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Costello and Howard go missing when the economy needs them most [and] Attachment.



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Wayne Swan MP Federal Labor Shadow Treasurer

COSTELLO AND HOWARD GO MISSING WHEN THE ECONOMY NEEDS THEM MOST

John Howard and Peter Costello have gone missing in action just as the Australian economy needs them most.

For ten years the Prime Minister and Treasurer have been claiming credit for running a low inflation, low interest rate economy.

Now just as the economy is facing its most serious inflation threat in a decade Howard and Costello have abdicated responsibility for interest rates.

Rather than stand and face these economic challenges head on, the Prime Minister and Treasurer have surrendered control of the Australian economy to a tropical fruit.

In the last election when John Howard asked “who do you trust to keep the economy strong” and “keep interest rates low”, very few people answered “bananas.”

The Reserve Bank has consistently warned the Howard Government that capacity constraints are putting sustained upward pressure on inflation and interest rates.

These capacity constraints, such as the skills crisis and infrastructure bottlenecks, could have been addressed with appropriate Commonwealth Government policies.

Unfortunately the Howard Government has failed to heed the Reserve Bank’s warnings and Australian families are now paying the price.

The fact is the Reserve Bank’s core inflation measure, which controls for one-off price spikes, has been edging up since the beginning of 2004 (see Attachment A).

This consistent rise reflects long-term inflationary pressure in the Australian economy that should have been addressed with anti-inflationary economic policies.

These long term inflationary pressures have contributed to the six consecutive rate rises by the Reserve Bank over the last four years.

Labor has been calling on the Government to address these inflationary capacity constraints that are putting upward pressure on interest rates since the last election.

Labor has already announced policies to invest in the skills of Australian workers and coordinate and fund productive infrastructure that will boost Australian productivity.

ENDS Fri 28 July 06 Contact : Lachlan Harris 0417 592 338

ATTACHMENT A

UNDERLYING INFLATION AND INTEREST RATE RISES

1

2

3

4

Mar 2004

Jun 2004

Sep 2004

Dec 2004

Mar 2005

Jun 2005

Sep 2005

Dec 2005

Mar 2006

Jun 2006

Underlying inflation Interest rate rises

RBA INFLATION TARGET BAND

Source: RBA