Lenore Taylor in the SMH.
One of the first fights inside the ALP will be about why it so comprehensively lost the economic debate during the election campaign.
Very senior figures are asking why Labor didn’t talk louder and sooner about its achievements in managing the country through the global economic crisis.
With the national accounts this week showing the economy growing at 1.2 per cent in the quarter and 3.3 per cent over the past year, it’s a very good question.
A government that gets itself kicked out, or even almost kicked out, while delivering growth like that in this global economic climate must be politically incompetent on a grand scale. Which, of course, it was.
The ALP have simply never had a coherent story on the economy. Part of the problem, I think, is that rather than just govern they have wanted to over-politicise things. It’s not enough for the ALP to be in office, they want to humiliate the Liberals. That cost them dearly during the CPRS saga – rather than just get their legislation through, they wanted to belt up the Liberals and succeeded to the extent that the Liberals replaced their leader.
Tony Abbott had a very effective story on the economy. Debt and deficit works well – people understand it. Taylor makes this argument.
And the debt argument was neatly punctured by calculation of the Treasurer, Wayne Swan, that Australia’s national borrowings are equivalent to someone on $100,000 a year taking a loan for $6000. But that line barely dinted the Coalition advertising campaign and Tony Abbott’s ever-repeated ”pay back the debt” slogan, with voters again and again professing deep concern about national indebtedness, even though their own mortgages would have almost certainly have been bigger than $6000.
This analogy confuses public and private debt. Private debt is where Wayne Swan borrows $6,000 and pays it back himself. Public debt is where Wayne Swan borrows $6,000 and everyone else gets to pay it back.
Sinclair – good to highlight the economic illiteracy of the trusting journalist. But the analogy is even worse than a conflation of public & private debt.
This is because Swan is using a net debt as a % of GDP figure, which (foolishly) assumes government has a call on 100% of GDP.
Actually the quantum of the loan is around four times higher, as the Fed Govt is around a quarter of GDP and therefore the debt is more like $24K.
Still a $24K loan may be reasonable…
But the Federal Government already has big outlays – in fact it generally spends more than it earns every year. Say like a family five with school fees. Each year they are earning a $100K, but they are spending $105K and then each year taking out loan to cover the difference.
In that circumstances it is probably best to not take out a $24K loan and why any sensible family would need to be very, very careful with their money. As any waste of money is very serious indeed (pink batts anyone?).
But instead to the ALP clearly public money is free money and not accounted for…
And this is why the public is much smarter than a gallery journo and why the ALP does not have a good economic story to tell at all!
Wystan
4 Sep 10 at 5:55 am
Sinc, Abbott could never articulate this key point and it left him vulnerable to the best question (to him) of the election campaign from the Chaser boys, who confronted him a chart with his income ($250k) vs his mortgage ($700k) compared to national income ($1.1tr) vs national debt ($60b). There was even a voter at our booth who came up the local Liberal candidate and asked him why the deficit was such a big problem.
The real problem wih public debt is that it reflects public spending. It’s okay for the government to borrow if it is spending on worthwhile stuff. But most of the time it is not. The problem with the BER-fueled deficit was that it was like taking on a $16b mortgage for a $4b house.
Sleetmute
4 Sep 10 at 6:40 am
I think that is right. Abbott could have slaughtered Labor on the economy and didn’t. I think that reflects core problems with Abbott and Hockey, who can’t even seem to make Swan look bad (Swan makes a fair fist of it himself though).
There is a difference between the economic story of the Country and of the Govt, which seems to have been missed by almost all of the media.
pedro
4 Sep 10 at 7:36 am
No no no no no – you got it wrong. Public debt is where the government borrows money to give trinkets to the parasitic class, and the productive class gets to pay it back.
boy on a bike
4 Sep 10 at 8:07 am
I agree – but further to this point, it should be up to the advocates of public debt to prove that the spending is worthwhile, and not just assert it.
Sinclair Davidson
4 Sep 10 at 8:51 am
If Labor had campaigned hard on the success of its economic policies, it begged the question of why they had to get rid of their leader. This was the fundamental problem for Julia during the campaign: by emphasising supposedly superior economic policies of the government, it would draw attention to Rudd – who had supposedly led the government off track. Tangled up in….
Judith Sloan
4 Sep 10 at 9:24 am
Wow: massive Labor black hole revealed.
C.L.
4 Sep 10 at 10:17 am
I think the confusion in this instance was between national income and government income. Most people understood that the conversation was about government borrowing, however the analogy assumes that the governments income is the same as the nations income which it isn’t unless taxation is 100%.
An opposition with more wit would have asked Swan if his intention was to lift taxes to 100% or if he was just trying to lie to the Australian people.
TerjeP
4 Sep 10 at 10:20 am
Don’t worry, C.L., the shortfall in mining tax revenue will be more than made up for by the economic bonanza of extravagant weddings by the flamboyant community.
