Ryan Bridge: Governments should control spending and stability

There are basically two big things governments control that affect the economy and therefore all of us: spending and stability.  They're not to be taken for granted, but too often they are.  Romanians are going to bed right now, unsure of who will run their country. The Government's just lost a confidence vote.  The socialists have sided with the far-right, of all groups, to collapse the Coalition.  This is bad for their economy because business relies on stability and predictability. Their absence kneecaps investment decisions and therefore growth. It's the same reason investors are jittery in the UK.  Long-term bond yields are the highest they've been since 1998.  Why?  Because Starmer is going to get a hiding in local elections.  His replacement, either Angela Rayner or even the outsider Andy Burnham, are left of him and that could mean more spending and borrowing. Something markets, unsurprisingly, think the motherland can ill-afford at present. Which brings us neatly to spending - look no further than across the Tasman. The RBA yesterday hiked the cash rate, pushing mortgage costs up, for the third time this year. And it comes with a warning to Jim Chalmers, their Nicola Willis equivalent and her jogging buddy in DC, watch your spending cobber or you'll make this worse.  Too much spending is fuel on the fire, and the fire is burning, heading for 5%. Pretty much every economist there, including our mate Paul Bloxham (Rockstar economist), says the key risk to Aussies right now is the threat a budget —due Tuesday— bazookas the cash more than expected.  That could force rates even higher and Australians would get poorer.  All of this is to say there are plenty of lessons around the world, just in the last 12 hours, let alone modern history, that say politicians' main job is basically to be responsible.  Get along with one another. And don't be tempted to buy votes with cash you can't afford in the short-term that we all pay for in the long-term.See omnystudio.com/listener for privacy information.