How are the ‘adults’ managing our economy?



Who will ever forget the insults, the slurs, and the slander that the Coalition heaped upon Kevin Rudd, Julia Gillard and Wayne Swan as they managed the economy through the Global Financial Crisis and beyond? They were depicted as children playing games in their political sandpit with no idea of what they were doing, making one catastrophic mistake after another.

Remember how the Coalition boasted that the children should get out of the way and let the adults take over, insisting as they did that they were the experts at economic management. So convincing was the rhetoric that the electorate believed them and has consistently rated them as superior to Labor in economic management in opinion polls.

Recall the ‘debt and deficit disaster’, a mantra with which they assailed Labor for years. Remember the ‘intergenerational debt’ they accused Labor of accumulating.



Since their election in 2013 they have had their chance to show their much-vaunted expertise under the skilled management of Tony Abbott and Joe Hockey, and then Malcolm Turnbull and Scott Morrison, with Mathias Cormann a consistent shadowy presence. How have they done?

I am indebted to one of our most astute political commentators, Bernard Keane, Crikey politics editor, for the best analysis I have read of the Coalition’s economic performance over the last four years. You can read it in its entirety in his article in the April 3 edition of Crikey: How the deficit was blown: The Coalition’s $100 billion bill.

I have drawn heavily on Keane’s analysis and have quoted from it substantially. Here is an abbreviated version of it. Sit down before you read it, and have a tranquillizer handy.

Keane begins:
”Since its election in 2013, the Coalition has given away $46 billion in political decisions, and signed the Commonwealth up to $50-60 billion in long-term spending that will hammer the federal budget for decades to come. (My emphasis.)

“The 2013 Pre-Election Fiscal Outlook, produced independently by Treasury and Finance, forecast a return to surplus this financial year and net debt peaking last year at $219 billion.

“The Coalition’s first budget forecast a return to surplus in 2018-19 and net debt peaking at $264 billion.

In MYEFO at the end of 2016, the budget was forecast to be still $10 billion in deficit in 2019-20, when net debt would be $364 billion.
Can you believe that after their promise to return the budget to surplus this year, and their assurance that net debt would be confined to $219 billion last year, the ‘adults’ subsequently told us that the budget would not return to surplus until 2018/19, and later that in 2019/20 we would still have a $10 billion deficit and that net debt would balloon to $364 billion, twice as high as Labor’s deficit ever was! No wonder the ratings agencies are breathing down their necks! And they still claim that the situation would have been much worse had Labor still been in government!

While Keane acknowledges that much of the spectacular deterioration of the budget under the Coalition is due to revenue write-downs, he asserts that “the government has worsened its own position through a series of political and ideological decisions that give the lie to its claims to be the victim of an irresponsible Senate”. He details the substance of those decisions as follows:
  • an $8.8 billion gift to the Reserve Bank to make the 2013-14 budget deficit look worse, and earn future dividends for the government.
  • Repeal of the carbon price cost the Commonwealth around $12.5 billion in lost revenue over the forward estimates and at least $1.8 billion per annum beyond that (based on a conservative estimate by the Climate Institute, lower than the government’s own estimate)
  • The government’s company tax cuts agreed last week will cost $5.2 billion over the forward estimates.
  • Repeal of the mining tax – despite the government’s claims that it raised no money – cost it $3.5 billion over the forward estimates, according to budget papers.
  • The reversal of Labor’s changes to Fringe Benefits Tax reporting requirements to end the rorting of novated leases cost, by its own admission, $1.8 billion over the forward estimates.
  • Income tax cuts for middle- and high-income earners cost $3.8 billion.
  • The ineffective Emissions Reduction Fund so far is costing $2.55 billion, although the government has decided no further funding will be wasted on it.
  • A Northern Australia Infrastructure Fund, established with no effective oversight, assessment or evaluation mechanisms and flagged as a funding source for unviable coal mining projects, will cost $5 billion.
  • A National Water Infrastructure Development Fund established as a funding source for Barnaby Joyce’s obsession with building more dams, is costing $0.5 billion.
  • A scheme to prop up dairy farmers threatening to desert the National Party, via the discredited means of concessional loans, is costing $0.55 billion.
  • Australia’s continuing participation in Middle East military ventures has so far cost $0.72 billion since Tony Abbott sent Australian forces back to Iraq in the name of fighting the “existential threat” of ISIS.
  • The government is spending $0.24 billion on a school chaplains program, although further funding has been halted for now.
  • Nick Xenophon extracted an additional $0.37 billion worth of conditions as price for his support for company tax cuts last week.
Keane lists several significant costs beyond the forward estimates from a number of other government measures:
  • The disastrous F-35 joint strike fighter program will cost taxpayers at least $17 billion over the period to 2023. There are new problems with the aircraft that are not being addressed or are worsening, and with no guarantees the cost will not escalate further.
  • The government’s decision to reverse the Abbott government’s approach and construct the new generation of Royal Australian Navy submarines in Australia is expected to add up to 30% to the $50 billion cost of the program in order to provide less than 3000 jobs in South Australia.
  • The company tax cuts agreed last week will cost $25 billion over ten years, although the government remains hopeful it can increase that cost to $50 billion! although there remains no evidence from anywhere in the world of any economic benefit from company tax cuts. (My emphasis)
  • The continuing fiscal impact of some of the above measures beyond the forward estimates will cost the budget, on a conservative estimate, $6 billion per annum (unindexed)
  • .
Although some of the decisions were backed by Labor such as the submarines decision, which will cost the taxpayers many billions of dollars, the F-35 purchase, and the income tax cuts, “these decisions are in defiance of evidence, represent the triumph of ideology over reason, and in many cases were rankly political." (My emphasis)

