Fiscal ‘facts’ sure to make a prestidigitator proud

In The Australian today:
“The news would have sent the champagne corks popping. Merely two days before Christmas, Ross Gittins, the sage of the Fairfax press, had crunched the numbers and the verdict was in: Rudd-Gillard-Rudd may not have been models of fiscal rectitude, but Howard was far worse.”

About Henry Ergas

Henry Ergas is a columnist for The Australian newspaper and the inaugural Professor of Infrastructure Economics at the SMART Infrastructure Facility at the University of Wollongong. The SMART Infrastructure Facility is a $61.8 million world-class research and training centre concerned with integrated infrastructure solutions for the future. Henry is also Senior Economic Adviser to Deloitte Australia. Prior to these concurrent roles Henry worked as a consultant economist at NECG, CRA International and Concept Economics. Henry's previous career was as an economist at the OECD in Paris, where amongst other roles he headed the Secretary-General’s Task Force on Structural Adjustment and was Counsellor for Structural Policy in the Economics Department.
This entry was posted in Uncategorized. Bookmark the permalink.

30 Responses to Fiscal ‘facts’ sure to make a prestidigitator proud

  1. Blogstrop

    I knew it! Ross Gittins is Techno.

  2. Tintarella di Luna

    Bingo blogstrop

  3. Baldrick

    … and then he woke up!

  4. Tintarella di Luna

    Methinks Ross-Techno Gittins is suffering the ill effects of too much processed soy, probably overdosed on soyburgers at Christmas lunch – apparently it’s the phylates, safer sticking to miso and tofu.

  5. Tintarella di Luna

    Congratulations Henry, nice way to end the year with a bit of the unvarnished truth instead of the tarnished.

  6. Tom

    Thank you, Henry. I’ve filed this in my remembery as a most useful reference. I suspect thousands more will do likewise.

  7. Rabz

    Nice piece, Henry and even if it is somewhat akin to shooting fish in barrells, such staggering idiocy needs to be held up to the ridicule it so richly deserves.

    As I noted yesterday, geniuses like the Git make certain wrongologists here look like Nostradamus.

  8. gabrianga

    Another application for a position at the Guardian?

  9. .

    Ah…the ‘stucteal defecit’, a concept much loved by ALP power corridor walker, Homer Paxton.

  10. J.H.

    Howard was worse, WTF?….
    Howard/Costello retired 98 billion dollars of Labor/Keating Government debt over ten years and left the country and the new Rudd Government with a 30 billion dollar surplus. Plus they ran balanced or surplus budgets year in year out……… Yet Gittins reckons Howard was worse than the Rudd/Gillard/Rudd Regime which left Australia with 300 billion dollars of debt after only 6 years in office!

    What drugs does Gittins put on his cornflakes to come up with the conclusion that Howard was worse?

  11. .

    I suspect a potent cocaine/LSD mix.

    Talk about a hearty breakfast!

  12. Rob MW

    Henry is becoming Australia’s version of Mark Steyn. Word smith extraordinaires that can make even the most grumpy (me) of people belly laugh. Although poor ole’ Ross is an easy target given that as soon as he touches the keyboard joke books the world over are rewritten.

  13. David Brewer

    Too right, JH.

    Gittins’ article relies on amazing cherry-picking: it compares spending growth under the last 10 years of Howard compared with the last 5 years of Rudd/Gillard/Rudd. Wow! Leave out the first 2 years of tough Howard budgets – the ones needed to staunch the massive debt and deficit left by Keating. Then leave out Rudd’s first budget – whopping deficit. And then only compare what came after these two completely different beginnings? Talk about an unfair comparison, this is ridiculous. All it proves is that Howard got on top of the problems he inherited quickly, whereas Rudd quickly created problems that soon forced restraint. Note also that Gittins takes no account of the massive fiddling carried out to reduce the notional deficit in 2012-13, which means that 2013-14, still a Rudd-Gillard-Rudd budget, will blow out to one of the two or three largest in history in nominal terms.

    Gittins also focuses too much on spending and not enough on revenue or the balance. Howard managed a positive balance 10 times and sustained large reductions in the debt while also reducing taxes and thus laying the foundations for faster growth. Rudd/Gillard/Rudd have done the opposite – running colossal deficits despite raising real tax levels (NDIS levy, restricting super concessions, raising taxes on non-residents, increasing income taxes in certain bands etc. etc.).

