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Stimulating hypocrisy from Hockey: Joe’s changed tune

With Treasurer-elect Joe Hockey considering fiscal stimulus, it’s time to revisit what he said about how pointless stimulus was four years ago in opposition.

Joe Hockey puppies

With incoming Treasurer Joe Hockey now publicly musing about providing fiscal stimulus to the economy out of concern about how weak it is, let’s look back at the Coalition’s best arguments against stimulus when Labor used it during the financial crisis …

A weak economy is no justification for spending.

In September 2009, the June quarter national accounts showed the Australian economy was growing at 0.6%. The budget in May that year had forecast unemployment to rise from 6% to 8.25%. In September, unemployment was at 5.8%. That was when then-shadow treasurer Joe Hockey said that the GDP numbers showed it was time “to pull back on the spending … to pull back on its massive spending program”.

The proof today in the accounts,” Hockey explained, “is that the money being spent over the next four years by the Rudd government will be about politics and not about economics. The outcome today is proof positive that Australia is resilient and capable, and if we continue to spend money the way the Rudd government is, we will have higher taxes and higher interest rates. Today’s a warning bell for Mr Rudd.”

Australia’s most recent GDP growth rate is 0.6% and unemployment is now at 5.8% — just like when Hockey spoke. Unemployment is currently forecast to reach 6.25% next year, not 8.25%.

According to Hockey’s 2009 argument, it’s time to pull back on spending.

Borrowing for stimulus crowds out the private sector and drives up interest rates.

A tighter fiscal policy would not have soaked up so much of the scarce available capital market resources, lessening the chance of crowding out of private sector borrowers,” Hockey said in August 2009. “We must ensure that fiscal policy does not result in the government crowding out private sector access to affordable credit in a growing economy,” he said a few months later. The dead hand of government borrowing “crowding out” the private sector and lifting interest rates became a Coalition theme.

It’s why I have been so resolute in my opposition to the reckless accumulation of debt by government,” said Hockey. “That debt is placing upward pressure on interest rates domestically and has an effect internationally, making it more difficult for enterprise”

Four years later, Commonwealth net debt:GDP has gone from negative when Hockey spoke to 11% of GDP. Under the crowding out thesis, this must mean interest rates have soared and business, as opposition finance spokesman Andrew Robb put it later, would be unable “to access finance for love or money”.

The RBA cash rate is currently 0.5 of a point below where it was when Hockey spoke in 2009. Small and big business lending rates have been falling for two years and according to the Reserve Bank are now equal to or lower than they were in 2009 at the depths of the financial crisis. As for crowding out, the RBA shows business investment even after the peak of the mining boom remains higher than in 2009, when Hockey warned business would be unable to access credit.

Stimulus doesn’t create jobs.

It was the automatic economic stabiliser of the exchange rate and the work of the Reserve Bank which restarted our economy,” said Robb in 2012. Any other claim was a “deceit” that “has been used to justify borrowing and spending of $87 billion and more”.

In fact, it destroys jobs.

Both then-opposition leader Malcolm Turnbull and Hockey claimed in early 2009 that the Rudd government was in fact destroying jobs with its stimulus and bank deposit guarantee policies, although Hockey struggled to give an example when repeatedly asked for one by Leigh Sales.

At that point the number of employed people was 10.9 million. Two years later employment stood at 11.4 million, with the same (in fact, marginally higher) participation rate. Just under half a million jobs had been created in the period after Hockey spoke.

For that matter, low interest rates are more important than jobs.

At a media conference at Parliament House in September 2009 (the transcript, oddly, never emerged from Hockey’s office) on the August 2009 jobs figures — same unemployment rate as now — Hockey was asked by a journalist, “you’re saying it’s more important to keep interest rates low than spend money to keep people in work?” “Yes,” Hockey replied.

The economy may well need some additional fiscal support in coming months. Hockey has already flagged the Coalition will not be aggressively cutting spending to return quickly to surplus and flagged that if stimulus is necessary, monetary policy is near the end of its capacity to provide it. That is, Hockey is going about the task of managing the economy sensibly.