Worse, some of them are likely to generate new waves of spending: the removal of an effective, cheap carbon price in 2014 created an energy policy vacuum that led directly to the current energy crisis and proposals from the government to spend billions of dollars re-entering the power generation industry.

Our military involvement in the Middle East looks set to increase, not decrease, in coming years.

The cost of poor decision-making will be borne by taxpayers for years, even decades, to come.” (My emphasis)
It would be hard to imagine a more condemnatory account of the Coalition’s ‘adult’ management of the nation’s economy in the four years since 2013. Its predictions have all been wrong. The ‘adults’ have steadily worsened the nation’s fiscal situation. The 2019-20 budget is projected to still be $10 billion in deficit, the promised surplus is nowhere in sight, and the nation’s net debt is projected to be $364 billion, twice as high as it ever was under Labor!

In an update in Crikey Weekender: Seven new terrible economic records ScoMo set in March - Scott Morrison has some new records to add to his quest to be known as Australia's worst treasurer reads: "The Office of Financial Management released figures last week showing gross borrowings at $484.6 billion. Of this, $58 billion is residue from the Howard government or its predecessors. Labor increased it by $212 billion. Another $214.6 billion has been added since the 2013 election. Hence the Coalition has now more than doubled Labor’s gross debt, in three years and six months. It doubled Labor’s net debt in January."



The unavoidable conclusion is that this ‘adult’ government is economically incompetent, driven by its conservative rump, quite unable to see its way through the nation’s economic difficulties, incapable of analyzing the economic situation, inept at deriving solutions, bereft of planning ability, and hog-tied by ideological constraints. Moreover, it is so unutterably arrogant that it cannot see its ineptitude. And even if it could, would it be capable of doing anything about it?

As a substitute for informed opinions, all we get is self aggrandizement and platitudes from Turnbull, and a torrent of meaningless drivel from the Coalition's two motor-mouthed financial Daleks: Morrison and Cormann.

How has it come to this with the adults in charge?


What do you think?
What is your assessment of Scott Morrison as Treasurer?

Should he be replaced?

If he needs to be replaced because of incompetence, who should replace him?

Let us know in comments below.

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The Peter Principle again – has the GOVERNMENT reached its level of incompetence?



It is not often that we see The Peter Principle played out before our very eyes. We saw it recently with ex-PM Tony Abbott and his Chief of Staff, Peta Credlin as they were promoted from opposition where they were deemed to be competent, to government where they were manifestly incompetent. This calamity has been described in The Peta Principle – how Abbott rose to the level of his incompetence.

In describing his management principle, Laurence J Peter asserted that as managers are promoted, they rise to the level of their incompetence because the selection of a candidate for a position is based on the candidate's performance in their current role, rather than on abilities relevant to the intended role. We have written about The Peter Principle before.

