Editorial: France and Greece rejecting austerity

20:27, May 09 2012

France and Greece have spoken - Keynsianism is reclaiming parts of Europe. As in most democracies, the people love to party; they don't go much on the austerity that inevitably follows. France this week voted in its first Socialist president since the 80s; Francois Hollande had campaigned on spending, not sacrifice. In Greece, two-thirds voted for parties that reject the tough EU-IMF bailout deal to rescue the Greek economy.

Julia Gillard's Government promised austerity in Australia, too, when Treasurer Wayne Swan delivered his fifth Budget on Tuesday. Instead, it was a Robin Hood affair; higher taxes on the business sector, especially miners, are to be redistributed to what Labor calls the "Aussie battlers". The bribes are every bit as cynical as the no-interest student loan inducements of the Helen Clark-led government.

But Ms Gillard had to do something. Labor is staring down the barrel of a thumping defeat unless it can persuade a sceptical electorate that only it can return the entire nation to prosperity. Australia has a two, even three-speed economy; states with minerals are doing well, those without are not.

At the same time, the prime minister was determined to deliver a Budget surplus after last year's A$37 billion (NZ$47b) deficit. Having pruned public spending severely  defence has taken a real hit  Mr Swan could trumpet a A$1.5b surplus in 2012-13.

He and Ms Gillard hope that will keep the ratings agencies at bay and re-establish Labor's economic credentials. But in many respects, this week's Budget is the least of Ms Gillard's worries.

Prime minister for only 23 months, she nearly lost the election for Labor in 2010. Recognised as a master negotiator, she struck a deal with a handful of independents and returned to office. However, modern Australia's unfamiliarity with the compromises necessary in coalition administrations and with having a sheila in charge have made for difficult days. One poll after another says Labor will be trounced at next year's federal election and, though she triumphed in a leadership ballot against predecessor Kevin Rudd a few months ago, the tom toms suggest another spill is likely.

And whoever leads the party also has twin scandals to wrestle with. The first involves backbencher Craig Thompson, formerly a union national secretary, who, it is alleged, used a union credit card to spend A$500,000-plus on prostitutes, fancy meals ... Police are investigating. The second embroils independent MP Peter Slipper, whom Ms Gillard convinced to take the Speaker's role from a Labor MP, giving her an extra vote to cushion the party's precarious parliamentary majority. He faces court action over a former staffer's allegations of sexual harassment. Both MPs say they have done nothing wrong.

In recent weeks, Prime Minister John Key must have privately despaired at the stench of decay attending the corpse that is the ACT Party and its sole MP John Banks. He might take some comfort from knowing that his plight is not as bad as that of his Australian counterpart


The Dominion Post