Infidel Tiger
4 Sep 10 at 10:30 am
I think the ultimate point is that the householder with a mortgage is purchasing a house for a very good reason. The government, on the other hand – apart from burning 200 houses down – didn’t actually need to go beserk with a ‘stimulus’ because the so-called “GFC” represented no profound threat to Australia in the first place. Reasons: the financial solidity of the Howard-Costello inheritance and the ongoing mining bonanza.
C.L.
4 Sep 10 at 10:31 am
For a party that put economic management at the heart of the campaign the use of this ‘$6000 debt on $100,000 income’ line is of serious concern. What’s equally concerning is the lack of critical analysis by journalists (like Taylor) of this half baked, and deceptive analogy. As others have pointed out Swan only has access to around 25-30% of this income, and all of this is currently committed to expenditure supposedly until around 2012-13. Unless of course the government is going to seize private income (ie mining tax).
While the Chaser question was a cheap stunt I’m afraid it’s a pretty feeble comparison as I assume Abbott has some capacity to repay his debt.
David
4 Sep 10 at 10:36 am
The problem with election campaigns is that everybody says what the parties should have said. If you came up with good arguments for either side without waiting for a party leader to do it for you, then you can guarantee that a million other Australians thought the same.
With all the buzz that goes on in an eletion campaign, it is absolutely inane to complain that a politician hasn’t said enough about something. You have to remember that all politicians speak to us through the prism of the pig ignorant media.
As to Swan’s stupid analogy, I’ve asked 10 people about it and they all say that he is mixing up the national GDP with the government debt. Most of them were only marginally interested in politics and none were overly conversant in economics, but they all knew enough to know that Swan was telling us lies. DOn’t you think that a lot of voters out there realised this too.
The problem a lot of us have is that we treat the voters like mensa rasa who know nothing between elections and who need politicians to give them every bit of information during the campaign. And if a politician doesn’t say something, the pundits seem to think that the voters can’t work it out for themselves. That is why the only people that my acquaintance thinks lower than politicians and used car salesmen are journalists.
Rococo Liberal
4 Sep 10 at 11:16 am
That’s a little unfair on used car salesmen.
Infidel Tiger
4 Sep 10 at 11:20 am
“It’s not enough for the ALP to be in office, they want to humiliate the Liberals.”
Sinclair –
Definitely think you are on to something here. Julia has twice now thrown her Left faction behind two flawed ‘Terminators’ – Biff and KRudd – both of whom clearly viewed the Coalition as an anomoly to be effectively wiped from the political landscape.
Julia largely retains her lawyer’s cool demeanour on most public occasions. But the Coalition resurgent under ‘Mr Rabbit’ seems to have caught her wrong-footed.
I suspect Julia is too New Class/Professional Left to get inside the headspace of the centre-right, and thus she projects the disppearance of it, rather than seeks to interpret it.
Probably also explains why she thinks a formal embrace with the Greens is both tolerable and manageable.
That’s a weakness in imagination that may yet cost her dearly.
Myrddin Seren
4 Sep 10 at 11:33 am
I think you’re right about the ‘humiliation’ factor on the CPRS. Rudd’s lowy speech was an amazing act of hubris and bad politics. Likewise the ‘death of neoliberalism’ stuff was a dumb move that immediately drove a lot of economic liberals who had tired of Howard back to the Libs. (And Labor never tried to coax them either, ie their non-decision on book tariffs)
But economically Labor is still afraid of its shadow. It has been a good (not great, nor reforming) economic manager. And did the right thing during the GFC. It should have won the debate easily. But add 1 part government unable to make its argument and 2 parts partisan press at news and you get a govt that is seen as somewhat less competent than they were.
Though Abbott was also awful at exploiting it. He clearly is out of his depth as an economic manager, and given his actual views, his lines about small government just rang hollow to all. And hockey’s propensity for predicting gloom and doom for the economy because of the ALP is too easily shown up. News ltd did far more damage to the ALP than Abbott on economic issues.
Andrew Carr
4 Sep 10 at 12:01 pm
The fear and loathing factor is real, yes. A good point. In fact, months before Rudd and Swan’s catastrophic ineptitude and wrongheaded response to the phony “GFC” boogey monster in 2008, Labor was bristling with fury. I wrote about it frequently at the time. Having inherited a cakewalk from Howard and Costello, Labor was existentially discombobulated from the outset. They had nothing to ‘save’ Australia from and flailed about hopelessly – seeking a narrative to justify their existence. The Ideas Summit advertised this cluelessness very well. They literally had no idea. The first Liberal boogey monster they tried to combat was a putative inflation hangover but it was too dull and stupid to work. The “GFC” was perfect. Gillard has subsequently claimed, hilariously, that her tuckshops and toilet blocks saved the country. During the campaign, she lied that the Liberals wanted to do “nothing” in response. And so along with Rudd’s malodorous class warfare poelmics, the ETS, the RSPT and the failed WorkChoices wedge, a pattern of Liberal-hatin’ – combined with existential meaninglessness – acted to produce a government whose chief characteristics were spin, hysteria, haste and personal attacks. In the end, it destroyed Rudd and has now led Julia Gillard to become a diminished figure on the national stage – with no real legitimacy or authority.