In illustrating his principle, Peter used the example of a head gardener in a botanical garden. He was a genius at gardening. He knew his botanicals, where to place them, and their needs for sunshine, shade, water, drainage, nutrients and pruning. He had ‘green fingers’. So good was he that when the position of manager of the garden became vacant, he was considered an obvious choice. He accepted it, albeit regretful that he would be leaving the garden for an office. He failed. He was all at sea with budgeting, ordering supplies, and managing staff and the payroll, and he missed the outdoor life. He had been promoted to the level of his incompetence. He exemplified the Peter Principle: ”managers rise to the level of their incompetence”.

If we begin with the premise that in opposition the LNP was competent in as far as it was able to effectively mount a case for election, and was successful at the ballot box, let’s examine whether that competence has been sustained after its promotion to government. Let’s not get diverted by its tactics, reprehensible though many of them were.

This piece opens for discussion several, but not all areas of government. A verdict about the government’s competence in each is offered. You are invited to make your own assessment, something you will soon do at the ballot box, now that Malcolm Turnbull has made his momentous announcement about the election. In Howard-like style he asks: “Who is best able to lead Australia in the transition from the mining and construction boom to the ‘new economy’?” You will soon have your say.

Bill Clinton said: “It’s the economy, stupid”. That seems like a good place to start.

The national economy
Malcolm Turnbull cited Tony Abbott’s lack of economic leadership as one of the prime reasons for his leadership challenge. There was good reason for this. The first Abbott/Hockey Budget, ideologically driven as it was, turned out to be a disaster. The electorate, even Coalition supporters, rejected it as unfair, and key elements are still stuck in the Senate. It was incompetently handled, but Abbott still wears it as ‘a badge of honour’. The 2015 Budget was a pathetic attempt to square the ledger, but it failed too; business groups criticized it, as it did nothing to reduce the deficit, which Joe Hockey had promised would be eliminated in the government’s first term.

Just a few days ago, the Australian Office of Financial Management stated that gross government debt is now $413.7 billion, up $140 billion since the 2013 election.

The fact that the deficit is ballooning is a measure of the government’s incompetence in financial management. Its attempts at reducing expenditure have been offset by an almost equivalent amount of new expenditure. It has turned a messy puddle into a quagmire, with no obvious exit. LNP supporters blame the economic headwinds: falling commodity prices, the end of the mining boom and the volatile dollar, but these are the realities managers of the economy have to face. Hockey and Abbott were hypercritical of Wayne Swan when he faced similar conditions, but sought to make these conditions as excuses for their own failures. A further sign of its incompetence is that as yet the Coalition has been unable to come up with a plan to correct the deficit. We are still in limbo as we wait for the Green Paper on Tax Reform, now months overdue. Conflicting statements from LNP members have confused the situation. Nobody seems to know what’s going on. Can we expect any clarity now that the election has been announced?

What about the players?

Hockey was incompetent as Shadow Treasurer. Full of loud-mouthed criticisms and arrogant promises, he offered no cogent plan for fiscal management; he just said he’d fix the problems, and quickly. In government he was patently incompetent, so much so that his colleagues, and even past PM John Howard, advised Abbott to remove him. Abbott didn’t, and Hockey was swept away with Abbott on 15 September 2015.



Hockey’s sidekick, Mathias Cormann, survived, but whether or not he is competent is impossible to say. Whenever he appears on TV, no matter what the questions, he responds like an automaton programmed with clichéd answers that have marginal relevance to them. As he departs each interview with a self-satisfied smile, can anyone understand what he has been on about? He may know his stuff, but who knows whether he does?

The new Treasurer, Scott Morrison, got a tick of approval from his supporters for ‘stopping the boats’ and when he became Minister for Social Services, he got a tick for being tough on welfare recipients. He was seen as a rising star in the LNP firmament; there were whispers that he was prime ministerial material. What a disappointment he has been. Has he been promoted to the level of his incompetence?

In his typical rumbunctious style, he was quick to pronounce the government’s fiscal problem as a spending problem, not a revenue problem. This reflected his aversion to increasing taxes, and his penchant for reducing them. Economists were astonished. They despaired that he would ever understand Economics 101. Now he tells us that his much vaunted promise to lower personal income tax is 'off the table' because the Budget can't afford it! But lower company taxes might be affordable! Is it Morrison’s ineptitude that is holding back the long-awaited tax reform package? His inconsistent communication to the electorate bespeaks uncertainty. He has shown no evidence that he can do the job to which he has been promoted. He seems to have risen to the level of his incompetence.