  14. candy

    It is quite odd when John Howard is generally considered one of the best PM’s with a prosperous Australia which is how you’d measure success, that an elite economist like Ross Gittins thinks otherwise. Perhaps it’s time for retirement.

  15. Rabz

    an elite economist like Ross Gittins

    He’s a glorified accountant, FFS.

    And a stunning hypocrite, but that goes without saying.

  16. LOL, Henry accuses Gittins of cherrypicking, but the graphic cherrypicks the first three years of each government, which in Hawke’s case coincided with the Howard-engineered 1983 recession, and in Rudd’s case coincided with a global depression.

  17. Tom

    You really are a z-grade troll, pond scum.

  18. .

    but the graphic cherrypicks

    No it doesn’t.

    Howard-engineered 1983 recession

    Creative work made up all on your own. A+. The real reason was prices inflexibility re wages and FX. How can you blame Howard when he often totally disagreed with Fraser, who had the final say?

    Rudd’s case coincided with a global depression recession.

    As did Howard’s given the lag – which was also compunded by a bad drought.

  19. Joe Goodacre

    It is correct that Howard was a bigger spender, but I’m hard pressed to see how Howard was worse than Rudd/Gillard.

    The Liberal Party from 1997 benefited from a lift in the savings rate due to superannuation reforms under Keating/Hawke, floating of the exchange rate and making the reserve bank independent.

    From 2004, the coffers were also filled with the once in one hundred years terms of trade.

    As a result Federal government receipts increased from $134 billion in 1996-1997 to $295 billion in 2007-2008. This was an increase of approximately $15 billion per year, or an average of 11% per year from the 1996-1997 baseline.

    Spending in this period increased from $140 billion in 1996-1997 to $272 billion in 2007-2008.

    Over 11 years, this was a growth of $12 billion per year, or an average 9% increase per year from the 1996-1997 baseline.

    The Rudd government came in with revenue at $295 billion, which increased to $336 billion in 2011-2012 (MYEFO estimated). This was an increase in receipts of approximately $10 billion, or 3% average increase per year from the 2007-2008 baseline.

    Spending was at $272 billion in 2007-2008 and that increased to $370 billion in 2011-2012 (MYEFO estimate). This is an increase of $24.5 billion per year, or 9% per year from the 2007-2008 baseline.

    The difference between the Howard and Rudd/Gillard governments is thus – Howard grew spending an average 9% per year from the 1997-1998 baseline, however receipts grew at a faster rate (on average 11% per year).

    Rudd/Gillard had similar growth in expenditures, but revenues only grew at an average 3% per year from the 2007-2008 baseline.

    It would appear that Howard/Costello at least spent less than they received, but they benefited from a remarkable increase in receipts (whatever the cause).

    Rudd/Gillard spending increased in a similar pattern to Howard/Costello, but they didn’t adjust when revenue receipts failed to gain as quickly as expected.

    Either way – neither government were advocates of small government, big freedom.

    All of this is available here – http://www.budget.gov.au/2011-12/content/myefo/html/13_appendix_d-01.htm

  20. Chris M

    Pure Marxism from Gittin, this type of propaganda is daily fare in countries like communist China.

  21. Pete of Freo

    And what come after denial Ross, more denial?

  22. PeterMax

    This excellent article exposes the very serious problem that Australia faces from the lack of financial awareness and very serious irresponsible actions of the Labor/Left/greens/ABC/Fairfax and their supporting journalists like Gittins who does not want to understand or does not care how much they/he misleads Australians, to their great detriment and the very serious damage to our national interest.

    For many years the ” feel good ” Left have been mostly wrecking Australia – with the help of many journalists – and the Coalition have been fixing it with Labor then being voted in again, with the help of most journalists. This stupidity and wrecking must stop.

    A solution to the Left’s and supporting journalists’ attacks on our national interest, is for the Coalition to make sure that the dire consequences from the actions of the Left and their journalists are loudly proclaimed. With the Left and their journalists strongly blamed – by news-letter if necessary though unavailability of most media – for the hardships encountered by the public when the Coalition – as always – cleans up Labor’s debt, mess and their consequences.

    So far the cycle has been that Labor makes good guys of themselves by squandering $billions, the Coalition makes itself unpopular by cleaning up Labor’s mess and most media ensure Labor gets voted back in again.

    To protect our national interest, this cycle must stop, even if it means that the Coalition either does not clean up Labor’s mess or take 30 or more years to do it, which time would not be unreasonable when cleaning up Rudd/Gillard Labor’s huge mess.

