Australia's election

The Australian Prime Minister, Mr John Howard, has gambled on a long six-week general election campaign in the hope that he can…

The Australian Prime Minister, Mr John Howard, has gambled on a long six-week general election campaign in the hope that he can come from behind once again and triumph.

His approach may be the correct one. In the first week he has closed the gap in the polls. However, in insisting that the election should be about "trust" and the economy, he is adopting a strategy that is not risk free.

There can be no denying that the Australian economy has flourished through the eight years that Mr Howard's Liberal-National coalition has been in power. Interest rates and inflation have been kept low and economic growth and employment levels have risen. Mr Howard contends that interest rates would rise if Labor came to power because it would spend more. This charge touches a nerve. While the economy has grown significantly, so has personal debt - doubling over the last eight years to 140 per cent of annual household income.

In the so-called "mortgage belts" surrounding Australia's larger cities even small increases in borrowing costs could have serious lifestyle repercussions. Most of the marginal seats held by the coalition are concentrated in these areas. Australia's independent central bank raised interest rates twice last year and has intimated that another rate increase will come through soon.

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Labor's leader, Mr Mark Latham, has committed his party to keeping the federal budget in surplus. The government's economic management deserves credit but there is no hard evidence, as yet, that the finances would deteriorate under Mr Latham.

Mr Howard's decision to emphasise trust is curious. Last month he was criticised by 43 former military and diplomatic officials for a foreign policy that, they said, was both dangerous and deceptive. He also stands accused of twisting the facts in the "refugee children overboard" hullabaloo which helped him win re-election three years ago. Not surprisingly an opinion poll, which puts the coalition and Labor neck-and-neck, has Mr Howard far behind Mr Latham on the issue of trust.

Truthfulness and trust however may not be of foremost concern to Australians. Tomorrow, Labor is due to detail its package of tax reforms. The independent Melbourne Institute says the proposed package would constitute significant economic reform that could boost labour supply by over 70,000 - a contrast indeed with the coalition's 2004 budget which was effectively employment-neutral. If they are well received, the coalition can be expected to trump the Labor proposals.

This election has all the signs of being the closest-fought in recent times.