Malcolm Turnbull needs a circuit-breaker to stop the damaging speculation that has rendered his leadership totally ineffective. Therefore, he is grasping at the Rudd Government's stimulus package, with his mantra that the multi-billion dollar spending will put up taxes and interest rates and leave a debt burden for our children.
Kevin Rudd needs a circuit-breaker as well, some protection from the fall-out from the malodorous state government in NSW whose ministers can't seem to keep their pants on. But the Prime Minister's problems are not in the same league as those of Turnbull and the temporary NSW Premier, Nathan Rees.
Turnbull is absolutely correct to say rates will go up. That's not rocket science. The minutes of board meetings of the Reserve Bank, which are now made public, show what lies ahead.
But why are rates about to rise, as early as next month? When you're at the bottom, the only way is up. They were lowered to ''emergency levels'' as part of the effort to resuscitate the economy. Does anyone remember the Opposition moaning just once about rates being cut to reduce the burden on business and home owners? Uh-uh.
Turnbull voted in favour of the first stimulus package, last year, when cabinet realised the breathtaking depth and speed of the global financial crisis. But he objected to giving up to $900 to punters to pass on to shopkeepers at the mall, and thousands of dollars to subbies all around the country to build school halls.
The school building program has its good points, for instance, spreading the largesse to every community, and it has drawbacks, such as the late shift of money from high school science labs and language centres to primary schools. Added to that is the breathtaking hubris of forcing schools to keep the signs up until after the next federal election.
But the proof is in the pudding, n'est-ce pas? Two days ago, our very serious Federal Treasurer, Wayne Swan, managed a little smile as he stepped to the podium to give his thoughts on that day's release of the national accounts.
We all know the global economy fell off a cliff in December. The Australian economy went backwards in the December quarter and struggled to record 0.4 per cent growth in gross domestic product in the March quarter. But the surprising news was that the data released an hour before Swan's media conference showed that Australia's economy lifted a healthy 0.6 per cent in the three months to June. Of the developed nations, only Australia, South Korea, Greece and Poland have avoided a technical recession defined as two quarters of ''negative growth'' in the past 12 months.
''[Australia's growth] is a remarkable result given how fragile the global economy is currently,'' Swan said. ''Today's result means we are the fastest growing advanced economy over the past year and the only advanced economy to have recorded positive growth over the past year ... And when every other major advanced economy fell into technical recession, we did not. So economic stimulus has meant that Australia has avoided technical recession.''
One reason that Swan was able to spend up was that the outgoing Coalition Government left the economy in very good shape. The balance sheet was in the black and the banks were governed by strong financial and prudential regulation. Going back into debt grates against the Coalition's philosophy.
Therefore, yesterday, Turnbull accused the Government, again, of reckless spending. His line is that he isn't against all stimulus spending, just that it should be smaller and better targeted.
While he was delighted with the growth figures, he suggested it was not produced just by pump-priming the economy with stimulus spending. ''The question is, how much bang do you get for the buck?'' he told the ABC. ''The reality is you've got an easing in monetary policy [and] interest rates were lowered, that was probably the biggest domestic stimulus ... They reallocated $1.5billion away from other programs to the schools, to the Julia Gillard Memorial Assembly Hall program just the other day ... We said instead of cash handouts they should have brought forward the tax cuts. We felt that would have put cash in people's pockets.''
But consumers did have money in their wallets, courtesy of the Government's handouts, and figures released with the national accounts show they spent up big on games, toys and hobbies. CommSec chief economist Craig James says the real reason the economy performed so well during the economic crisis was this spending-to-forget.
With the retail spending spike over, the economy is now being pump-primed by the schools projects, and that will show up in the September quarter economic data.
Turnbull wants the stimulus spending to be halted. Cancel contracts for school projects? Can't do that. Instead, the spending will end automatically towards the end of this year as the contracts are fulfilled, and then the economy is on its own.
Rudd and Swan have crafted the economic crisis into a virtue and that really galls the conservative parties that traded for years on the argument that Labor couldn't be trusted. That was easier to argue when Paul Keating left a massive debt to the incoming Howard government.
But now Rudd and Swan are adept at massaging public expectations about the economy, walking the tightrope between praising their achievements so far but using lots of cliches about ''the rocky road'' and ''choppy conditions'' to warn about what lies immediately ahead the double whammy of rising rates and interest rates.
Those two factors are Turnbull's circuit-breaker and he will hammer the Government on them when Parliament resumes next week. Rudd et al will crow about the economic growth, as they are entitled to do.
Turnbull has to walk a fine line because every time he raises the stimulus, he reminds voters that the Government is on the ball. He should stop talking directly about the payments (very difficult to do, admittedly) and just hammer the Government on rates and jobs.
This time next year the stimulus will be a fond memory and the country will be in the grip of higher interest rates, and suffering from higher employment and full-scale election fever.
In the short term, a by-election will be held for the safe Liberal seat of Bradfield being vacated by Brendan Nelson. Labor will not stand a candidate, but, even so, it gives Turnbull a chance to try to link Rudd to the basket case that is the Rees Government, with a campaign based on ''sending a message to Canberra'' about the ineptness of the NSW Government.
It's a long shot because voters can differentiate between federal and state issues, and they've given up on Rees already. Even so, this strategy might temporarily take the focus off Turnbull's poor public support and Nelson's description of the man who unseated him as Opposition Leader as suffering narcissistic personality disorder.
Ross Peake is National Affairs Editor.
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