The triumph of Tony Abbott

According to the conventional wisdom of just a few years ago, Tony Abbott should never have become prime minister of Australia.  The doyens of the press gallery had marked him as a right-wing throwback to a bygone era.

After all, Mr. Abbott is skeptical about alarmist claims of man-made global warming.  He is a former Catholic seminarian who opposes abortion and same-sex marriage.  His gaffes — he recently said a female parliamentary candidate had ''sex appeal'' — have provided fodder for left-leaning satirists.  He is an Anglophile, a former Oxford boxing blue and an unashamed constitutional monarchist who sides with America in the world.

Yet for all his evident shortcomings, Mr. Abbott led his center-right Liberal-National coalition to a resounding victory at the weekend, handing the Australian Labor Party one of its biggest defeats.  How did this political outcast win power down under?  And is he a role model for conservatives around the world?

To understand the momentousness of this weekend's election outcome, let's recall how the Liberals wandered in the political wilderness after Kevin Rudd took power in 2007.  The consensus then was that he would consign conservatives to opposition for a generation, much as American pundits predicted Barack Obama's victory in 2008 would mark a liberal realignment of the U.S. political landscape.

In response, the Liberal leader Malcolm Turnbull and other so-called moderates within the party jettisoned policies of the conservative era of Prime Minister John Howard from 1996 to 2007, believing the way forward was to ape the Rudd agenda.  So they agreed to reverse pro-market labor laws that made it easier for business to hire and fire.  Apologies and feel-good pronouncements were offered to indigenous Australians for past western sins.  They grew more relaxed about illegal immigration and people-smuggling rackets that had virtually ended under Mr. Howard.

And crucially, the opposition's leaders embraced the global warming agenda.  As if to demonstrate the liberal Liberals' fitness for government, they endorsed Mr. Rudd's signature legislation, a cap-and-trade emissions trading scheme.  The result was that the governing Labor party held commanding double-digit leads over its conservative opponents.

But Labor's Indian summer came to an end, and what changed the political climate was climate change.

For two years, the global warming debate had been conducted in a heretic-hunting and illiberal environment.  It was deemed blasphemy for anyone to dare question not only the climate science but the policy consensus to decarbonize the economy.  Mr. Rudd even claimed that climate change was the ''great moral challenge'' of our time and even denounced critics of cap and trade as ''deniers'' and ''conspiracy theorists''.  The hapless Liberals led by Mr. Turnbull — an Oz version of Mitt Romney — were in the deepest political valley.

Mr. Abbott, then widely written off as a remnant of the Howard era, decided to challenge the media-political zeitgeist.  Cap and trade, he argued, merely amounted to economic pain for no environmental gain, especially for a nation that accounted for only 1.4% of greenhouse gas emissions.  He contested the Liberal party leadership, winning by a single vote.

Like Margaret Thatcher's victory in the U.K. Conservative party leadership ballot and Ronald Reagan's nomination as the Republican presidential candidate in 1980, this delighted the left.  They considered him too divisive and — gasp! — conservative to be electable.  According to one distinguished intellectual, under Mr. Abbott's leadership the Liberals would become ''a down-market protest party of angry old men and the outer suburbs.''

Then along came the failed 2009 Copenhagen summit, which exposed the Rudd agenda as a sham.  When the rest of the world refused to endorse the climate enthusiasts' fanciful notions for slashing carbon emissions, Mr. Rudd imploded.  Mr. Abbott seized the moment and highlighted the higher energy costs created by Labor's emissions trading scheme.

Almost overnight, Mr. Rudd's stratospheric poll figures cratered.  Facing a changing (political) climate, he ditched the emissions trading scheme, his government's key-note legislation.

Labor factional warlords panicked, knifed Mr. Rudd in an internal party coup and installed Julia Gillard as prime minister.  Undeterred, Mr. Abbott continued his relentless attacks on other key issues of principle and policy.

He opposed Canberra's big-spending and interventionist agenda, which had turned a $20 billion surplus under the previous conservative government to skyrocketing debt and deficits;  while he supported tough border protection, which had traditionally helped boost public confidence in large-scale and legal immigration.  By refusing to buckle in his opposition to Labor's increasingly antibusiness agenda, he set the scene for his electoral success at the weekend.

To be sure, despite his vaunted commitment to reducing the size and scope of government, Mr. Abbott is hardly the second coming of Milton Friedman.  His plan for an expensive paid paternal leave program, for instance, suggests a social-engineering streak.  But the point here is that he is cut from an entirely different cloth than his opponents both inside and outside his own party.

