A banana too far

So good old John Howard is going to stick it out for another election swing, supporting his good buddy George W and old mate Tony Blair.

I would have got white the get was worth getting. Now he’s almost destined to go out in a blaze of public rejection.

Not, sadly, for his gung-ho ‘we’ll fight ‘em on the beaches’ stand, but because the Australian economy is going bananas, the wrong way.

Johnny Howard still blames banana prices for the economic predicament, but after a decade of control there aren’t many other places to aim the blame.

Sometime today, (or tomorrow in Australia, it’s hard to tell) the Reserve Bank is going to hike interest rates. Apparently inflationary pressures are building up throughout the economy, threatening the bank's goal to keep price rises between 2 and 3 per cent over the long term.

Johnny puts it all down to the great banana drought of 2006, but experts say differently.

“The Reserve is not raising rates because of bananas. It focuses on broad measures of inflation. It ignores prices that are soaring or plunging — bananas and petrol, computers and clothing — to focus on "core inflation" across goods and services as a whole,” says commentator Tim Colebatch in the Melbourne Age.

He goes on top say:

The day the consumer price index was released last week, showing prices up 4 per cent in the past year, [Treasurer] Peter Costello met it with a statesmanlike response.

Ignoring cheap political shots, the Treasurer reiterated four times in as many minutes that the key task is to prevent high petrol prices being passed on by firms into higher inflation throughout the economy. In effect, he explained why rates must rise.

Alas, that proved too subtle even for some newspapers to understand, let alone ordinary punters. So by Sunday the Treasurer had switched tack and was blaming inflation on bananas and petrol prices.

The reality is far more complex. Inflation is not breaking out like a rash of smallpox, but across the economy, petrol prices are pushing up business costs, while a range of factors — high employment, solid wage growth, big tax cuts, shortages of skilled workers, and easy credit — are reducing resistance to price rises.

So I guess Johnny will be back to squeezing employment, one of his favourite pastimes, and then he can move to the other, pillorying the hapless unemployed.

Little wonder senior political pundits in Australia have taken to variants of slimy toad. It’s a good thing he decided to hang in for another election, he will fall because of the economy, but humiliating defeat is still almost too good for him.