informal.

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First published in The Australian on May 11, 2009.



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About the Author

Professor Paul Kerin teaches strategy at Melbourne Business School.

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