At the G20 Summit in Washington a week ago Joe Hockey said ‘People find it refreshing to hear that Aussie honesty’. It is nice to think that other people see us that way but I wonder what Treasurers at the G20 would make of it if they had been listening to what Joe Hockey had been saying about the Australian economy over the last six years.
For years Joe Hockey and Tony Abbott have been warning us in quite shrill terms about our deficit and debts. We faced a budget ‘emergency’. It turned out to be phoney. Together with Tony Abbott, one could be excused for believing that the Australian economy was a smoking ruin.
We were told for a long time that the Coalition would provide a budget surplus in year one and get the deficit down from day one. Then as the election rolled on the retreat began and the Coalition finished its election campaign by telling us that the Coalition Government would ‘deliver a surplus as soon as we can’.
Actions speak louder than words but the windy words continue. If there was a real emergency we would be well on the way to a mini budget. We would have been told that nothing else would save the day. We can now see that the rhetoric of the Coalition has been reckless, inflammatory and fraudulent. There is a lot of huffing and puffing but no real action. Is that Aussie honesty?
Unfortunately it seems that the Reserve Bank of Australia has now been drawn in to the political games of the Coalition. Joe Hockey has agreed to an $8.8 billion taxpayer capital injection into the bank. That is amazing. It helps serve Joe Hockey’s political agenda in highlighting a possible emergency. It is also an old trick in politics as in business to load as many problems as possible onto the previous regime. Saul Eslake has described it as “a ridiculous piece of theatre” According to both former Labor Treasurers, Wayne Swann and Chris Bowen the Reserve Bank never approached the Labor Government for such a capital injection. Wayne Swann said yesterday that if he had been approached he would have agreed. But he was not approached. Furthermore on 10th April this year Treasury advised the Treasurer against boosting the Reserve Bank’s reserve fund. Very strange! Why is it happening now? And why does it have to be in one hit? Surely it could have been over two to three years. But by providing the injection in one hit this year it can all be attributed to the failures of the previous government. This looks a dodgy exercise? It is claimed that the Reserve was reluctant to pay large dividends to the government and so deplete its funds. But it is not at all surprising for the government to maximize dividends from the Reserve Bank. Governments do it all the time with statutory authorities.
Some facts keep getting in the way of Joe Hockey’s bluster.
- Australia has one of the lowest levels of government debt to GDP in the world. The major money manager, Blackrock, measures sovereign risk. It reports that Australia is amongst the ten lowest sovereign risk countries in the world along with Norway, Singapore, Switzerland, Sweden, Finland, Denmark, Canada and New Zealand.
- The Australian Parliamentary Library has just released a report comparing the performance of Australian governments since the 1980s. The Commonwealth net debt fell from 5.6% of GDP under Howard to 2.4% under Rudd/Gillard Governments.
- The IMF has told us that most of our structural deficit problem in Australia can be traced to the profligate policies of the Howard/Costello period- lowering the personal tax scales as the mining tax boom filled the tax coffers
- Credit agencies continue to issue triple AAA credit ratings for Australian Government finance.
- In 2012-13, we had the largest year to year fall in the Commonwealth budget deficit ever recorded. Government spending fell a record 3.2% in real terms.
With the help of the China boom, The Rudd/Gillard Governments managed one of the best performing economies in the world, even through the Global Financial Crisis. But a failure of the Rudd/Gillard Governments was that they did not take up seriously the taxation review by Treasury – the Henry Review. This review carried a large number of recommendations to make our tax system more sustainable, more efficient, more equitable and simpler.
Will Joe Hockey’s Commission of Audit really deliver on government finances? I hope it will succeed and that the Coalition will not dodge real tax reform as the Rudd/Gillard Governments did. It is particularly important that the Commission does not fall for the siren voices of big business. .
It is concerning however that the Chair of the Commission of Audit, Mr Tony Shepherd, is also the Chair of the Business Council of Australia. The BCA is one of the most highly influential special interest groups in the country. It wants to roll back the Fair Work Act, amongst many other things, not to ensure that the market works better but to advantage capital. The Head of the Commission of Audit Secretariat is Peter Crone from the BCA. Just imagine if a Labor Government had appointed the President and Secretary of the ACTU to head a review of government finances. The Murdoch media would have had a fit.
There is no doubt that Joe Hockey and Tony Abbott succeeded in persuading the Australian electorate that the economy was in a mess and that the debt and deficit was out of control. None of it was true. My concern is that they are now reverting to their political ways that were so successful over the last six years.
Tony Abbott and his colleagues are addicted to criticism and attack, attack and more attack. Can they transition to responsible and inclusive leaders concerned about good policy rather than aggressive politics and photo opportunities? We have not seen it yet from Tony Abbott, Joe Hockey, Scott Morrison and Greg Hunt. Some honesty would be a good start.