Who Can Keep the Good Times Rolling?

If life were fair, John "Boom-Boom" Howard and Peter "Put-It-on-Credit" Costello would one day get a monument honoring their services to consumerism, wealth accumulation and fat profits. Perhaps a statue at every shopping mall or a team portrait in real-estate agencies would do the trick. Or maybe the banks could issue platinum credit cards celebrating the Liberal Prime Minister and Treasurer's contribution to the Swipe-It culture. They've had some luck, no doubt, but Howard and Costello have taken taxing and spending to audacious new levels, pushed away the poor's support struts, and launched their chosen people into hyper-debt. Right now, as they would behave toward a croupier during a winning streak, Australians feel like they want to buy these two politicians a drink - or at least to stay at their table while they deal the winning cards.

"Who do you trust to keep the Australian economy strong and to protect family living standards?" Howard asked at the start of the election campaign. The answer has not been in doubt for a long time, given that the Labor alternatives have been miserable. According to a Newspoll published last week, 58% of those questioned said Howard was more capable of handling the Australian economy (Latham was preferred by 27%). Since the conservative government was elected in March 1996, the economy has grown by one-third. Unemployment has fallen from 8.5% to 5.7%. Mortgage rates have dropped from 10.5% to 6.5%. Inflation has been sleeping in a hammock, slung at a rate of 2-3%, for a decade. That's the good news.

But household indebtedness is at a record level. Consumers are paying a higher proportion of their income to service their borrowings (and thus are more vulnerable, as is the economy, to a fall in asset prices or a rise in interest rates). Under Howard and Costello, foreign debt has doubled to $A393 billion (equivalent to 50% of national output). No wonder voters think the cost of money is the marker for economic safe hands - they're geared to the back teeth, and interest rates will only have to rise by a few points to burn the most vulnerable. As soon as the economy cools, most households will renegotiate their consumer and home mortgage debts; those really pressed will experience a bit of belt tightening, or be forced to spend a few more years in the workforce, or even cut into their children's inheritance. The greedy, the stupid, and the plain poor will curse their misfortune - and they'll get no sympathy from those on the other side of the street.

Howard and his ministers have grown accustomed to taunting Labor about the high interest rates that choked the economy to a standstill at the start of the 1990s. That interest rates have stayed low, as they have internationally, is as much a matter of luck as prudent policy. But it's also the payoff for market reforms over two decades that have raised productivity in almost every part of the Australian economy. Beating down inflation and expectations of future price rises for goods, services and labor has been the country's most impressive economic achievement. In any case, an independent Reserve Bank is responsible for interest-rate policy and moderating the swings in economic activity.