There was no one crucial time in Wayne Swan’s time as treasurer. Given he faced the biggest financial crisis since the 1930s, a recession in most of the developed world, the ongoing tendency of his Treasury to wildly overstate revenue, a mining investment boom of unprecedented magnitude and an extended period with the Australian dollar above parity, picking a single moment to encapsulate his treasurership is impossible. But two moments will suffice to demonstrate why Swan will be leaving politics at the next election having made a huge difference to the lives of ordinary Australians.
One was the 2008 budget. It was before the period of the emergency interest rate cuts and the two stimulus packages of the financial crisis. It was when the dominant fiscal narrative was still the need to cut the Howard government’s wasteful spending, to implement Kevin Rudd’s commitment to “take a meataxe” to the public service, which had ballooned as Howard had tried to spend his way to a fifth term in office.
Swan had been fully signed up to the meat-axe agenda, until after the November 2007 election, when he’d begun talking with people overseas about the burgeoning financial crisis, especially George W. Bush’s Treasury Secretary Hank Paulson. Swan met with Paulson and US Fed chair Ben Bernanke in April 2008, barely a month out from the Rudd government’s first budget, and then with other international figures at the IMF meeting in Washington the next day. On his return to Australia, he had an understanding of the crisis about to hit the world economy that no one else in the government had, and pushed for the massive spending cuts on which the budget was based to be curtailed.
The resulting document confounded everyone’s expectations. Asked why the spending cuts didn’t match up with the government’s rhetoric, Swan said he wanted to avoid “slamming the economy into a wall”. The 2008 budget was a key inflection point in turning from the spendathon and high-growth days of the Howard government to the desperate effort to ward off recession as the financial crisis hit. The stimulus packages would come later, and Swan has, both in his book on his time as Treasurer and in his retirement statement on the weekend, paid generous tribute to the role Kevin Rudd played in keeping the economy out of recession through those difficult times in later 2008 and 2009.
In response, all Rudd has been able to do is insult and abuse Swan. It speaks volumes about the generosity of spirit, or lack thereof, in each man.
Then there was December 20, 2012, when Swan announced that the Gillard government would no longer cut spending to offset a shortfall in revenue that was endangering the return to surplus forecast for that year. Swan, and Julia Gillard, had committed regularly and routinely — literally hundreds of times — to a return to surplus in 2012-13, often in terms like “hell or high water”; indeed, Swan had boasted of having already delivered on his commitment to return to surplus. Now, after repeated downgrades to revenue forecasts that required matching spending cuts (or fiscal trickery involving moving spending between years), that was abandoned.
It was humiliating moment for Swan, but like the 2008 budget, it was the right economic call. GDP growth, fueled by the mining investment boom, had begun to tail off; unemployment had begun to rise back toward 6%; the Aussie dollar — above US dollar parity for much of 2011 and 2012, driven by the mining investment boom, Australia’s higher interest rates and the government’s low deficits compared to other economies — was clobbering exports and import-competing industries. If Swan had continued to slash spending, 2013 very likely would have become a recession year.
For all his mockery of Swan, within months shadow treasurer Joe Hockey abandoned his own surplus commitment, and his first budget resulted in a $38 billion deficit, $20 billion more than Swan’s deficit for 2012-13 (and that, too, was the right call).
But the numbers are less important than jobs. Swan’s achievement — yes, with Kevin Rudd, and Julia Gillard, and Ken Henry, and Glenn Stevens, and Lindsay Tanner and Penny Wong in Finance — was to ensure unemployment never got above 5.9% at a time when other countries had double and triple that, and often for years on end. Hundreds of thousands of Australians — none of whom was ever the wiser — kept their jobs because of Swan and his colleagues, preventing a repeat of the profound economic and social dislocation of the early 1990s. His achievement was to do that while the Australian dollar was of an unprecedented strength that smashed our international competitiveness. And his achievement was to ensure that, for the first time in Australian history, a mining boom came to a close not with an disastrous explosion of inflation and an ensuing recession, but with a transition to other sources of growth and the preservation of the low inflation environment created in the wake of the financial crisis.
There’s much else to be said about Wayne Swan — especially his work since 2013 on issues around inequality, work that partly reflects his own learning about the failings of market economics. But for ordinary Australians, this was a bloke who made a fundamental difference in times that demanded people of quality step up.
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