Libs' economic stewardship far from exemplary

Mr Howard might crow about 3 or 4 per cent growth in GDP, but even within the economists' bailiwick (not counting social policy), one is entitled to ask more troubling questions. What is the "growth" actually of? If it's what we really want, why isn't it higher? If it's not what we want, then the number is meaningless. And what about net overseas liabilities of $500 billion, the 2003-04 current account deficit of $47.4 billion, and the net deficit of trade in elaborately transformed manufactures of $75 billion? ETM export growth has plummeted during the Howard years. These are indicators of sound economic management? The pundits say that the overseas debt reflects Australia's long-term and inevitable dependence on foreign investment. No it doesn't. Rather, foreign investment is insufficiently directed to appropriate objectives. The debt is also recently a product of unconstrained domestic consumer credit creation financed overseas. Treasurer Peter Costello says that the ETM deficit is a sign of healthy growth. No it isn't. Microeconomic reform has no answer for this significant phenomenon.

In short, the structure of the economy matters, and the conventional rules have nothing to say. What can the cash rate, the single instrument of monetary policy, do about excessive lending for investment properties without hitting lending for owner-occupation?

The answer is nothing. Are the monetary authorities inclined to do anything about this limitation of an aggregate macro instrument? No, because it's against the rules.

All thus stuff about "sound economic management" is just so much palaver. We have become so inured to the repetition of the conventional wisdom regarding appropriate economic policy that we internalise the self-hobbling of the political classes.

Australia is a cornucopia of resources - material and human. If the Netherlands and Switzerland, dependent more on their wits than on what comes out of the ground, can consistently return balances on current account in the black, why can't Australia? Sound economic management under Howard? The policy structure is magnificently second-rate. The so-called recent integration into the global economy, rather than transcending the colonial cringe, has reinforced it.