Too bad that when Labor did the same, he could do nothing but attack it. Labor has every right to repay him in kind.

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  • 1
    cnewt27
    Posted Monday, 16 September 2013 at 12:42 pm | Permalink

    Incoherent nonsense from Abbott and co for 3 years.

  • 2
    Jimmy
    Posted Monday, 16 September 2013 at 1:19 pm | Permalink

    This is going to be one of the few joys of an Abbott govt, watching them try to justify doing things which are inherently sensible but they have attacked for the last 4 years, things like running a defict, allowing debt to grow and good forbid stimulate the economy - and I can’t wait to hear the libs spruikers on this site reverse their position.

  • 3
    robinw
    Posted Monday, 16 September 2013 at 1:26 pm | Permalink

    I know they are full of it, so do you. The Australian people don’t though and won’t we all suffer because of it.

  • 4
    bluepoppy
    Posted Monday, 16 September 2013 at 1:38 pm | Permalink

    There should be a regulation that says any politician who lies during an election campaign automatically loses pre-selection. Problem is that we would only end up with about 20 representatives. Too generous?

  • 5
    Terry Goulden
    Posted Monday, 16 September 2013 at 1:49 pm | Permalink

    Having lived through the lies and half-truths from Hockey, Robb and Kormann for the last few years on the so-called crisis in our economy etc I don’t feel that I will ever be able to consider these people as a legitimate government. It was obvious that the only way they were able to achieve government was to completely fool the voting public

  • 6
    Gary Gaunt
    Posted Monday, 16 September 2013 at 1:56 pm | Permalink

    Sounds a lot like after they have seen the real state of the economy and the forward spending committed on political gewgaws by Labour they need to shift some goal posts.

    Not entirely unexpected and the usual Labor legacy.

  • 7
    Posted Monday, 16 September 2013 at 1:59 pm | Permalink

    Labor could attack the Coalition’s inconsistency if not hypocrisy, but hopefully for the good of the economy and for Labor’s own consistency Labor simply welcomes the Coalition to the Keynes club.

  • 8
    Jimmy
    Posted Monday, 16 September 2013 at 2:00 pm | Permalink

    Yeah Gary it is all the ALP’s fault - nothing to do with a ridiculously expensive PPL, or winding back means testing of the private health rebate, or reversing the high income super tax changes or the expensive direct action that won’t work or most importantly that the govt stimulating the economy when it weakens is actually good policy.

    And why couldn’t they see this real state prior to the election?

  • 9
    David Hand
    Posted Monday, 16 September 2013 at 2:01 pm | Permalink

    Hockey, Robb et al were talking about the weak economy all election campaign. It was Rudd, Swan, Albanese etc shouting “Cut cut cut” and “cut to the bone” with regard to Coalition economic policy.

    The fact is that the Australian economy in 2013 is much weaker than it was in 2009 at the height of the resources boom. That’s why the cash rate is at a record low. It’s also why Hockey will be running a deficit.

    There you go Jimmy.

  • 10
    Jimmy
    Posted Monday, 16 September 2013 at 2:01 pm | Permalink

    Gavin - I think the ALP should do both, support the stimulous and back it as good policy while pointing out that the Libs are late to the party.

  • 11
    Savonrepus
    Posted Monday, 16 September 2013 at 2:04 pm | Permalink

    This place has more bias than the Sydney-Centric Rugby League Administration. Just let Joe get on with doing what he has to do to sort out the mess and let the other mob play the leadership games that is the Labor Party.