One reason Mr. Abbott scored an emphatic victory is that he convinced voters that conservatives would not be profligate with tax dollars.  It remains to be seen what Mr Abbott does in office, but the formula worked at a time when the conventional wisdom said he was unelectable.

The upshot here is that Mr. Abbott did the very thing so many U.S. Republicans and British Tories have shied away from in recent years:  He had the courage to broaden the appeal of a conservative agenda rather than copy the policies of his opponents.  As a result, Australians enjoyed a real choice at the polls this weekend.  Mr. Abbott's resounding victory shows that they relished this opportunity to chart a more free-market course.

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Defenestration Down Under

To borrow from Oscar Wilde, one must have a heart of stone to watch the political death of Julia Gillard without laughing.  On June 23, 2010, she shocked Australia by toppling Prime Minister Kevin Rudd in a premeditated and ruthless Labor party coup.  Yet this week, the assassin herself has been fatally knifed — by the very man she backstabbed three years earlier.

What happened?  How has Australia's first female prime minister, whose parliamentary attacks on the alleged sexism of her conservative opponents won her world-wide acclaim this year, sunk so dramatically at home?

Start with Ms. Gillard herself.  In the runup to September's federal elections, her credibility has been draining away as if from an open wound.  Three years of broken promises and embarrassing missteps — from a hugely unpopular carbon tax to her failed publicity stunts, such as a recent magazine spread showing the avowed republican knitting a toy kangaroo for Britain's royal baby — have finally undermined the 15-year parliamentary veteran.

Throughout her prime ministership Ms. Gillard grossly misjudged middle Australia, whose politics skew rightward of Ms. Gillard's cosmopolitan home constituency of Melbourne.  Her ventures into the gender wars and class-war rhetoric to divide local labor from the wealthy were destined to turn off most Australian voters.  Polls this year consistently showed that despite low unemployment and interest rates, Ms. Gillard's Labor Party trailed opposition leader Tony Abbott and his center-right coalition by landslide proportions.

Ultimately, even the Labor warlords who had led the 2010 hit on Mr. Rudd accepted that matters had become so desperate that their party simply could not be led by Ms. Gillard come election time.  Party officials found it hard to motivate the Labor grass roots, much less crucial swing voters in the battleground seats of western Sydney and Queensland.  Ms. Gillard's authority was so low it could not feasibly recover.  Not surprisingly, this week she has suffered scornful political obituaries that make Mr. Rudd's demise three years ago pleasant in comparison.

Whatever his faults, Mr. Rudd rates high marks for sheer animal survival.  He was so widely written off after his downfall in 2010 (not to mention his botched leadership challenges in February 2012 and March 2013) that he even promised this year that there would be ''no circumstances'' under which he'd be leader again.  But although his resurrection may lead to a poll boost initially, it is unlikely to revive the government's fortunes.

For one thing, Mr. Rudd will be leading a fatally fractured camp.  In recent years Mr. Rudd's own Labor colleagues have publicly dismissed him as ''disloyal'', ''dysfunctional'', a ''saboteur'', a ''psychopath'' and a ''complete and utter fraud'' with ''no Labor values.''  They have said he lacks the skills of leadership and fundamental conviction needed to lead the party out of the mire.  At least six cabinet members have resigned since Mr. Rudd's coup.  And yet Mr. Rudd's party, by a caucus vote margin of 57-45, has agreed to inflict upon the Australian people the very person they were so reluctant to inflict upon themselves.

Nor should anyone forget Mr. Rudd's vacuous policy agenda during his first term from November 2007 to June 2010.  His constant striving to be all things to all men — on issues as varied as economic reform, border protection and carbon pricing — merely insulted the electorate's intelligence.  It is hard to see how attitudes will change given his recent flip-flopping over gay marriage (which he now supports) and letting in more foreign workers (which he now opposes).

Mr. Rudd's economic pronouncements are particularly uninspiring.  During his tenure Mr. Rudd blamed ''neoliberalism'' for causing the global financial crisis, and he has since credited his government's record stimulus spending and pro-union policies for saving Australia from economic contagion.  Never mind that Australia actually weathered the storm thanks to a record commodities boom and those free-market policies Mr. Rudd so likes to deride.  Never mind, too, that Mr. Rudd had inherited a dozen years of budget surpluses from the previous conservative government, giving him a strong fiscal position from which he could try to use tax dollars to fuel a recovery.

