Where is the real Peter
Costello? Is he the best Treasurer
we’ve ever had, or could a chimp
have run the economy? On the positive side, Australia has
experienced high economic growth rates, avoided recession, and avoided
the
east-Asian crisis. To some extent he can
claim success for these achievements. True, the previous government had
initiated important reforms. Costello did some hard yards. A very
simple policy mistake could have seen
us engulfed in the east-Asian crisis, but he strenuously argued against
raising
interest rates at the time. New Zealand
made that mistake and paid the price.

Costello’s greatest achievement
relates to the rather boring topic of public debt. An indebted government represents both
economic and moral failure. Costello has
engrained this idea in the political psyche; the reduction of net government
debt has been an obsession. Mind you,
this policy has earned him few friends in the economic profession who argue
that governments can somehow fine-tune economic growth using fiscal
policy. Costello has no truck with such
nonsense and future generations should be grateful he has not increased their
tax burden via public debt.

It is in the current tax burden that
we see Costello’s greatest failure. Think of the tax burden in these terms: The government spends like a
drunken sailor, it has reduced Labor debt, and it has run an ever-increasing
budget surplus. Rather than cut taxes,
he is now nationalising the stock market through the Future Fund. Other failures include the Telstra
privatisation. Management (both past and
present) should never have been allowed to run amok and destroy shareholder
value.

How can we evaluate his complex
record? On public debt policy he has
been exactly correct. In the greatest
economic crisis to hit our region in decades he made exactly the correct
call. It is not fair to say Costello
inherited his good fortune. On taxing
and spending, he has been mediocre; the Future Fund is just wrong. All up a solid performance, but could do much
better.

Peter Fray

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