Noodle draws our attention to this Emma Alberici paragraph:
Back to that $96 billion “Labor debt” inherited by the Howard government in 1996 – which actually comprised $40 billion of Fraser government debt that carried through the Hawke-Keating years taking the true level of Labor debt in 1996 to $56 billion. Bringing down that debt wasn’t all about constrained spending and higher taxes, in fact neither of those things were characteristics of the Howard-Costello years. Government asset sales between 1996 and 2007 worth $72 billion wiped the net debt out entirely with $16 billion to spare.
That paragraph is remarkably similar to this one that appeared in the Illawarra Mercury:
$96billion “Labor debt”, comprised of $40 billion carried over from the Fraser government through the Hawke/Keating period, meaning that the true level of Labor debt was $56billion. To pay that off, the Howard Government sold almost $72billion of Government assets (Telstra, DASFLEET, etc), meaning that the move to negative net debt was not really due to any miraculous and bold fiscal settings, but owed everything to a series of asset sales.
That paragraph – and the figures contained in it – was first written by Stephen Koukoulas (AKA The Kouk):
The $96 billion “Labor debt” inherited by the Howard Government in 1996 comprised $39.9 billion of Fraser Government debt that carried through the Hawke/Keating period meaning that the true level of Labor debt in 1996 was $56 billion. To pay that $56 billion off, the Howard Government sold almost $72 billion of Government assets meaning the move to negative net debt was not really due to any miraculous and bold fiscal settings, but owed everything to a series of asset sales.
So how can we be be so sure the paragraph has been taken from The Kouk?
Two things. First the debt that the Howard government ‘inherited’ from the Fraser government, via the Hawke-Keating government, would have been $16 billion and not $39.9 billion. What The Kouk has done is revalue the $16 billion in real terms in 1996 dollars. But the face value of the debt is what gets paid back – $16 billion. At best The Kouk can argue that the Fraser government left the equivalent of nearly half the Hawke-Keating debt to the incoming government. The Kouk explains that point here (emphasis added):
When John Howard was Treasurer, net Government debt rose at a steady pace, hitting 7.5% of GDP when Fraser lost the 1983 election. In 1996 dollar terms, 7.5% of GDP is around $40 billion which is in fact the real level of net government debt “inherited” by the Hawke Government when it won the 1983 election.
I think he over-eggs the story by claiming that is the amount that flows through to the Howard-government era. But whatever he is up to, Alberici and the Illawarra Mercury take that figure at face value.
The next thing that The Kouk has done is gross up the value of the Howard-government asset sales to 2007 dollars and then compare that to the 1996 dollar amount of the ‘inherited’ debt.
To get an accurate indication of the true dollar impact on debt of those asset sales, I have converted them into June 2007 dollar terms. Take the sale of DASFLEET, for example, which was sold for $408 million in July 1997. In June 2007 terms, this was worth $536.8 million. Or perhaps the first tranche of Telstra is interesting. Sold for $17.2 billion in November 1997, that converts to $22.6 billion in June 2007 terms.
That is a mistake. That particular comparison gets the timing wrong. (At the very least he could have grossed up the $96 billion to 2007 dollars). The Kouk’s mistake is exactly the same mistake Alberici makes and the Illawarra Mercury makes. That is after she (and the Illawarra Mercury) have confused the real value of the Fraser government debt in 1996 dollars with the face value of the Fraser government debt (the amount that actually needed to be paid back).
As she says:
In politics, myth, when repeated often enough, has a way of becoming gospel.
It looks like The Kouk’s myth is being repeated often – as is the Alberici claim that the IMF identified the Howard government as being fiscally profligate. We have dealt with that issue before.
Update: Emma Alberici responds in comments below.