In any case, changing leadership won't revive Labor's fortunes so long as the party remains deeply connected to trade unions that resist the demands of a market-based economy.  The powerful Australian Workers Union, for instance, has led Labor's campaign to restrict temporary foreign workers with visas, who would help boost the nation's long-term economic prospects.  Moreover, its push to increase union membership across the resources sector is at odds with laborers, who are more interested in how the dividend and share buyback from increases in company profits could can boost their superannuation savings.  Labor today is out of touch with the development states of the resources boom, Queensland and Western Australia.  Moreover, Labor is wedged between two core constituencies that are fundamentally at odds with each other:  inner-city social progressives on the one hand, and more conservative suburban and regional voters on the other.

Addressing these problems could take years, and as a result Mr. Rudd has little hope of beating Mr. Abbott in September's federal elections.  In the meantime, however, for sheer entertainment value not much can compete with the bloodsport of Labor politics down under.

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No Love Lost Between Labor and Rudd

In yesterday's ballot for the Labor Party's 102-strong legislative caucus, freshly resigned Minister of Foreign Affairs Kevin Rudd lost spectacularly to Prime Minister Julia Gillard — 31 to 71 votes.  Australia's favorite politician and most popular prime minister in history, a man who gets mobbed like a rock star on the street, left dejected for the back bench.  How did Mr.  Rudd become so loathed in his own party?

Even in the rough-and-tumble world of Australian politics, last week had to go down as one of the worst.  It began with a leaked YouTube video of Mr. Rudd swearing profusely and slamming his desk.  Then senior Labor Party ministers complained about Mr. Rudd's relentless stealth campaign to seek revenge on Ms. Gillard, who had knifed him during his first term as prime minister in June 2010.  Next Mr. Rudd appeared to have pre-empted a move against him by resigning as foreign minister while abroad.  That preceded a contest for the ruling party's leadership with enough conniving and betrayal to make Lady Macbeth blush.

Meanwhile, authority is draining away from the prime minister as if from an open wound.  A year of mounting mistrust over her carbon tax back flip is destroying what little credibility she has left.  Ms. Gillard's approval rating is only 26% and her minority government trails the center-right Coalition by double digits in opinion polls.  Even those who rally around Ms. Gillard do so with little hope — theirs is a contemporary charge of the Light Brigade.

Mr. Rudd's fall from grace has little to do with Ms. Gillard and everything to do with Mr. Rudd.  The 54-year-old Mandarin-speaking former diplomat has two weaknesses:  He has never been much liked by anyone who's worked closely with him and he presided over a dysfunctional government and unprincipled policy agenda from December 2007 to June 2010.

Start with the personal.  Mark Latham, the former Labor leader and now a widely read columnist, reflects the views of many of Mr. Rudd's colleagues when he says:  ''Those who know him best like him least.  And those who say they like him have never actually met him.''  Nearly everyone accepts that ''Heavvie Kevvie'' is somewhat boring and a bit nerdy.  (How else to describe someone who refers to himself in the third person as ''K. Rudd'' and who utters cringe-inducing Australianisms like ''Happy Little Vegemite'' and ''fair shake of the sauce bottle''?)

But his colleagues prefer stronger adjectives — abrasive, arrogant, aloof and autocratic.  In the past week, one member of parliament called him a ''psychopath'';  one senior minister derided him as ''a complete and utter fraud'';  several others refused to serve under him;  and even his former senior mental health adviser has warned that ''this man is not fit for prime minister.''

Then there is his record.  During his two-and-a-half years as prime minister, he espoused so many different positions, often repeatedly and stridently, that he left virtually everyone with the impression that his arguments were always suspect.  Ms. Gillard is widely detested across the nation for legislating a carbon tax she pledged not to introduce.  But Mr. Rudd flipped and flopped with the best of them.

This is a man who once defined himself as an ''economic conservative,'' but once in office took a leftist and interventionist approach to almost every economic issue he addressed.  A man who pledged to stem the flow of illegal immigrants, but ended John Howard's tough stance against people-smugglers that boosted public confidence in large-scale and non-discriminatory legal immigration.  A man who claimed climate change was ''the great moral challenge of our time,'' but dropped the evangelical language along with an emissions trading scheme after the Copenhagen debacle changed the political climate at home.

