Sunday, December 09, 2007

Rudd's no-win horns of dilemma

I can't see him getting out of this with honour substantially intact.

Kevin Rudd's been Prime Minister for a week, and he's faced with two no-win situations.

First, climate change - which I mentioned a couple of days ago. He has indicated his commitment to making headway on emission control, but in the short to medium term, this means substantial pain, since significant industrial restructure is needed.

The way through is tricky and calls for much intelligent planning, and some hard work. That is, formulating a set of strategies (including various incentives and disincentives) that aren't too disruptive in the short term - ie don't savage the government in the next electoral cycle - but lay the groundwork for a substantially changed economy.

There are signs that he remains strongly concerned with tackling climate change. A few days ago he warned that climate change posed a significant threat to agricultural production. This on the back of an ABARE* report that highlighted the decreases in agricultural output that climate change would bring.

However, this also runs up against Rudd's other dilemma: balancing his stated number one objective - keeping inflation under control - against his regrettable election promise of substantial tax cuts.

There will surely be the temptation to slow down on rolling back the Liberals' hated Industrial Relations legislation. This issue now represents a lever of economic control, which Rudd can choose how to operate. Unfortunately. For those on the receiving end.

Ideally, by 2010 we would see an economy in transition, the tax cuts directed (somehow) to productive use for other purposes, and relatively favourable working conditions for those with weaker industrial bargaining power.

One can only hope.

*ABARE: The Australian Bureau of Agricultural and Resource Economics

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