Ross Gittins, who writes for the SMH, is a god. when it comes to economics. he cuts through the crap. anyway, here is his latest take in the wake of announcements by our prime minister (who wants a 5th term) that we should 'Go for Growth'!

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More to running economy than going for growth
http://www.smh.com.au/articles/2007/10/21/1192940902965.html

Ross Gittins
October 22, 2007

MONDAY COMMENT

SORRY, but I can't warm to the Liberals' Go For Growth as an inspirational, future-oriented election slogan. For one thing, it's too reminiscent of Paul Keating. For another, it's too close to the ideal of growth at any cost.

It's a slap in the face of those who believe our push for eternally higher living standards needs to be modified by acceptance of the imperative of minimising the damage economic activity does to the environment.

It's a strange slogan to be espoused by a Prime Minister newly converted to the cause of halting global warming - although the use of economic instruments such as tradable emission permits is intended, of course, to minimise the conflict between environmental protection and economic growth.

It's also a slap at those who believe that, in our pursuit of economic growth, we need to pay more attention to quality, not just quantity. That there's no point in becoming richer if you damage your relationships with family and friends in the process.

In short, Go For Growth has a terribly old-fashioned ring to it. As I say, it reminds me of Keating. That was his slogan during the boom of the late 1980s, though he added a characteristic twist, saying his policy was to "Go for growth - and hang on!"

Hang on turned out to be good advice because, before long, the economy roared off the speedway and landed us in "the recession we had to have". Deep recessions are indeed unavoidable if you're mad enough to believe in driving the economy as fast as possible at all times.

I remember it well because, at the time, I thought going for growth sounded a good idea. The subsequent recession taught me different - as has the record period of expansion we're still enjoying.

Since the running of the economy passed from the politicians to the central bankers, the underlying philosophy has shifted from Go For Growth to Slow But Steady Wins The Race.

When you think about it, the two slogans neatly encapsulate the rival mentalities of politicians and econocrats. The pollies always want to keep their foot on the floor and are reluctant to apply the brakes before it's absolutely necessary.

The inevitable consequence is what used to be called Stop/Go policies. It was the last gasp of misguided Keynesianism: in your impatience to get unemployment down you poured on the stimulus to get the economy out of recession and, while ever unemployment remained unacceptably high, you refused to contemplate any slowing.

Anyone who worried about what this process might be doing to inflation pressure was a stooge for the rich and powerful and didn't really care about the plight of the jobless.

It took macro-economists far too long to twig that the more you went at it like a bull at a gate, the sooner the engine would overheat and the sooner your sheer terror at the speed you were doing around corners would force you to jam on the brakes, leave the road and bring on the next recession.

Recessions were rarely more than seven years apart.

Eventually, however, the econocrats realised that if you cared about unemployment it was the recessions - not any less than flat-chat growth between them - that did the damage. That was when the former governor of the Reserve Bank, Ian Macfarlane, began repeating his mantra that the trick to getting unemployment down was to keep the recessions as far apart as possible.

And the way to achieve that was, paradoxically, to worry more about inflation. When macro management was handed over to the more patient, longer-sighted econocrats, they abandoned Go For Growth and substituted the goal of "sustainable" or "non-inflationary" growth.

To put it another way, they instigated a speed limit for growth, with the limit governed by the need to keep the inflation rate between 2 and 3 per cent on average over the cycle.

Aided by micro-economic reforms that have intensified the competitive pressure in markets and made the economy less inflation-prone, the inflation target has so far managed to stave off the next recession for a record interval of more than 16 years.

In that time the Reserve Bank has been through three protracted braking episodes, including the present incomplete episode. For much of that time progress in reducing unemployment was painfully slow, with surprisingly few full-time jobs being created.

From our present vantage point, however, with the official unemployment rate down to its lowest in 33 years (and broader measures of unemployment, which take account of underemployment and hidden unemployment, also at three-decade lows), it's clear that Slow But Steady does win the race.

Presumably, the point of the Go For Growth slogan is to remind people of the Government's (in truth, the Reserve Bank's) superior economic performance and put it in a forward-looking context.

Unfortunately, in John Howard's efforts to breathe life into that slogan in comments made to the Herald last week, he implied he imagined we lived in a world of perpetual spare capacity, had no idea of the existence of a non-accelerating-inflation rate of unemployment, and argued that micro reform had eliminated the business cycle.

He must have been let out without his economist minders.

Fortunately, we know that whoever wins the election, management of the macro economy will remain in the safe hands of the central bankers, who won't have a bar of the Go For Growth mentality.

Ross Gittins is the Herald's Economics Editor.

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Come on Kevin (Rudd, the alternative prime minister) - let's not mirror the government's approach here! We want quality, not quantity! a low carbon, sustainable future means restructuring our economy and getting new priorities!