Peter Smith

Wayne Swan’s dismal magic act

The late, befezzed, and revered Tommy Cooper was a comedian in the guise of a prestidigitator. Failed magic tricks were his forte. He often failed after multiple attempts to get the rabbit out of the hat. Wayne Swan is a bit like Tommy Cooper, admittedly without the comedic talent and the fez. He, too, after multiple attempts has failed to get the rabbit out of the hat.

First promising to produce the rabbit to our amazement in his budget speech in May, 2010, he’s had us all agog ever since. Repeated incantations by him and his alluring assistant, Julia, have kept us mesmerised, staring at that hat. Alas all agog for nothing.

Never mind, economists are lining up to say how they preferred Mr Swan delivering a turkey for Christmas and didn’t want to see the rabbit anyway. It was the wrong season for rabbits, apparently. I even saw Chris Richardson (of Deloitte Access Economics) on the telly excusing the government for not revealing the rabbit because they had only just seen the latest revenue figures. He also said that the Opposition would be in the same tough spot in extracting the rabbit; showing how even handed he is.

In the same segment it was reported that an unnamed and disenchanted Labor politician had said that even remote tribes in the middle of the Amazonian jungle had known for some considerable time that the rabbit would remain inside the hat. That some jungle tribes apparently know more about economics than Dr Richardson and his ilk might surprise some.

Luckily for Swan he has any number of shills, stooges and plants among the great commentariat to help him hawk his act. He must draw particular comfort from the support of that Keynesian devotee Rob Oakeshott.

Before we all go mad; short of some dramatic and precipitous cut in spending or increases in taxes, neither of which are politically feasible at this stage, the budget outcome for this year, is the budget outcome, is the budget outcome. In other words, it is set in stone. Announcing the fact doesn’t change the fact, so why Swan is being congratulated by Keynesian nitwits is beyond me.

Whatever Swan says is irrelevant. Along with Ms Gillard and company, he has long since set the parameters which will result in yet another deficit.

Swan might want everybody to believe we have a revenue problem. Mr Snodgrass the local bank manager isn’t taken in by that kind of special pleading. Don’t come the old yeah but no but with me, he says to one of his less articulate delinquent customers. Neither should we be taken in by Swan’s pleading. Along with Greece and the United States and most Western nations we have an expenditure problem.

In the four years from 2007/08 (the last year of a Howard and Costello inspired budget surplus) to 2011/12, expenditure in nominal terms grew at an average annual rate of marginally under 11%. This compares with an average of marginally under 7% in Howard’s last four years of undoubted largesse.

A guide to Swan’s spendthrift mindset was evident when he was foiled by the Greens in trying to give away uncollected, and as it proved non-existent, MRRT revenue to companies. Did he pocket the potential savings? Not a bit of it. Even the prospect of them burnt a hole in his pocket. He splashed them on increasing family benefits.

For the edification of most economists, though thankfully not all, government spending almost always lowers economic growth. It does this by crowding out more productive activities. Keynesian economics is nonsense from start to finish. It does not survive proper economic scrutiny. Please read John Stuart Mill for further edification. Finally, write a short essay explaining how JSM presciently demolished Keynesianism before Keynes was born.

Deficits and debt lead to economic stagnation and misery not to nirvana. If this were not so Greece would be nirvana. What is hard to understand about that?

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics

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