Wayne Swan’s Mid Year Economic and Fiscal Outlook has delivered the surplus Australia’s economic debate deserves.
It’s chock-full of fiddles, pea-and-thimble tricks, “rephasings” of spending, the full set of accounting tricks plus a few new ones: the grab for lost super accounts ($550 million, and right away please) will probably earn some Treasury officer a Public Service Medal. Like the switch to monthly company tax instalments, it’s a one-off, though of generous proportions (the company tax change won’t kick in for more than 12 months and won’t affect the surplus). Plus there’s the usual tax rises described as “savings”, a word that this government has twisted beyond all meaning. Not to mention yet another downward revision in revenue from the MRRT, a dog of a tax dictated to a wounded government by three multinational mining companies, one of which is one of the world’s great tax dodgers.
There are, admittedly, also some high-quality savings: new ways to curb the extravagant waste of taxpayer money that is the private health insurance rebate are always welcome, as are cuts to the Baby Bonus. Strangely, the usual hairshirt types like David Murray who rail against “welfare” and the poor quality of public policy are silent on this today. The opposition, though, is happy to bag the cuts; it seems that when the Coalition wants to target welfare, it refers to “the age of entitlement”; when Labor proposes welfare cuts, it’s because the government “lacks experience” in raising children.
Hint hint. Deliberately barren. Empty fruitbowl. You get the message.
Then there’s the third category, the dozens and dozens of small savings gathered from across the public service. These are, unfairly, deemed “rats and mice savings”. It was precisely “rats and mice” spending that got away from the Howard government in its last two terms as its fiscal discipline vanished in the face of constant upward revenue revisions: programs that should have been temporary were endlessly extended, money never spent was rolled over from year to year, grants programs were expanded on a whim. And all of them needed public servants to administer them, endlessly inflating the numbers of bureaucrats the Commonwealth needed even as the first stage of the mining boom drove unemployment down toward 4%.
But it’s the fiddles and and tricks that will get most of the attention, and that’s apt. The need for a surplus is a political fiction, one on which is the government is relying to maintain its economic credibility with voters and the commentariat. So the achievement of the surplus through an array of money shuffling measures is entirely appropriate, a political exercise for a political goal.
It’s also exactly what our economic debate deserves. The level of economic debate in Australia is rubbish. It’s dominated by two national newspapers editorially aligned against Labor and dedicated to acting as amplifiers for the business community and anyone with a barrow to push agains the government. The opposition has steadfastly refused to offer anything in most areas of economic policy except criticism, often self-contradictory criticism. Joe Hockey yesterday confirmed that the Coalition would not be offering any details of its economic policies until the Pre-Election Economic and Fiscal Outlook, i.e. four weeks before election day. The Leader of the Opposition himself looks dangerously ignorant whenever he opens his mouth on economics.
And voters give the government little or no credit for its economic management. Labor’s chief economic challenges weren’t to find ways to spend all the extra money Treasury kept finding from the first mining boom and work out ways to reduce union power. They were to navigate through a huge financial crisis, a collapse in corporate tax revenue, a US recession, a European depression, the rise of our currency to safe haven status, the return to traditional savings levels by consumers and the extraordinarily disparate impacts of a second mining boom. In handling all these, Treasury, the RBA and the Labor leadership have turned the high-taxing, high interest rate, inflationary economy Labor inherited into a low interest-rate, low-inflation economy with significantly lower level of taxes to GDP than in the Howard years while maintaining employment growth.
You won’t find much discussion of that in Australia’s economic debate. Instead, that debate is a series of confected issues designed to bag the government — about labour productivity falling, about an almost trivial carbon price, about its mishandling of the relationship with China, about having too much debt, about how we’re an “expensive place to do business”.
Labor’s job is to keep on delivering economically what it has delivered so far. As long as it continues to do that, it can play surplus games as much as it likes. It’s never going to get an even break from its opponents anyway.
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