Which political party is better at running the economy? It’s been the subject of many dinner party conversations, but the question relies on a false premise: that governments play a significant role in the economy in the first place.
In reality, the economy is driven by firms, households and international trade. Most Australian governments come and go without having had much economic effect at all. This is fine in normal times. But we’re not living in normal times. Starting from an already weak position, the economy has faced a bruising start to the year, with many more challenges to come as the full effects of the bushfires, coronavirus and Trump’s trade truce take effect. A passive government will no longer cut the mustard.
It’s a good thing that governments don’t normally have to play a significant role in the economy. Its ability to run on autopilot is testament to the ingenuity of our people and the well-designed markets, institutions, norms, rules and laws that have been developed over many years. Just watch the incredible job being done by institutions like the NSW Rural Fire Service in fighting the fires, the ABC in keeping the public informed, our medical institutions in managing the coronavirus, our academic institutions working 24/7 to develop a vaccine, and the economic institutions and mechanisms automatically stabilising the economy. They stand in stark contrast to the recent performance of our federal government politicians.
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