C.L.
4 Sep 10 at 12:29 pm
Swan’s inflation monster did convince 10′s of thousands of home owners to fix their interest rates at ~8%. They were realy chuffed a month after when he was then fighting the national soup kitchen and bread line emergency.
Infidel Tiger
4 Sep 10 at 12:39 pm
There was even a voter at our booth who came up the local Liberal candidate and asked him why the deficit was such a big problem.
No, that’s the wrong way to look at it.
The way to look at it is to say you earn a large salary but also have extremely large recurring commitments over and above the salary and if you lost your job, you’re basically fucked, as you can’t go to the bank and borrow to keep the lifestyle.
The idiotic, innumerate left-wing wants us to believe we don’t have a problem because our debt to GDP ratio is low.
That’s a bullshit way of looking at it. If the bottom fell out of the commodity markets and the world went into a another double dip, we’re basically fucked because our deficit could easily reach 10% of GGP like it did in Britain.
Who would finance us then except at punitive rates along with demands by ratings agencies that we close down the gap or head to the IMF.
We have no downside protection in our budget in a world that really does look messy and the growth arrow could head south in a big way.
JC
4 Sep 10 at 1:06 pm
Carr,
As usual you’re not making any sense.
JC
4 Sep 10 at 1:07 pm
Remembering the hatred: there was no low to which Gillard wouldn’t descend.
C.L.
4 Sep 10 at 1:17 pm
Gillard.. The Kmart Pelosi? Good one CL. LOL.
JC
4 Sep 10 at 1:21 pm
Lenore dear, the answer is there was no Global Financial Crisis. There was a North Atlantic Financial Crisis, which was just another huge kick in the guts for the completely cactus US political economy.
Rudd would have bored the nation senseless with heroic war stories of his saving us from something none of us felt, or experienced in any way. In doing so, he would have gifted Abbott endless opportunities to remind the nation of Rudd’s pink-batts and school tuck-shop “heroics”.
Bottom line: By now, Tony Abbott would have enjoyed two weeks of being called “Prime Minister”.
Peter Patton
4 Sep 10 at 2:01 pm
Great story all right. Only problem was it had an $11 billion hole in it and the chickens have come home to roost re economic credibility.
Theone thing tht is going to get Labor over the line is that they didn’t have to bullshit about the economy, the facts speak for themselves. The party of smoke and mirrors aka the Coalition has been exposed this last week for the frauds they always were.
Brilliant stuff….thank you Andrew Wilkie.
Justice indeed.
Lloyd
4 Sep 10 at 3:24 pm
Hi Wayne!
Michael Fisk
4 Sep 10 at 3:34 pm
Peter
there was no global financial crisis. That’s hilarious.
Where do you think the major financial centres are?
Do you think an economy with 160% household debt to disposable incone is vulnerable to financial crisis? Or do you think finance doesn’t matter?
sdfc
4 Sep 10 at 8:41 pm
“You have to remember that all politicians speak to us through the prism of the pig ignorant media. ”
This applies to Swan as well as Abbott. I did not poll people but it appears quite a few people were sort of scared by the crisis and thought the stimulus was useful at least as a precautionary measure. That a lot of spending was bungled did hurt Labor but not necessarily the idea of the stimulus – or debt. I don’t think Abbott’s message about debt really stroke home.
I can’t really see what is the fault of the media exactly. Except that they do tend to go with the kind of predominant ‘expert’ point of view, be it on climate change or macro-economics. But the politicians can say in their interviews what they want.
Boris
5 Sep 10 at 1:22 am
The more we look back the more I agree with Glenn Stevens. this wasn’t a global crisis as much as it was a north Atlantic crisis.
The global element of the crisis according to Stevens lasted about 6 to 8 weeks.
The further we move away from that time and look back, the more I think he’s right.
JC
5 Sep 10 at 1:28 am
“Do you think an economy with 160% household debt to disposable incone is vulnerable to financial crisis? Or do you think finance doesn’t matter?”
Households weren’t impacted in that way. Small RMB securitisers were. On the back of an expected downturn there were short lived job losses and a fall in hours worked. This happened much later of course.
Maybe you can explain why household debt is a worry when only securitisers really got a shock.
Did the drying up of XCP make anyone lose their home in Australia other than someone who went hog wild on the RHG IPO?
.
5 Sep 10 at 1:02 pm