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Federal

Oct 23, 2012

Swan serves up exactly what we deserve

Wayne Swan's MYEFO surplus is a fiction -- which is entirely apt for an economic debate based mostly in fiction.

Wayne Swan’s Mid Year Economic and Fiscal Outlook has delivered the surplus Australia’s economic debate deserves.

It’s chock-full of fiddles, pea-and-thimble tricks, “rephasings” of spending, the full set of accounting tricks plus a few new ones: the grab for lost super accounts ($550 million, and right away please) will probably earn some Treasury officer a Public Service Medal. Like the switch to monthly company tax instalments, it’s a one-off, though of generous proportions (the company tax change won’t kick in for more than 12 months and won’t affect the surplus). Plus there’s the usual tax rises described as “savings”, a word that this government has twisted beyond all meaning. Not to mention yet another downward revision in revenue from the MRRT, a dog of a tax dictated to a wounded government by three multinational mining companies, one of which is one of the world’s great tax dodgers.

There are, admittedly, also some high-quality savings: new ways to curb the extravagant waste of taxpayer money that is the private health insurance rebate are always welcome, as are cuts to the Baby Bonus. Strangely, the usual hairshirt types like David Murray who rail against “welfare” and the poor quality of public policy are silent on this today. The opposition, though, is happy to bag the cuts; it seems that when the Coalition wants to target welfare, it refers to “the age of entitlement”; when Labor proposes welfare cuts, it’s because the government “lacks experience” in raising children.

Hint hint. Deliberately barren. Empty fruitbowl. You get the message.

Then there’s the third category, the dozens and dozens of small savings gathered from across the public service. These are, unfairly, deemed “rats and mice savings”. It was precisely “rats and mice” spending that got away from the Howard government in its last two terms as its fiscal discipline vanished in the face of constant upward revenue revisions: programs that should have been temporary were endlessly extended, money never spent was rolled over from year to year, grants programs were expanded on a whim. And all of them needed public servants to administer them, endlessly inflating the numbers of bureaucrats the Commonwealth needed even as the first stage of the mining boom drove unemployment down toward 4%.

But it’s the fiddles and and tricks that will get most of the attention, and that’s apt. The need for a surplus is a political fiction, one on which is the government is relying to maintain its economic credibility with voters and the commentariat. So the achievement of the surplus through an array of money shuffling measures is entirely appropriate, a political exercise for a political goal.

It’s also exactly what our economic debate deserves. The level of economic debate in Australia is rubbish. It’s dominated by two national newspapers editorially aligned against Labor and dedicated to acting as amplifiers for the business community and anyone with a barrow to push agains the government. The opposition has steadfastly refused to offer anything in most areas of economic policy except criticism, often self-contradictory criticism. Joe Hockey yesterday confirmed that the Coalition would not be offering any details of its economic policies until the Pre-Election Economic and Fiscal Outlook, i.e. four weeks before election day. The Leader of the Opposition himself looks dangerously ignorant whenever he opens his mouth on economics.

And voters give the government little or no credit for its economic management. Labor’s chief economic challenges weren’t to find ways to spend all the extra money Treasury kept finding from the first mining boom and work out ways to reduce union power. They were to navigate through a huge financial crisis, a collapse in corporate tax revenue, a US recession, a European depression, the rise of our currency to safe haven status, the return to traditional savings levels by consumers and the extraordinarily disparate impacts of a second mining boom. In handling all these, Treasury, the RBA and the Labor leadership have turned the high-taxing, high interest rate, inflationary economy Labor inherited into a low interest-rate, low-inflation economy with significantly lower level of taxes to GDP than in the Howard years while maintaining employment growth.

You won’t find much discussion of that in Australia’s economic debate. Instead, that debate is a series of confected issues designed to bag the government — about labour productivity falling, about an almost trivial carbon price, about its mishandling of the relationship with China, about having too much debt, about how we’re an “expensive place to do business”.

Labor’s job is to keep on delivering economically what it has delivered so far. As long as it continues to do that, it can play surplus games as much as it likes. It’s never going to get an even break from its opponents anyway.

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75 thoughts on “Swan serves up exactly what we deserve

  1. izatso?

    Baaaahahaa ….. Swanny stands all the sharp shooters, thieves, divers and dodgers, fiddlers, scammers, the highly-paid disemblers, Wayne lines ’em all up and shoots them down again with their own words and directions ! Not what they were expectin’, just what they deserve ! Give ’em nothing Swanny ! What a HOOT !