The new Assistant Treasurer, Kelly O'Dwyer, holds little promise either. Her attempt to transmit a message on house prices should negative gearing be changed was inconsistent with her leader’s message. She looked incompetent. In fact between them, Morrison, O'Dwyer and Turnbull predicted house prices would go up and down. Then Peter Dutton, way outside his portfolio, chimed in that changing negative gearing, Labor style, would "bring the economy to a shuddering halt". They can’t all be right; the question is: ‘who has the most incompetent position on this issue?’

For his part, Malcolm Turnbull has done nothing to reassure the electorate that the economy is now in good hands after the Abbott/Hockey calamity. He has shown no signs that he has a grasp of economic management, that he has a cogent plan for tax reform, that he sees a way forward towards a balanced budget, that he has practical plans to realize his grandiose concept of an exciting 'new economy' based on our agility in seizing opportunities, and that he can manage the transition from the mining and construction boom to this new economy. He may be competent, but leaves us with the uncomfortable feeling that perhaps he's not up to his job either.

Verdict: The government looks incompetent in economic management. It has yet to prove otherwise.

Industrial relations
Turnbull mouths strong words about the need for IR reform, talks often about ‘union corruption’, but although there have been 20 referrals from the Heydon Royal Commission into Union Corruption and Governance, no charge has been laid against any union official. He wants Sunday penalty rates reduced to Saturday rates, wants to restore the Australian Building and Construction Commission, and wants the 'Registered Organizations' Bill passed. He threatens that if these are resisted in the Senate when it is recalled for three days on 18 April, that will bring about a double dissolution election on 2 July. Like his colleagues, he is afraid of a ‘WorkChoices’ – style campaign by the unions, but seems prepared to risk it.

Whether or not Turnbull’s threats are hollow, and whether he is competent in IR, will soon be obvious.

With Michaelia Cash as his bellowing Minister for Employment to assist him, the prospect of a balanced outcome in the IR arena seems remote. Is she competent? How can we tell? Her utterances are so strident, so exaggerated, so aggressive, so ocker, it’s hard to dissect away the rhetoric to find the substance, if indeed there is any.

Verdict: Turnbull and Cash are probably incompetent in IR, but prepared to take a risky gamble in this gladiatorial arena.



Climate Change
From past history we know that Turnbull has a grasp of the science of global warming and its sequelae. He is competent in as far as he understands the problem, the risks and the solutions. He also understands the inadequacies of the Coalition’s Direct Action Plan to abate carbon emissions, and has berated it in disparaging terms.

His fault is in embracing Direct Action as a reasonable approach to planet-threatening global warming. That is reprehensible rather than incompetent.

Turnbull’s advocacy for renewables seemed to have blown away by the fossil fuel advocates in his own party, but he has now announced he is dumping Coalition plans to scrap the Clean Energy Finance Corporation, and has heralded plans to essentially de-fund the Australian Renewable Energy Agency and replace it with a new 'Clean Energy Innovation Fund'. In view of his past utterances, who knows how much to expect from him on climate change? Bill Shorten believes he has Turnbull's measure in a debate on renewables.

When it comes to his Environment Minister, it is impossible to tell whether or not Greg Hunt is incompetent. I suspect that he does understand climate science, but that in the pursuit of the LNP’s conservative ideological position of climate skepticism, if not denial, he is prepared to abandon science and inflict his gobbledygook on the electorate to give the impression he knows what he’s doing and is protecting us all from environmental harm. For the first time this week though Hunt at last did seem concerned about the degraded state of the Great Barrier Reef. But is there anyone who really believes what this man says? Is he incompetent or simply deceitful?

Verdict: Turnbull and Hunt look incompetent. More likely they are just devious.

Education policy
Here is an area of government where there has been vacillation, indecision and ambivalence. Turnbull knows the value of education, but enslaved by LNP attitudes to the Gonski reforms, has beaten a retreat from the funding that is needed in years five and six. The previous minister, Christopher Pyne, exhibited his incompetence in both the Gonski reforms and the university reforms he tried to implement. He fashioned the mantra: “You can’t solve the schools problem by throwing money at it” as an excuse for doing nothing, and managed to alienate the university student population with his ‘user-pays’ style reforms of the university sector. Having ripped billions of dollars from university funding, the university Vice Chancellors were willing to accept Pyne’s funding model, simply to survive. The matter has not yet been resolved.

