Economy leaps on to centre stage

CANBERRA - After two weeks dominated by Labor's self-immolation, fashions and campaigning styles, Australia's election campaign yesterday finally exhumed former US President Bill Clinton's famous reminder: It's the economy, stupid.

With the Reserve Bank keeping interest rates on hold, Prime Minister Julia Gillard and Opposition Leader Tony Abbott focused on the issue they had both identified at the start of the race as the key to victory.

Given the rates decision, its performance during the international crisis, and a steady recovery since, the Government should be able to use its record - and forecasts for the next few years - as a formidable weapon.

But voters continue to hold long-standing doubts about Labor, and in polls consistently rate the Coalition as a superior economic manager: the latest Newspoll favoured Abbott 47 per cent to 40 per cent over Gillard as better controller of the national purse strings.

Nor is Abbott at this stage prepared to give Gillard the chance to push her case in a face-to-face confrontation, rejecting the Prime Minister's offer of another debate next Sunday night focusing on the economy.

Apart from the fact it would divert attention from the Coalition's campaign launch that day in Brisbane, Abbott has been turning Gillard's about-face on a second debate to his advantage, portraying the move as a show of desperation.

"The Prime Minister repeatedly refused to have the three debates Labor committed to when she was ahead in the polls," he said.

"Now that her campaign is in trouble, she's flip-flopped on this too."

But his comment "she's surely not trying to say to us that no doesn't mean no" was seized on as a gaffe.

The Australian Greens immediately labelled the comment "inappropriate"since 'no means no' is usually used in the context of anti-rape campaigns. Abbott defended himself on radio: "The Labour Party spin merchants are running around saying 'This is terrible, this shows Abbott is insensitive to women. I'm not going to cop this kind of vicious smear."

The Opposition has repeatedly attacked Labor's record, disputed its performance during the financial crisis and hammered the cost of the stimulus package used to counter it, claiming that as a result the nation was at present borrowing A$100 million ($119.5 million) a day.

Labor is also under attack for its plan to use a special "one-off" dividend of A$300 million from the state-owned health fund Medicare Private to help pay for election promises.

Although any consequent rises were denied by Treasurer Wayne Swan, Abbott said the dividend was equivalent to an 8 per cent increase in private health insurance premiums.

The Government is pounding the Opposition over its tax policies and for changes to a previously announced campaign promise for a paid parental leave system that, while more generous than Labor's, would not take effect for two years, would cost A$3.3 billion a year rather than the A$2.7 billion originally estimated, and which would be funded by a 1.5 per cent levy on the nation's biggest companies.

Promising high employment, Gillard said yesterday the Government's stimulus measures had created 450,000 jobs while millions were thrown out of work elsewhere.

"We made the better economic decisions when the going was tough, and for the future we are going to keep making the better economic decisions."

Optimistic Treasury forecasts were yesterday supported by Reserve Bank Governor Glenn Stevens' summary in support of the board's decision to keep its cash rate unchanged at 4.5 per cent.

He pointed to rising incomes and demand, higher output growth, increased business investment, low inflation and gradual growth in employment and wages.

But the huge swing that dumped John Howard's conservative Government from power at the last election, when Australia was prospering, is a cautionary tale for Gillard.

Analyses of Howard's defeat have indicated that apart from a range of other issues - notably industrial laws - rising interest rates and petrol prices had helped foster a perception of falling living standards and inequalities in wealth distribution.

Australia's economy as it heads towards the August 21 election is strong, but uneven, especially in the marginal seats crucial to the outcome. There are large disparities in incomes and in pressures on family life.

The latest annual work and life index released by the Australian Council of Trade Unions yesterday showed the proportion of full-time workers reporting dissatisfaction with their work-family balance had increased, especially among women, and men aged 29 to 49.

A wide range of indicators further point to problems in the suburbs, among them rising costs in such key areas as council rates, electricity and gas, and - even with interest rates on hold for the moment - mortgage repayments and soaring rents.

More than 630,000 households are forecast to come under some form of mortgage stress by the end of the year, including thousands who have trouble paying essential bills.

A small overall rise in retail sales figures for June, released yesterday by the Bureau of Statistics, disguised falls in food, clothing, footwear and other personal accessories. "People are actually putting less on the dinner table and that's reflected with a drop in food retailing," United Retail Federation president Scott Driscoll said.

- ADDITIONAL REPORTING: AAP