Yesterday in Melbourne, I spoke at the Finance and Treasury Association public sector conference. Treasurer Peter Costello would not have enjoyed one of the power point slides I presented.

“Accounting fiddles”, “glass jaw”, “tax and spend”, “raiding the RBA”, “blowing out super” and “intimidating economists” were some of the phrases that reverberated around the room as delegates tucked into lunch.

Costello may have tried to distance himself from John Howard’s spending spree last year through that fascinating Pam Williams feature in the Fin Review earlier this year, but the fact remains that he’s the treasurer who will next month try to claw back some of the largesse.

It’s interesting to note that Costello and Howard last year presided over the second biggest increase in Federal own-purpose outlays (excluding defence and interest payments) since the Whitlam years, of 10.7% – exceeded only in 1983, the last occasion on which a Coalition government sought to spend its way into a 4th term of office, with rather less success, as it turned out.

We exclude defence and interest on the grounds that one can make a case that the former needs to go up given our commitments in Iraq, East Timor, Solomon Islands and PNG, while the latter has gone down mainly because the Reserve Bank has halved interest rates over the past decade and the government has flogged a lot of assets.

Legend, as you may recall, has it that the treasurer at the time of the last big spend up, one John W Howard, was so troubled by what his profligate PM made him do to his budget that he let it be quietly known that he considered resigning over it. He was not so troubled that he actually resigned, mind you.

However, there does not appear to have been any similar occurrence of fiscal conscience by the treasurer on this most recent occasion. Of course, Costello is on some measures the highest taxing treasurer in Australia’s history – the revenue base having been boosted by the surge in commodity prices and unbelievably strong employment growth.

This contrasts with Howard who found his revenue base eroded by the recession of 1982-83, thus leaving the “black hole” that Hawke and Keating exploited as mercilessly as Howard did over the one allegedly left by Kim Beazley, as finance minister, in 1996.

Peter Fray

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