  • 12
    Jimmy
    Posted Monday, 16 September 2013 at 2:04 pm | Permalink

    Hockey, Robb et al were talking about the weak economy all election campaign. It was Rudd, Swan, Albanese etc shouting “Cut cut cut” and “cut to the bone” with regard to Coalition economic policy.”
    And it was Hockey Robb et el spruiking the need for surplus while promising billions in new spending. Given they still haven’t released their costings but we know they factored in higher growth rates than treasury predicted in the PEFO “cuts” are still highly likely while a surplus is unlikely - the exact opposite of what the libs have “promised”

  • 13
    Frank Birchall
    Posted Monday, 16 September 2013 at 2:05 pm | Permalink

    Learn some basic economics, Gary; Hockey’s brazen hypocrisy is just par for the LNP course: say anything, do anything to attract votes (at least in the short term)and of course automatically oppose whatever the ALP government proposed, however stupid such opposition turns out to be.

  • 14
    Jimmy
    Posted Monday, 16 September 2013 at 2:06 pm | Permalink

    Savonrepus - Could you explain exactly the “mess” Hockey has to sort out and how the policies they currently have will “sort it out”?

  • 15
    Joe Fitzpatrick
    Posted Monday, 16 September 2013 at 2:21 pm | Permalink

    We now have a bumbling, self-contradictory, sweaty idiot in charge of the economy.

  • 16
    klewso
    Posted Monday, 16 September 2013 at 2:32 pm | Permalink

    Welcome to Shrek’s “Swampenomics”? Mind the quicksand of duplicity - the further in we get the more there is.

  • 17
    Griffiths Karen
    Posted Monday, 16 September 2013 at 2:40 pm | Permalink

    Swampenomics” Wonderful!

  • 18
    Andybob
    Posted Monday, 16 September 2013 at 2:49 pm | Permalink

    Say it ain’t so Joe !

  • 19
    robinw
    Posted Monday, 16 September 2013 at 2:52 pm | Permalink

    Savonrepus - the only mess Joe Hockey has to clear out is the one between his ears. I’m afraid that could take a lifetime to achieve which leaves the state of our economy in the hands of a partisan and bumbling ideologue.

  • 20
    the duke
    Posted Monday, 16 September 2013 at 3:06 pm | Permalink

    lefties still reeling after the massacre? the name of the most recent ALP treasurer escapes me however, Hockey will prove a better treasurer than Swan.

  • 21
    Jimmy
    Posted Monday, 16 September 2013 at 3:09 pm | Permalink

    lefties still reeling after the massacre?” What massacre? Seems to me the margin was on the smaller side of what the libs were expecting and they don’t control the senate.
    “Hockey will prove a better treasurer than Swan.” Should he prepare space on the shelf for the treasurer of the year award then? And exactly what economic policy gives you that confidence?

  • 22
    Griffiths Karen
    Posted Monday, 16 September 2013 at 3:11 pm | Permalink

    Seriously ‘the duke’- look at his comments and responses. Hockey has no idea about economics, and that is a pretty frightening outlook! Not being party political here, cos u did win, but Hockey HAS NO IDEA!

  • 23
    the duke
    Posted Monday, 16 September 2013 at 3:18 pm | Permalink

    And exactly what economic policy gives you that confidence?”

    ha! funny thing is, the Coalition doesn’t even need a policy for this one. Leadership stability and having the ability to connect with the business community will work wonders.

    In fact, the recent NAB Business Sentiment survey provides ample evidence that the business community had no confidence in the ALP whatsoever.

  • 24
    Griffiths Karen
    Posted Monday, 16 September 2013 at 3:28 pm | Permalink

    the ….” it’s been the same after every Oz election-a spike in all things economic-business confidence, stock market, Oz dollar etc. then it all falls back to reality, just as the market has. Choose anyone else on your side as treasurer, but not Hockey.

  • 25
    Jimmy
    Posted Monday, 16 September 2013 at 3:31 pm | Permalink

    ha! funny thing is, the Coalition doesn’t even need a policy for this one.” Are you trying to out do Fiona Scott for the stupidest statement of the year?

    the recent NAB Business Sentiment survey” And there we have it, the old “confidence” argument, there have been numerous article recently outlining how stupid this line of thinking is from the conservatives, business investment wasn’t at all bad under the ALP and “confidence” doesn’t generate GDP growth or employment.