  23. Tel

    He’s a glorified accountant, FFS.

    Take back what you said about accountants!

    An accountant would be able to tell the difference between a surplus and a deficit.

  24. It would appear that Howard/Costello at least spent less than they received, but they benefited from a remarkable increase in receipts (whatever the cause).

    Rudd/Gillard spending increased in a similar pattern to Howard/Costello, but they didn’t adjust when revenue receipts failed to gain as quickly as expected.

    Either way – neither government were advocates of small government, big freedom.

    Well said, Joe G. Refreshing to see someone with full command of the facts set it all out like that on this site.

  25. Jazza

    Why the surprise–the mob at Fairfax ,mostly still think the ALP did a good job of government.

    Maybe the incompetence awash in all Ministries, deficits, the waste,the spin, the lies,the beatups, Rudd and Gillard poncing about,the daily governmental announcements that led nowhere fast, the four insulation deaths and the BER money thrown at union dominated conglomerates were “fiscally valid”and we the suffering taxpayers should be grateful for the heavy burdens and six wasted years,just so these useless wankers can feel good?

  26. David Brewer

    Latest figures here:

    http://www.budget.gov.au/2013-14/content/myefo/html/16_appendix_d.htm

    For all Howard’s failings, it’s really hard to see how one can run a”moral equivalence” line on budget responsibility. On any relevant parameter – spending, deficit, or the changes in the levels of either – Labor governments consistently perform worse over more than 40 years.

    Highest spending levels, in descending order: Hawke 84/5 (27.6% of GDP), then Hawke 85/6, Hawke 86/7, Hawke 83/4, Keating 92/3, Keating 93/4, Rudd 2009/10, and there are half a dozen more Labor years before the highest Coalition figure of 25.1% under Howard.

    Highest deficits: Rudd 2009/10 (4.2% of GDP) then Keating 92/3, Keating 93/4, Rudd 2010/11, Hawke 83/84, then a further list of Labor years as long as your arm before you get to the highest Coalition deficit of 1.9% of GDP (Fraser, 1977/8).

    One could continue with many comparisons of changes in both these parameters over various periods, but the most instructive for checking Henry’s argument might be the biggest 2-year increases in the deficit. Given that it takes time to bring in whopping spending plans, the two-year changes may be more instructive than the one-year changes, although Labor wins hands-down on them too.

    Biggest two-year deteriorations in the budget balance: Rudd 5.9% of GDP from 2007/08 to 2009/10, then Keating 4.5% from 89/90 to 91/92, next Keating from adjacent years, then Whitlam 3.7% of GDP from 73/4 to 75/6.

    It’s time Labor faced facts on their fiscal performance, and the reasons for it, which Henry cogently explains.

  27. .

    It is correct that Howard was a bigger spender, but I’m hard pressed to see how Howard was worse than Rudd/Gillard.

    muttley sez:

    m0nty
    #1128266, posted on December 30, 2013 at 6:13 pm

    Well said, Joe G. Refreshing to see someone with full command of the facts set it all out like that on this site.

    muttley thinks we don’t criticise big government conservatives often, except when we do, it’s a civil war or something.

  28. Rudd-Gillard-Rudd may not have been models of fiscal rectitude, but Howard was far worse.

    In what crazed Wonderland is anyone thinking this? Fucking idiot.

  29. JohnA

    I did some calculations on the Debt Servicing Burden ie. the total amount drawn off Budget Outlays to repay debt and interest.

    I have a pdf of the spreadsheet shared in my Google docs (free advert for them?) available for viewing at Debt Service.

    It demonstrates that the toughest years were early – pre 2001 and GST, when repayments were the heaviest load on outgoings.

    It also shows just how much the Rudd/Gillard/Rudd-Swan budgets relied on borrowings to sustain expenditure when the revenue estimates were over-stated and then failed to materialise.

    I didn’t have time to date the Dotcom bust or the Asian Financial Meltdown, or the avian flu strike against toursim etc.

    [Sir Roderick Murgatroyd] Let the agonies, err, analysis commence…

  30. Joe Goodacre

    Thanks for the source to the latest figures David.

    Agreed wholeheartedly – Labor are undoubtedly less fiscally responsible.

    However – Howard and Costello get a pat on the back (in my view) from a lot of people on economic performance which is undeserved.

Comments are closed.