NEWS ANALYSIS: Rudd upfront about economic challenges facing Australia
by Michael Heath,
2013-07-02 05:47:13.0
KEVIN Rudd is ditching the optimism of his predecessor and is selling himself as the best leader to steer Australia through a downturn as Chinese demand wanes.
The new prime minister, who ousted Julia Gillard last week as the ruling Labor Party headed for a landslide election loss, has been warning that the end of a China-led mining boom could lead to a recession.
Mr Rudd has highlighted the dangers posed by a slowing China in at least five statements.
Australia’s new cabinet was sworn in yesterday with Mr Rudd naming a record number of six women, and switching focus to the economy ahead of November elections. They join treasurer Chris Bowen, who replaced Wayne Swan, Finance Minister Penny Wong, Health Minister Tanya Plibersek and Families Minister Jenny Macklin in the 20-member cabinet.
As employers including Ford cut jobs, Mr Rudd’s language puts him more in tune with voters than with the message of prosperity and employment growth stressed by Ms Gillard and former treasurer Mr Swan.
Mr Rudd is betting his record as leader through the 2007-09 financial crisis, when Australia sustained growth amid global turmoil, will help to close Labor’s two-year opinion-poll deficit.
"Rudd’s wanting to reframe the economic debate," said Stephen Koukoulas, a former adviser to Ms Gillard and now MD of Market Economics. "He’s being more direct on China’s slowdown and the end of the boom.
"A sense of crisis also helps him cover the budget deficit and debt issues that the opposition has hammered, and allows him to remind people of what he did last time."
Ms Gillard and Mr Swan’s economic credibility was undercut when they failed to return the budget to surplus last fiscal year as they had promised.
The Reserve Bank of Australia, which meets to set policy today, has cut its benchmark rate by two percentage points since November 2011 to revive growth in job-intensive industries, such as construction and manufacturing. Swaps traders are pricing in a 21% chance that governor Glenn Stevens and his board will lower the cash rate to 2.5%.
Prospects for the Bank’s reductions as the Federal Reserve considers paring back its stimulus, drove the Australian dollar down 12% last quarter, the biggest slide worldwide after the Syrian pound.
Mr Rudd, who faces an election due by November 30, has already boosted the government’s standing. A Newspoll conducted on June 28-30 and published in The Australian newspaper yesterday showed the Tony Abbott-led opposition in front of Labour by 51% to 49% on a two-party basis, in a poll designed to gauge which party is most likely to form the government under Australia’s preferential voting system.
That is down from a 14 percentage point gap a week ago.
Mr Rudd has warned that a government led by Mr Abbott would adopt an austerity approach similar to that of Britain.
Manufacturing in China, Australia’s biggest trading partner, expanded at the slowest pace in four months last month, and growth in the world’s second-largest economy probably eased for a second straight quarter, according to a Bloomberg News survey. Since reclaiming the leadership, Mr Rudd has highlighted Australia’s challenge, noting that trade with China now accounts for about 10% of the economy.
Australia cannot rely on a sole source of growth and must boost manufacturing, services and agricultural industries, Mr Rudd said in Newcastle yesterday, as he announced his new ministry.
This should be achieved "by making full use of the falling exchange rate, which, in fact, boosts our global competitiveness, and to enhance our productivity", he said.
Bloomberg
BACK IN THE JOB: Australian Prime Minister Kevin Rudd speaks to the media at Parliament House in Canberra on June 26. Picture: REUTERS
KEVIN Rudd is ditching the optimism of his predecessor and is selling himself as the best leader to steer Australia through a downturn as Chinese demand wanes.
The new prime minister, who ousted Julia Gillard last week as the ruling Labor Party headed for a landslide election loss, has been warning that the end of a China-led mining boom could lead to a recession.
Mr Rudd has highlighted the dangers posed by a slowing China in at least five statements.
Australia’s new cabinet was sworn in yesterday with Mr Rudd naming a record number of six women, and switching focus to the economy ahead of November elections. They join treasurer Chris Bowen, who replaced Wayne Swan, Finance Minister Penny Wong, Health Minister Tanya Plibersek and Families Minister Jenny Macklin in the 20-member cabinet.
As employers including Ford cut jobs, Mr Rudd’s language puts him more in tune with voters than with the message of prosperity and employment growth stressed by Ms Gillard and former treasurer Mr Swan.
Mr Rudd is betting his record as leader through the 2007-09 financial crisis, when Australia sustained growth amid global turmoil, will help to close Labor’s two-year opinion-poll deficit.
"Rudd’s wanting to reframe the economic debate," said Stephen Koukoulas, a former adviser to Ms Gillard and now MD of Market Economics. "He’s being more direct on China’s slowdown and the end of the boom.
"A sense of crisis also helps him cover the budget deficit and debt issues that the opposition has hammered, and allows him to remind people of what he did last time."
Ms Gillard and Mr Swan’s economic credibility was undercut when they failed to return the budget to surplus last fiscal year as they had promised.
The Reserve Bank of Australia, which meets to set policy today, has cut its benchmark rate by two percentage points since November 2011 to revive growth in job-intensive industries, such as construction and manufacturing. Swaps traders are pricing in a 21% chance that governor Glenn Stevens and his board will lower the cash rate to 2.5%.
Prospects for the Bank’s reductions as the Federal Reserve considers paring back its stimulus, drove the Australian dollar down 12% last quarter, the biggest slide worldwide after the Syrian pound.
Mr Rudd, who faces an election due by November 30, has already boosted the government’s standing. A Newspoll conducted on June 28-30 and published in The Australian newspaper yesterday showed the Tony Abbott-led opposition in front of Labour by 51% to 49% on a two-party basis, in a poll designed to gauge which party is most likely to form the government under Australia’s preferential voting system.
That is down from a 14 percentage point gap a week ago.
Mr Rudd has warned that a government led by Mr Abbott would adopt an austerity approach similar to that of Britain.
Manufacturing in China, Australia’s biggest trading partner, expanded at the slowest pace in four months last month, and growth in the world’s second-largest economy probably eased for a second straight quarter, according to a Bloomberg News survey. Since reclaiming the leadership, Mr Rudd has highlighted Australia’s challenge, noting that trade with China now accounts for about 10% of the economy.
Australia cannot rely on a sole source of growth and must boost manufacturing, services and agricultural industries, Mr Rudd said in Newcastle yesterday, as he announced his new ministry.
This should be achieved "by making full use of the falling exchange rate, which, in fact, boosts our global competitiveness, and to enhance our productivity", he said.
Bloomberg
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