A blistering analysis released today undermines claims that 200,000 jobs were saved by the stimulus as based on “spurious” Treasury modelling and finds the rescue package weakened the economy. It also says stimulus spending such as the $16 billion Building the Education Revolution “failed to deliver as originally expected and left a loss of competitiveness as a lasting legacy” by increasing imports and drawing resources away from the tradeable sector.
Last Wednesday, Mathias Cormann, Minister for Finance and Acting Assistant Treasurer, launched a Minerals Council monograph by Professor Tony Makin on Australia’s declining international competitiveness.
Cormann unequivocally endorsed Makin’s finding that Labor’s stimulus spending had aggravated that decline, while making little contribution to Australia’s recovery from the global financial crisis.
Two days later, Treasury issued a press release directly contradicting its minister and criticising Makin’s conclusions. To make matters worse, the release was not cleared with the Treasurer’s office or that of the Acting Assistant Treasurer.
The Abbott government only has itself to blame – it should have sacked several senior Treasury staff on day one. But it didn’t – Martin Parkinson, for example, was allowed to stay on until December this year. This is a government that keeps telling us that the public will respect a government that makes tough decisions – yet has made very few, and can’t even sack Treasury officials who continue to advocate for the failed policies of its predecessor.
This morning Tony Makin comes back at them:
Treasury has clearly lost its way over recent years. It seems incapable of articulating a solution to our competitiveness and productivity problems, and has failed to understand why fiscal activism is a dangerous instrument to use when monetary policy can be used instead. Like latter-day Bourbons, Treasury has seemingly “learned nothing and forgotten nothing” about Keynesian demand management. By so fervently defending it, Treasury makes its own case for fundamental organisational change and renewal at the top.
He is quite right, of course. But don’t hold your breath. Even John Howard didn’t have the courage to sack Ken Henry in 2007, and Tony Abbott is no John Howard.
Already the Liberals are slinking away from a fight:
As the government fell silent on the contentious paper by economist Tony Makin, Labor treasury spokesman Chris Bowen used the new debate to accuse ministers of denying the need for policy action during the global financial crisis.
The [Treasury] statement was said to be issued without checking with ministers, but some in the government played that down on the grounds that it was primarily a dispute about economic theory rather than national policy.
The Liberals need to understand that disloyal servants will be the death of them. In Howard’s last year both the Treasury and RBA undermined his government – Abbott has just completed his first year and already Treasury is running amok.