Such have been the twists and turns of his philosophical journey that it is impossible to know what Mr. Rudd thinks.  Add to this that he ran an utterly dysfunctional and chaotic cabinet.  By most accounts, he regularly treated staff and public servants with rudeness and contempt.  He silenced internal critics and punished those against whom he held a grudge.  And he held up vital decisions while he vacillated over policy and procedure.  No wonder his colleagues overwhelmingly rejected him (again).

Much of the brouhaha of last week won't die down anytime soon.  Although Mr. Rudd has been relegated to the back bench, he will dog his nemesis effectively.  For her part, more than a few of Ms. Gillard's own supporters think the prime minister is among the walking dead.  Meanwhile, many Labor figures are fretting and wailing that Australia's oldest party, which has experienced three splits in the past hundred years, is tearing itself up again.

As the government heads for the mother of all hidings in the next election due in 2013, party hard heads will cast about in vain for someone else who can stymie Mr. Rudd's next challenge while blocking the rise of opposition leader Tony Abbott and his conservatives.  If the last week is anything to go by, they'll struggle to find a cure for its deep-seated ills.

 

Australia's Carbon Warning for Obama

President Obama's Environmental Protection Agency is fighting a rear-guard action to accomplish via regulation what voters rejected via Congress:  ruinously expensive restrictions on carbon emissions in the name of fighting ''global warming''.  This is perhaps partly out of the administration's own convictions, but also because Mr. Obama knows that a large slice of his left-wing base is clamoring for such measures.  But before he goes much further down that road, he should take a look at how a similar political calculation is playing out in Australia.  In short, not well.

Prime Minister Julia Gillard, in office for less than a year, is pushing forward with a carbon tax Down Under.  The measure is hugely unpopular -- its announcement this week pushed Ms. Gillard's Labor Party to its lowest popularity ever in an opinion poll conducted for The Australian newspaper (owned by News Corporation, which also owns the publisher of this newspaper).  Labor shouldn't be surprised.  The idea of a carbon tax was so controversial before last August's election that Ms. Gillard promised not to enact one as a ploy to win votes.  Members of her administration have repeated that refrain, to proverbial applause, several times since.

Why, then, has Labor been so politically foolish as to revive the idea?  Because Ms. Gillard has been backed into a political corner by anti-carbon advocates on the far left.  Under her leadership, Labor failed to win a majority in the House of Representatives and the Senate in that August vote, so she governs in an uneasy coalition with a clutch of independent and Green Party legislators.

The leader of those Greens, Bob Brown, has used his kingmaker sway to pull Ms. Gillard steadily leftward ever since, including inducing her to oppose tougher border protection and to support same-sex marriage.  The new carbon tax proposal is part and parcel of that.

The situation bears some striking similarities to events in the U.S., although the details are different.  In America, voters have shown again and again their distaste for carbon taxation or cap-and-trade emissions regulation in the name of slowing global warming.  Enthusiasts' ambitions finally collapsed last year when the Senate, controlled by Democrats, couldn't agree to hold a debate on even the most loophole-ridden version of cap-and-trade.

Meanwhile, although Mr. Obama is not beholden to a small band of congressional swing voters who support carbon regulation in the way Ms. Gillard must heed the Greens, he's in a box of a different sort.  He actually did campaign in support of carbon regulation, declaring his nomination to lead the Democratic presidential ticket as ''the moment when the rise of the oceans began to slow and our planet began to heal''.  This suggests that among his electoral base, and among his supporters in Congress, is a small but potentially important minority who want him to follow through on the promise implied by that grandiose claim.

Mr. Obama at least has the luxury of going about it in a stealthier way.  U.S. law gives his EPA just enough of a fig leaf to try to push forward with carbon regulation despite congressional opposition, though even then by most accounts he is pushing existing laws to their limits or even beyond.  Ms. Gillard has to go to her parliament for an up or down vote on carbon taxation.  That might be one reason why her anti-carbon moves are generating more pronounced opposition now -- the Australian public is more aware of what their leaders are getting up to than are their American peers.

Carbon-tax supporters in Canberra will try to make their proposal more palatable with additions like a rebate on the electricity bills the tax would push higher or the like.  But this will only further complicate the politics by giving tax opponents more fodder.  For instance, they can skewer the rebate as an inefficient and theoretically inconsistent way to hand carbon consumers' money back to them.  And while the tax may yet pass, that could prove a Pyrrhic victory for Ms. Gillard and her coalition partners come the next election.