  • 26
    the duke
    Posted Monday, 16 September 2013 at 3:37 pm | Permalink

    partially true however a key dynamic that has been constraining demand in the Australian economy has been the failure (to date) of business confidence to respond to lower interest rates in the way interest rates have acted as
    a circuit breaker in previous economic cycles.

    also, and you think Wayne Swan was an astute treasurer? believe what you want i guess…

  • 27
    Honest Johnny
    Posted Monday, 16 September 2013 at 3:41 pm | Permalink

    I think we will see a lot of hypocrisy coming out of this new government. They will convince the tabloid newspaper/radio audience that its O’K to go further into deficit/debt under the coaltion because its “only the coaltion that can fix it”. Under Labor it always labeled a “mess”. Under the coalition its labeled “strong, decisive government in difficult times”, under Labor its labeled “bad Government”.
    Hypcrisy - that’s precisely why I don’t like em.

  • 28
    the duke
    Posted Monday, 16 September 2013 at 3:41 pm | Permalink

    ahhh Jimmy… produce a credible article suggesting business confidence is a ‘stupid line of thinking’ and I’ll happily read it..

  • 29
    Jimmy
    Posted Monday, 16 September 2013 at 3:42 pm | Permalink

    the duke - ” key dynamic that has been constraining demand in the Australian economy has been the failure (to date) of business confidence to respond to lower interest rates” Please find evidence of this beyond simple confidence surveys - what has been the level of business investment or business borrowing for example? Could you also include an analysis of the Australian dollars behaviour in recent years compared to other occasions that interest rates have been low and how that has “constrained” the economy?

  • 30
    Jimmy
    Posted Monday, 16 September 2013 at 3:43 pm | Permalink

    the duke - ” key dynamic that has been constraining demand in the Australian economy has been the failure (to date) of business confidence to respond to lower interest rates” Please find evidence of this beyond simple confidence surveys - what has been the level of business investment or business borrowing for example? Could you also include an ana ly sis of the Australian dollars behaviour in recent years compared to other occasions that interest rates have been low and how that has “constrained” the economy?

  • 31
    the duke
    Posted Monday, 16 September 2013 at 3:45 pm | Permalink

    whilst you are responding to my question, i’ll come back to you..

  • 32
    Jimmy
    Posted Monday, 16 September 2013 at 3:46 pm | Permalink

    the duke - Here is the first paragraph from an article on this site just last week -
    “A surging Australian dollar to near three-month highs overnight will help to bring a big dose of realism to all this talk of expectations and confidence driving a weak Australian economy higher. As US economist Paul Krugman said, the “fairies of confidence” and the “imps of expectations” are nothing but ephemera in the greater scheme of things, there to wave their wands when all else fails. We saw this yesterday when the sharp rise in business confidence in the National Australia Bank’s August business survey, but little or no impact on weak trading conditions.

  • 33
    Jimmy
    Posted Monday, 16 September 2013 at 3:49 pm | Permalink

    The duke - I forgot to put the title - its “Our biggest economic problem could be a housing price boom” and it goes on to say - “Much of this “confidence” stuff is economic gobbledygook — like Tony Abbott’s line that Australia is now “open for business”. Improving expectations and confidence among business and consumers is imprecise and hard to formalise, and has minimal correlation with real-world outcomes.”

  • 34
    Peter W
    Posted Monday, 16 September 2013 at 3:58 pm | Permalink

    Jimmy, The mess is the $250,000,000,000+ debt that needs to be serviced and retired. Interest at say 4% would currently be in excess of $25 million a day which must either come from taxes, borrowing or money printing.

    As tax revenue is the only way to service debt without inflation or further debt, the Coalition seeks to improve business confidence and activity thereby raising further revenue without having to increase tax rates. Whether this can be done remains to be seen. Business confidence appears to have improved but the structural damage to the market system due to poor and excessive legislation will take some time to repair.

