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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Comments (9) -

  • Lurline

    4/12/2017 5:46:13 PM |

    ScoMo needs to be replaced as treasurer, but there is nobody in the LNP I'd trust, including him. The whole government needs to be replaced last year, if not sooner. (If only we could turn back time to 2012 knowing what we know now).

    Of course if Trump and North Korea's posturing becomes a real p*ssing contest we won't have to worry as we won't have a country or planet to live on.

  • Frances Holman

    4/12/2017 6:33:14 PM |

    Have to agree with Lurline - Scott Morrison like Joe Hockey before him and the LNP generally are  pushing an austerity agenda that targets low and middle class Australians and favors the elite and business. Morrison should be replaced with someone with a Economics background rather than Geology degree. Not sure if there is anyone suitably qualified in the LNP  to fill the the job, Labor has Bowen, Swan and Leigh and I'm not sure why they don't tout their superior credentials at every opportunity.

  • Ad Astra

    4/13/2017 9:14:24 AM |

    Lurline, Frances Holman
    Thank you for your comments.

    You both are right. Morrison is not up to the job of Treasurer, nor does there seem to be anyone else in the government that is.

    It really is depressing to witness the debate around the upcoming budget, particularly housing affordability. There seems to be no considered response; instead a mishmash of ideas with no strategic integration. Positions on some strategies such as changes to negative gearing and capital gains tax are ideologically driven, instead of being part of an integrated plan.

    No one is pretending this is easy. Which highlights the need for careful, fact-driven, logical discourse that brings about a comprehensive plan.

    It is a tragedy for we the citizens of this nation that we have such incompetents in charge of such crucial decisions about such important matters.

    Nothing wil change until the government does.

  • Ad Astra

    4/13/2017 10:50:40 AM |

    Folks

    To add insult to injury, Crikey Weekender: has this to say: www.crikey.com.au/.../

    With reports of Prime Minister Malcolm Turnbull taking control of the 2017 budget and rumours that Scott Morrison will be demoted from the senior portfolio in the next ministerial reshuffle, the March news on the economy was disastrous for the Treasurer.

    “At least seven new records were set. None are to his credit.

    Labor’s debt doubled
    “The Office of Financial Management released figures on Friday 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.

    Rate of debt increase
    “Gross debt added in March was $18.7 billion, the highest monthly increment in Australia’s history. The most Labor treasurer Wayne Swan added was $13.2 billion in May 2009, at the depths of the global financial crisis. Former treasurer Joe Hockey’s highest was $12.7 billion in November 2013.

    “Nine months into this financial year, the total gross debt added so far has been a staggering $64.2 billion. That’s an extra $7.13 billion each month on average — the highest for the first nine months of any financial year in history.

    “It belts Hockey’s first nine months in 2013-14, when he added $53.6 billion — the second greatest ever. Labor’s highest was $44.7 billion in 2011-12.

    People unemployed
    “Since the restructure of Australia’s economy in the late 1980s, the jobless number has steadily declined. It dropped below 720,000 in 1998, where it stayed for the next 15 years. Until Joe Hockey.

    “Within months of the hapless Hockey becoming treasurer, it was back above 720,000 again. Levels have remained high ever since, despite changing prime minister and treasurer. The jobless number has been above 720,000 for 31 of the last 34 months. In February it was 748,123.

    Jobs for women
    “Women’s unemployment is now back above 6%. It has been 5.7% or higher for the last 39 months. The last time that occurred was 2001 to 2004. For most of Labor’s period, including the GFC, female unemployment ranged between 4.6% and 5.6%.

    The ratio of full-time to total jobs
    “This ratio fell in March 2016 to the lowest in history — 68.6%. It tumbled further for the next two months and then fell below 68% for the first time last September. The January number was a new record low of 67.7%. February’s is the third lowest ever at 67.99%.

    Ratio of men’s employment to population
    “This ratio has been at 62.2% for the last two months and for three of the last six. The last time it was this low was in the early 1990s recession.

    Underemployment
    “As Crikey showed last week, the number of workers who need to work more hours has exploded. It clicked over 1 million after Joe Hockey’s first budget and last month reached a new record 1,114,558 workers. That’s up as a percentage of the labour force from 7.8% when the Coalition took office to an all-time high 8.7%.

    Youth underemployment
    “For young people aged 15 to 24, underutilisation is now 31.5%, a new Australian high. This breaks all Joe Hockey’s previous records. The Labor period’s highest was 27.4%, and in the Howard years 27.9%.

    Engineering construction
    “Total engineering construction activity for the year to December 2016, announced by the ABS on Wednesday, showed the worst annual decline ever.

    “Activity in 2016 fell 19.7% on 2015, which was down 13.0% on the year before. Even 2014 was 9.6% below 2013, which was down 1.7% on 2012. That makes four consecutive annual declines – for the first time. The last three were all the worst on record.

    Trade surplus slashed
    “One positive for the Turnbull government in recent months has been the trade balance, which appeared as a surplus in November for the first time in 32 months. December’s trade surplus was even better at $3.33 billion, a record high.

    “That was followed, however, by the second worst collapse in Australia’s history. Figures released last month show the January balance is suddenly $2 billion lower at just $1.30 billion.

    “So, Scott, as the soothsayer said to Julius Caesar: “Beware the ides of March.”


    Do we need anymore evidence that Morrison is not up to the job of Treasurer? He is simply incompetent, yet is the ‘adult’ in charge of running our three trillion dollar economy!

  • TalkTurkey

    4/13/2017 1:00:51 PM |

    Comrades All,
    It fills me with a profound sense of gratification to see our predictions from the lead-up to the 2013 election coming true day by day. (Although we under-predicted the awfulness of the LNP in action.) I predicted that boat turnbacks would never happen, but Abbort turned out to be even nastier than I thought he could be. And note, when he got rolled it was less for his extreme nastiness and pious hypocrisy than for the fact he knighted the bloody Dook. [Doesn't say much for my countrymen eh.] So apart from under-estimating, I am delighted at the overall accuracy of our predictions, that all the Fighting Fifth spoke about all the time but which were denied by 99% of the MSM. (The 1% being Laura Tingle).
    I never thought they could be SO financially inept though. That's the most gratifying part of all, that they can have so hugely increased the deficit, while decreasing services, screwing the NBN, scaring the hell out of welfare recipients, going back on every promise including defunding TAFEs and Gonski reforms, oh too many things, environmental protection, employment, wage stagnation ... So I'm delighted at our prescience, the same way I'm delighted that my worst predictions for the planet are all proving so gratifyingly correct.

      

  • Ad Astra

    4/13/2017 8:35:26 PM |

    Talk Turkey
    It is gratifying that our predictions about the Coalition's financial ineptitude have turned out to be so accurate.  Though it would have been better for the sake of the nation, that we had been wrong.

    The awfulness of their financial management is shocking, literally.

    If only we could cancel their contract with the electorate, and start all over again!

    The voters have been sold a pup. Now it's biting them - every day.

  • Phillip White

    4/13/2017 9:36:28 PM |

    Not to worry. "Good Government" will begin any time soon

  • Ad Astra

    4/14/2017 10:28:31 AM |

    Phillip White
    Waiting, waiting, waiting!

Comments are closed