It is unlikely to matter in the long run, but this morning the Opposition took time out from falling apart to launch a “debt reduction strategy”. It represents a major shift back toward the Coalition’s traditional rhetoric of small government.
For most of the Howard years, that rhetoric was arch hypocrisy, as Government expenditure soared on the back of middle class welfare and pork barrelling. The Howard Government became the highest taxing and spending Government in Australian history until the Rudd Government threw $50b at the recession.
This morning, Malcolm Turnbull, flanked by Helen Coonan and Joe Hockey, committed to reducing Government expenditure to 25% of GDP, establish an independent Parliamentary Budget Office, reduce “waste and mismanagement” and “increase economic growth”.
The Parliamentary Budget Office is an excellent idea. But reducing “waste and mismanagement” is traditional fare for all Oppositions and can be safely ignored. And economic growth looks so obvious as to be meaningless — what politician has ever campaigned on economic recession? — but it is important because therein lies the magic pudding that the Coalition will cite against inevitable Government attacks that the 25% figure means massive cuts to expenditure.
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We know those attacks will come because they came when Joe Hockey, barely a month ago, committed the Coalition to reducing Government expenditure over time to 24%. Turnbull provided no explanation this morning for why Hockey has been repudiated on that lower figure, which would have been well below the levels achieved for most of the Howard and Hawke-Keating years.
In response to Hockey’s 24% figure, Wayne Swan pointed out that that commitment amounted to $48b in reduced expenditure.
My calculation suggests Turnbull’s 25% of GDP commitment amounts to over $36b in cuts in 2010-11, although the commitment is to do so “over time”. Done over the full three years of an electoral cycle, that’s $12b cuts each year for three years. No Government has ever achieved that.
The Coalition response is likely to be that “higher economic growth” will in fact do much of the work for them. That was sort of fiscal discipline that saw the Howard Government throwing money at everything that moved in its final term but still keeping expenditure to 25% of GDP because of the mining boom.
The Coalition’s commitment to “higher economic growth” will be via “a vigorous reform, infrastructure and innovation agenda” and support for small business (another inevitable feature of Opposition rhetoric). Infrastructure, of course, traditionally tends to cost Governments money rather than save it.
Any party’s commitments to reduce the size of Government should be welcomed. But on the Coalition’s form under John Howard, this should be treated with extreme scepticism. Malcolm Turnbull today failed to identify a single program that would be cut or expenditure that would be slashed to get his $12b a year. He didn’t even say that the Coalition would stop blocking the Government’s spending reduction measures, like means-testing private health insurance rebates, in the Senate.
It looks like the Opposition talks the talk but won’t walk the walk, for the sake of expediency.
But the Government’s stimulus package will be finished by the time Treasurer Joe Hockey stands at the Dispatch Box to deliver his first Budget. The savings will have to come from somewhere. Given the Coalition’s form, its promises of smaller government should be ignored until it produces, line-by-line, an account of where its expenditure cuts will come from.
And relying on some “economic growth” magic pudding to cut spending is the same old voodoo economics we’ve been hearing from politicians of both sides for decades. It’s a poor effort from an Opposition in disarray.