    Keynesianism is not a long term solution it just kicks the can down the road to a time that proponents hope will better suit debt reduction. But that time never comes as Labor always spends 110% of available funds. I hope Mr Hockey will have the courage to make the unpopular moves necessary to put the budget back in the black and slowly reduce debt. There is no other viable long term solution. You cannot service household debt by incurring further debt so why should the rules be different for government? Eventually the piper must be paid.

    I invite rusted on Labor supporters to view the current Treasury Bonds on Issue and advise how they would propose to service this enormous debt and maintain their favoured ‘bread and circuses’ style spending.

  • 35
    the duke
    Posted Monday, 16 September 2013 at 4:00 pm | Permalink

    well, as per RBA data, business lending increased in 2012 from a starting point of $635bn in January to $653bn (+$18bn in 2012) in December. As at the end of July 2013, business lending has grown to $660bn (+$6bn in 7 months).

    Based on my calculations, whilst the ALP was in power, business lending is going backwards?

  • 36
    the duke
    Posted Monday, 16 September 2013 at 4:02 pm | Permalink

    @ Jimmy - wasn’t the release of commonwealth owned land (to push down property prices) a key election promise of Kevin07?

  • 37
    Jimmy
    Posted Monday, 16 September 2013 at 4:02 pm | Permalink

    The duke - Just to help you out - “Capital expenditure by businesses rose by 4.0 per cent in the June quarter, the Australian Bureau of Statistics said today, higher than the 0.8 rise the market was expecting.”
    “During the 2013/14 financial year, businesses expect to invest $159.236 billion, which is 11.2 per cent lower than the estimate made for 2012/13 this time last year.” - You would think if your argument is correct given the election result was known that 2013-14 would of been higher than 2012/13.

  • 38
    Jimmy
    Posted Monday, 16 September 2013 at 4:04 pm | Permalink

    PeterW - “Jimmy, The mess is the $250,000,000,000+ debt that needs to be serviced and retired.” if that is the mess then how are the libs going to fix it - they aren’t predicting a surplus for this term of govt and possibly not for 10 years.

  • 39
    Jimmy
    Posted Monday, 16 September 2013 at 4:06 pm | Permalink

    The duke - “Based on my calculations, whilst the ALP was in power, business lending is going backwards?” Only a liberal supporter can take increasing figures and claim the are going in reverse.

    And don’t try to change the topic to some 2007 promise that is irrelevant to what we are discussing - answer my questions or admit you are wrong.

  • 40
    the duke
    Posted Monday, 16 September 2013 at 4:10 pm | Permalink

    as per the latest Westpac Market Outlook - “Business investment slumped in the March quarter, –4.2%, then fell further in the June quarter, declining
    –1.2%. That comes after a broadly flat finish to 2012, with investment expenditure up only 0.4% in the
    December quarter. Annual growth turned negative in the June quarter, printing at –1.3%, the first negative
    reading since mid-2010. Cuts in investment have been widespread. Mining investment trended lower
    from the December quarter 2012 and non-mining spending declined over the past two quarters. By asset,
    in the June quarter: non-residential building activity fell –1.6%; infrastructure work declined by –0.8%;
    equipment spending was cut by –2.5%; and intellectual property products rose 0.8% (constrained by a
    1.5% fall in exploration spending).”

  • 41
    the duke
    Posted Monday, 16 September 2013 at 4:13 pm | Permalink

    do the math Jimmy.. 2.8% growth in 2012, year to date growth of 1.1% in 2013.

    i’m not changing the topic, you were kind enough to bring up ‘a housing price boom…’

  • 42
    Jimmy
    Posted Monday, 16 September 2013 at 4:19 pm | Permalink

    So the westpac market outlook has “business investment” going backwards while the ABS has “capex” going forwards which is interesting.
    Now even if we assume you are correct with your figures could you put some context around the figures - what is causing them, “mining investment is trending lower” from historically massive peaks for example, what role has “liberal state govt’s played on “infrastructure investment”? and is it your argument that all this will be turned around simply by a govt change not policy implementation?
    And still waiting for your Aussie dollar impact on the interest rate circuit breaker.