Still, the news from Australia suggests Mr. Obama is taking a big gamble if he figures the public will never catch on.  Ms. Gillard's recent experience shows what happens when voters do, and the result is a disaster-in-the-making for any leader facing a re-election battle.

The Climate is Changing

When I say the climate is changing, I do not mean, as many people do, that man-made global warming is destroying Planet Earth.  I mean that the politics of climate change is changing rapidly all over the globe.  Al Gore's moment has come and gone.

In the United States, Democrats, nervously facing midterm elections, are calling on President Obama to jettison the cap-and-trade bills before the Senate.  In Canada, the emissions-trading scheme -- another term for cap-and-trade -- is stalled in legislative limbo.  In Britain, Tories are coming out against David Cameron's green stance.  In the European Union, cap-and-trade has been the victim of fraudulent traders and the carbon price has more than halved to $18.50 per ton.  In France, the Constitutional Council has blocked President Nicolas Sarkozy's tax on carbon emissions that was set to take effect in the New Year.

In Copenhagen, meanwhile, the United Nations' climate-change summit went up in smoke.  And in Mexico City later this year hopes for any verifiable, enforceable and legally binding agreement to reduce greenhouse gases -- and to bring in developing nations such as China and India that were, insanely, omitted from the Kyoto protocol in 1997 -- are a chimera.

Add to this that Washington was buried by record-breaking snowfalls last month, that hurricane activity is at a 30-year low in the U.S., that London is bracing itself for its coldest winter in decades, and that there has still been no recorded global warming this century, and it is no wonder public skepticism is rising across the world.

Nowhere is the changing climate more evident than in Australia.  Last month, the Senate voted down the Labor Government's legislation to implement an emissions-trading scheme.  Polls show most Aussies oppose the complicated cap-and-trade system if China and India continue to chug along the smoky path to prosperity.  The center-right Liberal-led opposition, moreover, is now led by Tony Abbott, a culture warrior who has described man-made global warming in language unfit to print in a family newspaper and cap-and-trade as "a great big tax to create a great big slush fund to provide politicized handouts, run by a giant bureaucracy".

Until Mr. Abbott's election as opposition leader last month, the climate debate in Australia had been conducted in a heretic-hunting, anti-intellectual atmosphere.  Prime Minister Kevin Rudd claimed that climate change is the "greatest moral, economic and social challenge of our time".  In clear breach of the great liberal anti-communist Sidney Hook's rule of controversy -- "Before impugning an opponent's motives, answer his arguments" -- Mr. Rudd linked "world government conspiracy theorists" and "climate-change deniers" to "vested interests".  Much of the media, business and scientific establishment deemed it blasphemy that anyone dare question his Labor Party's grand ambitions.

Australians had heard a lot of science, much of it poorly explained.  But the "dismal science" had been conspicuously absent from the climate debate.  There was very little serious analysis of the economic consequences of climate change:  What choices did we have to mitigate its effects, and how much would these choices cost us?  Labor ministers had emitted a lot of hot air about global warming and the urgency with which resource-rich Australia (which accounts for only 1.4% of global emissions) must act.

All of this has now utterly changed:  Australia's debate has entered a new phase, one that goes beyond the religious fervor and feel-good gestures that had held sway all too often.  Suddenly, political strategists are thinking the unthinkable:  far from presaging an electoral debacle that was inevitable under Mr. Abbott's green predecessor Malcolm Turnbull, the issue could be a godsend for conservatives Down Under.

Already, Mr. Abbott -- an Anglophile, Rhodes scholar, patron saint of Australian conservatives and protégé of former Prime Minister John Howard -- is gaining ground in the polls.  In their first test at the ballot box since they killed the government's climate legislation last month, his Liberal Party recorded impressive victories in by-elections in Sydney and Melbourne -- confounding the conventional wisdom that opposition to cap-and-trade will damage a center-right party in metropolitan seats.

In this environment, Mr. Abbott deserves praise for persuading Australia's conservatives to fight Labor on climate change -- even when the liberal wing of his own party would happily bow to Mr. Rudd.  Not only will he raise the temperature over the inevitable higher costs in energy, transport and groceries under the next tax -- and thus appeal to Labor's working-class and coal mining and other energy-intensive constituencies -- Mr. Abbott will also radiate the technological optimism that has characterised the human species since time immemorial.  His case is not an appeal to do nothing, but to avoid doing something stupid.  And unilateral Australian action in a post-Copenhagen world would be stupid:  Economic Pain For No Environmental Gain.  Not a bad slogan during an election scare campaign.

