Peter Smith

Budget night blight

Budget time was trying when I was a bank economist. We used to work until the early hours to fax (in those days) our comprehensive take on the budget to senior echelons of the bank, including to board directors. It was all theatrical and almost completely useless. Except that the later we finished (say 2 or 3 in the morning) the more impressive it looked and the bigger bonus I could look forward to. Really everybody read the Financial Review, I suspect, rather than our piece.

 So it is now, when budget time comes around, I buy a Financial Review to complement my Australian. Though, it is always confusing. Myriad accounts by numbers of writers on various aspects of the budget which you have to try to piece together to get an overall picture. 

To get some interest from a very pedestrian budget I tried to spot the Howard moments. The Howard moments are rather like those moments in Animal Farm when Napoleon reminded the animals that however bad it got it was worse under Jones. I probably missed some, but David Bassanese didn’t disappoint. Because the “budget is projected to whir back into surplus” he thinks it will appropriately bear down on growth “in stark contrast to the feeble efforts of the Howard government during the first mining boom”. Unsurprisingly Laura Tingle didn’t disappoint either. Lauding Swan’s spending restraint she noted that the “Howard era” delivered only one such example in 1997-98. Moreover she said, the splurge in spending in 2009-10 was “on par with levels seen during the Howard years”. What would they do without him?

Let us face it. Conservatives think that Howard overspent and contributed to the expansion of middle class welfare and the welfare state. I think that. Conservatives are entitled to that view. Left-leaning journalists, to save embarrassing themselves, should keep shtum. The party that they support has no credentials or credibility when it comes to spending restraint.

The new member for Longman, Wyatt Roy, put his very young finger on it when asking the Treasurer why we should have confidence in the budget returning to surplus when, in his lifetime (approaching 21 years), no Labor government had managed the feat. Swan’s reply was facetious but what could he say; the facts speak for themselves.

In the twelve budgets under Howard (1996-97 to 2007-08) there were ten surpluses and only two deficits. The average annual surplus over the entire period was over $8 billion. In the thirteen budgets under Hawke and Keating (1983-84 to 1995-96) ten were in deficit, with an average annual deficit of over $6 billion. Peter Van Onselen in The Australian drew attention to “Howard’s famous spendathon to get himself re-elected for a third term [in 2001]”. What he doesn’t say is that the resulting deficit of just $1 billion in 2001-02 was preceded by a surplus of almost $6 billion and immediately followed by a surplus of over $7 billion.

Howard, I think, did as much as he thought he could within the political and social culture which sees government as being responsible for people’s wellbeing. In this culture, which has insidiously developed and grown since the 1930s, governments earn kudos for what they have done. Doing things costs money. Ergo spending is the way to earn most of the media’s applause and voter support. Despite this, he consistently, year after year, saved substantial amounts when he could have spent. Yes, he could and should have saved more, but what he did, along with Peter Costello, was still astounding in an era when governments everywhere routinely spend more than they “earn”.  There should be no doubt based on the record that Gillard and Swan would have spent much more, and wasted much more.

It is not only the spending of the three years 2008-09 to 2010-2011, producing an aggregate deficit of an awe-inspiring $131 billion, but the sheer waste that much of it represents. And, added to the overpriced and unnecessary school buildings (still being built) and the ceiling batts and the green loans scheme and other ways found to waste taxpayers’ money, we have the massive off-budget spending on the NBN.

All of this is happening while the Reserve Bank is raising interest rates to contain the inflationary impact of the resources boom. You could only compare it to the Whitlam era for incompetence and recklessness. Then again, I doubt whether even Whitlam would throw into this mix a so-called carbon tax. Left cheerleaders among journalist must have an enormous capacity to form a distorted view of the past; and a benign view of economic incompetence and recklessness provided it’s served up by Labor.

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