Labor fools rush in

The old saying “Fools rush in where angels fear to tread” suits Julia Gillard and Wayne Swan to a “t”.While grandstanding at the G20 meeting in Cannes, the Australian prime minister attempted to win friends by announcing that she would happily tip more Aussie funds into the IMF to assist that body deal with the Eurocrisis.

Smarter, larger, more powerful and more relevant nations, among them the United States and China, were markedly more cautious. According to The Australian’s Dennis Shanahan, they didn’t want to commit more cash to the IMF or contribute to a European fund without strict conditions and monitoring. At their urging, leaders like Gillard had their profligate ambitions clipped somewhat. Shanahan writes: A communique from the leaders said members “could” provide extra finance for stabilising European sovereign debt if the Europeans could sort out their affairs. The word “could” was inserted to ensure the Europeans did not think there was an automatic donation from the non-European members and to keep pressure on Greece and Italy to agree to IMF monitoring. Opposition leader Tony Abbott has pointed out the risk that “the Australian taxpayer will end up contributing another $5 billion to the IMF so that Greeks can continue to retire at 50”. Gillard and Swan displayed no such caution. Throwing money at the IMF or some other European fund without extremely strict safeguards would be foolish in the extreme. Far from building confidence, it would indicate that some nations in the world have learnt nothing from the economic collapse created by unchecked lending. Money is fungible, that is it a commodity, like wheat, or silver, which is easily interchangeable. It can move like a fish through water. A cheque deposited in a Brussels Euro bail-out fund could easily surface in a Greek public service pension fund unless the strictest supervision is applied. The Americans and Chinese can see this, Gillard and Swan and many in their media cheer squad cannot. Last year, the Labor-Green-Independent minority government approved our share of IMF funding increasing from $5.3bn to $10.6bn. Meanwhile, our total public and private debt has risen to about $1trillion. Lo, Labor has been at the Magic Pudding again.