Joe Hockey’s term as treasurer will help forever dispel the myth that conservatives are “better economic managers”. If his half-term has a silver lining, it is that.
Unemployment is up, growth is weak, business confidence is in the doldrums. These were the outcomes of the attempts to impose the most right-wing economic strategy Australia has ever seen.
While all assure us Joe Hockey is a nice guy, he was hostage to the now-discredited conservative faction lead by our failed PM Tony Abbott. Their errors were clear from the start — like when they appointed Business Council hard man Tony Shepherd to chart the government’s strategy via the now almost completely forgotten Commission of Audit (remember that? It was only last year).
Hockey and Abbott fell for the trap that says because you know something about business you know something about economics. The Commission of Audit, with its austerity-like drive, was a disastrous prescription for a slowing economy and one transitioning out of the mining boom.
But Hockey’s political death was not just of his and Shepherd’s making. It was a direct result of Coalition policy over decades.
Hockey’s demise stemmed from profligate Peter Costello’s reckless boom-time bonanza, which the International Monetary Fund described as wasteful. The Coalition’s claim to be the party of better economic managers checks out … so long as the country is enjoying a once-in-100-year boom. Out-of-control tax breaks like superannuation tax concessions, negative gearing and capital gains tax discounts are now costing the budget $37 billion per year — with high-income households getting more than 60% of the benefit. The “structural deficit” we hear about so often was “structured” by the Coalition, and Joe couldn’t fix it.
His strategy wasn’t original; it’s known in the United States as “starve the beast”. You cut taxes for corporations and the rich in boom times, ensuring the beast of government services isn’t properly funded in hard times. You then cut the funding of the beast to balance the budget and begin again. It doesn’t help an economy to cut services, and the growth benefits of giving the very richest even more are limited at best. It’s not based on economics; it’s a political ideology. And that’s why, as a Treasurer tasked with explaining the economic basis for the Abbott policies, Joe Hockey so often came unstuck, not helped by poorly timed cigars and poorly expressed ideas about poor people’s motoring habits.
With one slogan, Hockey clearly demonstrated his one-eyed view of the Australian public: “Ending the age of entitlement.” But despite the huge budgetary hit of corporate welfare policies, tax breaks for the rich and subsidies for big mining companies, Joe saw only one section of the community as “entitled” — the most vulnerable.
Hockey also wrote his own script before taking the job. Even if every one of his cuts passed the Senate, the budget would have remained very much in deficit. And while a deficit is not inherently a bad thing, particularly in an economy with slowing growth, it doesn’t work so well politically when you’ve painted any deficit as bad, and one of the lowest public debt rates in the OECD as a “disaster”.
Hockey also seemed to drink the conservative Kool-Aid on renewable energy with his ill-judged hostility to wind farms — this wasn’t just politically clumsy but set him up as treasurer spruiking the economy of the past, not the future. A dangerous place to be as the economy inexorably moves away from mining and coal to the services sector.
His final failure was ignoring the Senate crossbench. Governments have not had a Senate majority for 30 out of the last 33 years of Australian politics. Negotiating with the Senate is a key skill in governing Australia, yet Hockey wilfully ignored the upper house and its colourful crossbench. This led to greater scrutiny of the horror 2014 budget, making a bad news story for the government go on indefinitely.
The lasting legacy of a hyped up anti-debt campaign is unclear. Having created such fear-mongering about Australia’s debt — the third lowest in the OECD — Turnbull must now try and undo those perceptions if he is to fulfil his cities and infrastructure vision. He will have to un-convince the public that debt is a problem and that debt can, in fact, be good if it is being invested in productivity-enhancing ventures like education and public transport.
The direct nature of Hockey’s communication that made him popular exposed the Coalition’s political ideology and helped strip bare the myth of its good economic management.