To be sure, Mr. Rudd remains politically popular on the back of a strong local economy that has weathered the global financial storm.  But as the changing climate shows, Mr. Abbott is tapping into a more skeptical mood about climate change.  If he wins the federal election later this year, Australia's opposition leader will be a role model to conservative skeptics around the world.

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Australia Will Survive the Greenback's Fall

Governments around the world currently are trying to respond to the declining value of the U.S. dollar.  Several Asian countries have intervened in currency markets to try to soften the blow.  Brazil has imposed a tax on the capital inflows seeking returns from an appreciating real.  Australia, however, is taking a different-and better-approach:  Doing nothing.

The central bank is operating monetary policy solely in line with domestic economic conditions.  With the economy rebounding and underlying inflation still above the 2%-3% target band, that has meant increasing interest rates from their emergency low levels-by 0.25 percentage points at two consecutive meetings, most recently last week.  This hike, coupled with strong global demand for Australia's mineral exports, has pushed the Australian dollar up 45% against the greenback since February.  It is possible that the Australian dollar could eventually reach parity or even beyond.

This is an unusual policy stance, especially in the Asian context.  Central banks in the region are buying the U.S. dollar in the hope of restraining its fall and promoting their own country's exports by keeping them from appearing relatively more expensive in dollar terms.  And domestic exporters have been howling.

But Australia is on the right track.  A depreciating U.S. dollar is a market signal that the U.S. needs to export more and save more.  It is a symptom of extremely loose monetary policy and high government spending in Washington.  It is also a warning about inflation, given a dollar today buys fewer goods than it did a year ago.  U.S. policy makers are reinforcing this cycle by refusing to reform America's "too-big-to-fail" financial system and avoiding tough decisions on spending priorities.  In a sense, the falling dollar is a signal that the U.S. needs reform at home.

Central banks abroad that buy dollars to control the dollar's fall are both ignoring and subverting these market signals.  Their dollar purchases are placed into reserves that are often recycled into purchases of U.S. government debt, enabling the profligacy that's causing the problem in the first place.  Meanwhile, this policy effectively imports U.S. inflation.  Inflation is a tax on initiative and innovation;  it leads to severe economic dislocation and allows governments to avoid making the kinds of efficiency-boosting reforms that would be in their best interests anyway.

Australia's decision not to follow suit will be controversial in a country that fears "Dutch disease", the situation where strong demand for a mineral-rich economy's commodities pushes the currency up, which in turns makes the manufacturing sector less price competitive.  Minerals comprise 8% of Australian GDP but 48% of total trade.  In the extreme, the fear is that Dutch disease could force manufacturers out of business entirely, as supposedly happened in the Netherlands after oil was discovered offshore in the 1950s.

The normal prescription lies in various nonmarket actions such as creating a sovereign wealth fund to keep commodity revenues offshore, or entry taxes, or various subsidies such as government "innovation funds" to boost the "competitiveness" of domestic manufacturers.  No doubt rent-seekers in Australia will be lining up the arguments for subsidies and various protections as prices for Australian goods and services rise on international markets.

But Dutch disease is just another form of creative destruction, and Canberra should not fear it.  Economist Joseph Schumpeter recognized that while economists fixate on price competition, business also competes on cost and quality.  If the prices of Australian goods and services are rising on world markets, this provides a clear incentive for Australian firms to either reduce their costs or to improve the quality of their offerings.

Rather than seek out government protection and subsidies, export-oriented firms should be innovating in response to a strengthening currency.  This ultimately benefits consumers and, very often, the firms themselves.  Similarly, governments should not be buying U.S. dollars and undermining market signals;  they should consider reforms like tax cuts and red-tape cutting that allow firms to respond to market signals more quickly.  Central bankers Glenn Stevens's lack of concern on the exchange rate should, in particular, force Canberra to reconsider plans to re-regulate labor markets and to reconsider its expensive and economically wasteful emissions trading scheme that would make manufacturers significantly less competitive.

Seen in this light, a weak greenback can have its advantages for the rest of the world.  The U.S. is an exporter of intellectual property and business know-how that often forms the basis of innovation.  If more countries followed Australia's lead, they would force the U.S. to bear the consequences of its fiscal irresponsibility, while also gaining more purchasing power to buy U.S. assets and technology on the cheap to help reform their own economies.  What a smart idea.

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