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Henry cautions against getting too cocky on economy

By Sandra O'Malley
Mon Aug 17 19:53:41 EST 2009
Eds: Takes in Homes

CANBERRA, Aug 17 AAP - Treasury secretary Ken Henry has cautioned against getting too cocky about the upbeat Australian economy - a second global shockwave may still be lurking in the wings.

And as the nation's top economic bureaucrat tried to put the brakes on expectations, the opposition moved to exploit any residual public concern about Labor's record on the economy.

In parliamentary question time on Monday, the coalition raised the prospect of possible tax hikes by the federal government following reports it was considering a capital gains tax on the country's poshest homes.

It questioned, too, whether an increase in the fuel excise could be on the agenda, as well as tax hikes to help fund Labor's health program.

The coalition strategy coincides with a new poll that suggests the economy remains one of the few possible weak spots for Labor.

A poll by Essential Research showed the Rudd government was still playing catch up with the previous Howard government when it came to how capable it was perceived at handling the economy.

The survey found 39 per cent believed the Howard government was better at handling the economy, against 37 per cent for the Rudd government.

Treasurer Wayne Swan has denied Dr Henry's tax review has been asked to do modelling for a capital gains tax on homes worth more than $2 million.

Dr Henry described the suggestion as "pure fiction" but Prime Minister Kevin Rudd failed to categorically rule out new taxes directed at the family home.

"I am unaware of any such request," was what he told parliament, rounding on the coalition for a campaign of "fear and smear".

If Dr Henry and Mr Rudd weren't reading from the same script on tax, they were when it came to the government's economic stimulus measures.

Speaking to business leaders on Monday, Dr Henry acknowledged the part the Rudd government's rapid fiscal policy response had played in helping Australia stave off the worst of the economic crisis.

"Retail trade turnover was showing significant weakness prior to the first stimulus payments," Dr Henry said.

Retail turnover had been sluggish for much of the latter part of last year, but since the stimulus retail sales had grown by more than five per cent to the end of June.

By contrast, retail sales in comparative developed nations were continuing to fall.

Overall, Dr Henry admitted, there were grounds for optimism about the Australian economy, which was more resilient than the rest of the world.

But, with pundits growing increasingly more confident about the Australian outlook, Dr Henry suggested a cold shower may be in order.

"We would want to be a little careful not to prematurely declare that the war is over," he said.

While Australia was holding up well, the international economy was "not out of the woods yet".

"It's possible that there will be a second shockwave," Dr Henry said.

"There's no reason to think it will be anything like the first shockwave in size and intensity - it won't be - but there could a second shockwave to hit us and that too could have implications for future growth."