Despite styling himself ‘Mr Fixit’, Pyne proved to be incompetent.

Now a nasty row has blown up over the Safe Schools program, which the arch-conservatives in the LNP want defunded. The review that Turnbull foolishly asked the new Minister for Education and Skills, Simon Birmingham to carry out to placate them, has scarcely done so. Predictably, they now question its findings, and some want another. They will never give up their quest to destroy the program, despite its widespread acceptance. Their bigoted language has been shocking. Now we know what to expect from these reactionaries when the pre-plebiscite ‘Sexual Equality’ debate begins!

We have written about this in Safe Schools, Unsafe Politicians

It is to be hoped that Simon Birmingham will make a better fist of the portfolio than his predecessor.

Verdict: Pyne incompetent; Birmingham, Turnbull under test.

Healthcare
Healthcare has always been a problematic area. With the ageing of population, and the escalating cost of an increasing variety of medical interventions, funding the health budget is a headache for any government.

Regarded by the AMA as the worst-ever Minister for Health, Peter Dutton demonstrated his gross incompetence when, in pursuit of savings, he tinkered with Medicare, tried to introduce a co-payment for GP consultations, and in the process put the entire medical profession offside. He failed so badly that Abbott decided to replace him with Sussan Ley.

Ms Ley shows more promise. She is smart, well informed, and has established a better relationship with the profession. Her problem is that she is labouring under the Treasurer’s budgetary constraints that demand savings be made.

Turnbull says little about health, but has maintained the severe cuts to health funding for the States that Abbott and Hockey introduced. He is currently wooing Premiers with modest promises of increased funding.

Verdict: Dutton incompetent; Ley and Turnbull under test.

National Disability Insurance Scheme
Turnbull decided to not have a minister dedicated to oversee the NDIS; instead he has placed it in the Social Services portfolio under Christian Porter who comes to the post with a good reputation. The scheme is underway, but will be expensive as it expands. How well Porter will do under the current budgetary constraints, remains to be seen.

The previous minister, Mitch Fifield, seemed to be doing a reasonable job but he has gone to higher places.

Verdict: Jury still out on Porter.

There are several other areas of government where incompetence is stifling action, but let’s conclude with the NBN.

National Broadband Network
Here is the dilemma. We know Turnbull is a tech head, and is a strong advocate of fast broadband. But from the moment he was instructed by Abbott to ‘demolish the NBN’ that Labor had initiated, he has fiddled with it, diluted it with old technology, underestimated the cost and rollout time, and has thereby given us a second class hybrid scheme when we ought to have had the very best to compete on the world scene.

So is he incompetent or simply compliant with the Treasurer’s demands to cut costs. The sorry story is detailed in More about Puff the Magic Malcolm

Whether the new Minister for Communications, Mitch Fifield, can salvage some of the wreckage Turnbull has created is still to be determined.

Verdict: Turnbull is probably under the thumb fiscally, but has been incompetent in implementation, rather than incompetent technically. Fifield is under test.

So there it is. The analysis points to significant areas of incompetence in government departments, and gross incompetence among several key ministers.

Too many ministers have risen to their level of incompetence. The Peter Principle has struck again!

Turnbull has yet to demonstrate that he is competent to run an effective and efficient government, especially with fractious reactionaries snapping at his heels. He has dilly-dallied about the upcoming reform packages, the thrust of the Budget, and until this week about the likely timing of the election and whether it will be a double dissolution one or not. Until last Monday morning he seemed indecisive and all at sea – not a sign of competence. Now that he has taken the election plunge we shall see if there are signs of competence hidden beneath his urban exterior. So far he's kept them well hidden.

The jury is out, but it will be the voters who will bring in their verdict when the election is held, whenever that might be. Turnbull will be awaiting their decision with trepidation.




What do you think?
What are your views about PM Turnbull’s competence six months in?

How do you rate the competence of his key ministers?

How do you rate the competence of the Turnbull government?

Does it deserve re-election?

We look forward to reading your views and your comments.