  • 43
    Jimmy
    Posted Monday, 16 September 2013 at 4:21 pm | Permalink

    do the math Jimmy.. 2.8% growth in 2012, year to date growth of 1.1% in 2013.” Do the math the duke “growth” is still “growth” it isn’t going backwards.

    And I didn’t bring up the housing boom, I referenced an article that mentioned the housing boom that also belittled your “confidence” argument, the housing boom part is irrelevant to our confidence discussion.

  • 44
    Jimmy
    Posted Monday, 16 September 2013 at 4:43 pm | Permalink

    The Duke - This is from the ABC PM website for a story dated the 29th of August-
    “Business investment unexpectedly picked up slightly in the June quarter, but economists say the ABS survey shows firms are planning to cut their spending on new machinery, equipment and buildings next year. Analysts say the weak outlook means at least one more interest rate cut is likely, and whichever party wins next week’s federal election is likely to face further pressure on already battered government revenues”
    How is this good news for the new govt and why isn’t the increased “confidence” of a coalition govt going to increase spending?

  • 45
    Jimmy
    Posted Monday, 16 September 2013 at 4:43 pm | Permalink

    The Duke - This is from the ABC PM website for a story dated the 29th of August-
    “Business investment unexpectedly picked up slightly in the June quarter, but economists say the ABS survey shows firms are planning to cut their spending on new machinery, equipment and buildings next year. Ana l ysts say the weak outlook means at least one more interest rate cut is likel y, and whichever party wins next week’s federal election is likely to face further pressure on already battered government revenues”
    How is this good news for the new govt and why isn’t the increased “confidence” of a coalition govt going to increase spending?

  • 46
    Richard
    Posted Monday, 16 September 2013 at 4:48 pm | Permalink

    I’m with Jimmy.

  • 47
    David Hand
    Posted Monday, 16 September 2013 at 4:57 pm | Permalink

    Confidence is absolutely critical to get Australia’s economy growing after the end of the resources boom. It is lack of confidence that has caused over $300bn in resources projects to be scrapped and why households are paying down debt rather than spending.

    The record low interest rates reflect the gloomy outlook. Employment is soft. This is why the coalition has postponed any talk of a return to surplus any time soon.

    None of this is hypocrisy or misleading the electorate to get elected. Hockey will lead a sensible policy response to current economic conditions.

  • 48
    Jimmy
    Posted Monday, 16 September 2013 at 5:01 pm | Permalink

    David - What has caused this loss of “confidence”? What has caused people to pay down debt? Govt policy or global conditions?
    And what changed between when the coalition was calling for surpluses and now when they are talking about deficits?

  • 49
    David Hand
    Posted Monday, 16 September 2013 at 5:39 pm | Permalink

    The loss of confidence has been caused by changing global conditions. Certainly the collapse in coal and iron ore prices brought the investment programme for the resources sector to a shuddering halt. We haven’t seen the end of it yet. And during that time, the ALP government was AWOL. There was no policy response as the Gillard government was captivated by the Greens agenda and thought that supporting the resources sector would not play well in voter land. So we just got insults about greedy billionaires instead.

    Consumer confidence probably disappeared when people’s houses stopped increasing rapidly and they worked out they’d have to pay the loans off eventually.

    I think the Coalition remains committed to surpluses. They’re just not going to cut, cut, cut, to the bone. Call it hypocrisy if you like. Some of us think it’s good economic management.

  • 50
    TheFamousEccles
    Posted Monday, 16 September 2013 at 6:03 pm | Permalink

    do the math”? Erm, “The Duke”, are you American? If so, then that’s cool, Americans contract Mathematics to Math, and that’s widely acknowledged.

    We don’t, however. Our lexicon of the English as it is spoke, contracts the noun Mathematics to Maths (to me it makes sense, but that’s a different story).

    It’s just, to me, any point you may have with the above discussion, is lost with clumsy, trite slogans. Anyway, carry on.

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