Professor Sinclair Davison and Alex Robson paint a positive picture of Peter Costello and his legacy as Australia’s longest serving Treasurer. The strongest praise is a humiliatingly patronising: “Costello did not make any big policy mistakes.”

This bar room analysis perhaps encapsulates many of the reasons for the election result which overwhelmingly rejected the Coalition’s “do nothing” approach.

While there is no doubt that Costello was Treasurer when some very good economic times were recorded, his legacy could be compared to a doctor who tells a patient they don’t have cancer rather than the surgeon who performed the miraculous operations to cure another cancer patient.

Davidson and Robson also leave out some critical performance indicators that on any impartial assessment tarnish or even wholeheartedly discredit Costello’s economic legacy and suggest he was a 5 out of 10 Treasurer and no better.

Before looking at those indicators, let’s ask a few pertinent questions:

  • Can Costello claim credit for the five straight years of booming growth in the world economy?
  • Can Costello claim credit for the 50 year high in Australia’s terms of trade?
  • Can Costello take credit for low global inflation?
  • Can Costello take credit for the floating exchange rate, banking deregulation, tariff reform, the RBA inflation target, Australia’s engagement in Asia?

The answer to these questions suggest Costello is more like the brat who inherited mummy and daddy’s house in Mosman or Toorak with a Porsche parked in the driveway rather than a man of vision, substance and altruistic aspiration.

Only because of that inheritance could Costello carry a swagger as he handed out a few inflation inducing income tax cuts and interrupt his morning tea for a 10 minute door stop interview when the jobs data showed a decline in unemployment.

What’s more, only an ostrich with its head in the sand would disagree that it was a “big mistake” to pump prime the economy with fiscal largesse when for the last four years the Reserve Bank was trying to dampen the most severe domestic inflation pressures seen in over 15 years. This is economic mismanagement 101.

Let’s look at a few other performance indicators which were conveniently ignored by Davidson and Robson.

Net foreign debt is now $570 billion (55% of GDP), versus $190 billion (38% of GDP) in 1996.

Households now allocate 12% of their take home pay on the interest component of debt servicing. This is more than the combined spending of the household sector on health and education! Household debt servicing was 7.5% in 1996 and ‘only’ 9% in 1990 when variable mortgage interest rates were 17%.

The current account deficit has been above 5% of GDP for five years. This is without precedent and leaves Australia vulnerable to the whims of global capital markets.

The level of government spending as a share of GDP is now at a level that would make Gough Whitlam and Frank Crean blush. It has never been higher. So too with the level of government spending as a share of GDP. Not only did Costello have his hand in your pocket, he was also spending your money on your behalf.

But wait there’s more.

Australia’s interest rates are now among the highest in the industrialised world and are higher than in many emerging market countries. A decade ago, Australian interest rates were below those in the U.S.. for example, now there are more than 2% higher are going to get even wider.

Davidson and Robson suggest Costello should get credit for not stuffing it up. Ay?

Economic management is about progress, efficiency, equity, fairness and simplicity with a vision that looks beyond the next election.

Costello was a big spender and big taxer. He added to inflation pressures when the Reserve Bank was pleading for fiscal conservatism. He presided over a labour market skills shortage and through WorkChoices, discouraged people from supplying their services to help alleviate the crisis.

Given this record, it is no surprise that Peter Costello has now squibbed the hard work by skulking to the back bench.