  2. Jimmy

    While I completely agree with this article I find it’s structure and tone a bit strange.

    I would also say that the most telling lines of this srtticle are “The need for a surplus is a political fiction, one on which is the government is relying to maintain its economic credibility with voters and the commentariat” and “And voters give the government little or no credit for its economic management” plus “In handling all these, Treasury, the RBA and the Labor leadership have turned the high-taxing, high interest rate, inflationary economy Labor inherited into a low interest-rate, low-inflation economy with significantly lower level of taxes to GDP than in the Howard years while maintaining employment growth.”

    The ALP have battled pretty strong head winds all thjrough their reign and have done paritcularly well while also cutting back many of Howards middle class welfare policies that left his budget in a structural deficit yet all we get from the MSM is Geewizz and Suzanne Blake still commentary devoid of any economic literacy.

  3. Jimmy

    While I completel y agree with this article I find it’s structure and tone a bit strange.

    I would also say that the most telling l ines of this article are “The need for a surplus is a political fiction, one on which is the government is rel ying to maintain its economic credibility with voters and the commentariat” and “And voters give the government little or no credit for its economic management” plus “In handling all these, Treasury, the RBA and the Labor leadership have turned the high-taxing, high interest rate, inflationary economy Labor inherited into a low interest-rate, low-inflation economy with significantly lower level of taxes to GDP than in the Howard years while maintaining employment growth.”

    The ALP have battled pretty strong head winds all through their reign and have done paritcularl y well while also cutting back many of Howards middle class welfare policies that left his budget in a structural deficit yet all we get from the MSM is Geewizz and Suzanne Blake still commentary devoid of any economic literacy.

  4. The Pav

    Jimmy

    That Geewhiz & Suzanne Blake lack any economic literacy is only to be expected.This is why they work for the opposition.

    Afterall Jovial Joe Hockey can’t even add up and their shining star “Costello” has effectively perpetrated a fraud with the “debt cris’ in Qld

  5. klewso

    Abbott – for such a little man he sure has a big mouth? Something to do with that dog-whistle of his?
    This is all Gillard’s fault as much as his though, isn’t it (if the tabloid media – run as it is editing our view at reality – runs true to form)?
    “If she’d had kids and been born a bloke, none of this would happen”?

  6. Jimmy

    Klewso – I know you are joking but I am also afraid that it will be tomorrow’s headline.

    The Pav – Hockey’s response to the MYEFO has been a joke, this is someone who thinks they can find billions upon billions in savings in the budget and as BK says wants to end the age of entitlement but then postures about the harshness of these cuts while simultaneously saying the govt needs to cut more (becuase they won’t have a surplus with these measures) and will then vote for them in the parliament anyway.

  7. drmick

    Thats the first time someone has acknowledged that no one will give them and even break anyway.
    If their achievements could get even a little exposure it would help. The frustration is compounded by the scripted stupidity offered by supposedly responsible (male) adults and the sheer bastardry & ignorance of the press gallery to report the stupidity as sheer brilliance by Abbott.

  8. Chess C

    BK – with respect to two of the issues you raise dismissively at the end, these are something Australia does have to think about (nothing to do with bagging the government, it’s just a fact.) Productivity is falling and Australia *is* an expensive place to do business. Thanks to the exchange rate and high overheads, there would be very few places in the world that are more expensive to employ people and run a business than in Australia. And finally, in last’s year’s survey by the WEF, Australia was ranked #75 for having the least burden of government regulation (Singpaore is ranked #1.)

  9. Mark out West

    The Libs have to stay the course because their unfunded policies can’t add up so they need to be able say the economy was ruined by Labor if they get in.

    The EU did a world happiness survey and found that although Australians are the 2nd wealthiest people in the world at the moment, they are by far and away the Biggest whingers. The Right is destroying this economy whing by whing.

  10. zut alors

    ‘ Joe Hockey yesterday confirmed that the Coalition would not be offering any details of its economic policies until… four weeks before election day.’

    Lumpy Lardclacker and his leader would be well advised to keep quiet on all economic matters until AFTER the election. They should be mindful of the old saying about it being better to stay silent and have people suspect you’re stupid than to open your mouth and have it confirmed.

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