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Chris Bowen is setting himself up for failure

As Chris Bowen proudly released Labor’s costings today, the RBA was busy blowing it out of the water.

As reported by the ABC:

“Australia’s annual economic growth rate in 2018 was 2.3 per cent, well below the RBA’s last forecast (in February, a few weeks before the data came out) that it would be 2.75 per cent.

In response, the bank has hacked its forecast for growth over the year to June from 2.5 to 1.7 per cent — its forecast was as high as 3.25 per cent as recently as November.”

Despite all the evidence of an economic downturn, Mr Bowen has chosen to use the real GDP growth forecasts from PEFO which were the same as the April budget:

2018-19  2.25%

2019-20  2.75%

2020-21  2.75%

2021-22  3%

2022-23  3%

Every single budget keeps predicting growth of 3% (or even 3.5%) coming soon.  The last time we achieved that was in 2012 when the growth was 3.9%.

He has also used the wage growth figures from PEFO.

2018-19  2.5%

2019-20  2.75%

2020-21  3.25%

2021-22  3.5%

2022-23  3.5%

According to the ABS, the private sector wage growth of 2.3% through the year to the December quarter 2018 was the highest through the year growth since December 2014. But annual rises of 3.5% are expected soon?????

Why do treasurers, or those aspiring to become treasurer, keep doing this? Or perhaps more to the point, why do the treasury and finance secretaries keep doing this?

I am sure Mr Bowen’s figures all add up, but predicating them on unrealistic assumptions whilst locking in promises of really really big, much bigger than yours, surpluses is a recipe for failure.

Labor has a far better policy agenda and an actual vision for where they want to take the country. Why spoil it by playing surplus wars?

Will they ever learn?

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38 comments

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  1. Kaye Lee

    I should add that these are the same figures the Coalition is using, but it will be whoever is in government that has to explain why they didn’t eventuate,

  2. Ill fares the land

    I think Labor has fallen for a pretty dumb stunt. The LNP moved “heaven and earth” to show that it would return to surplus using all manner of flawed and possibly unachievable forecasts. But they reasonably expect they will lose government and when Labor can’t deliver a surplus, they will proclaim they were right when they said Labor can’t manage the economy. The economic reality behind a budget surplus or deficit have been subsumed by the absolute obsession of governments seeking another avenue to use to attack their opponents. The risk that the same argument will be turned on them is clearly deemed minor compared to the potential politicial gains.

    I swear that from 2013 and for two years, I didn’t see the risible O’Dwyer answer a single question without somehow mangling the phrase “Labor’s debt and deficit disaster” into it. That only stopped when it emerged that the LNP’s own “management” was actually worse if the budget deficit is the measure.

    I believe that Labor would have done better to give a range of outcomes to show the sensitivity of their figures to forecast growth rates and wages growth. Better to be the government that made the predictions than the new government trying to justify how its “radica”l policy programme is or will deliver. Just imagine Mr Shouty McPottymouth and the shreiking, but then he is a simpleton and needs simple concepts.

  3. Geoff Andrews

    Holy disappointment Batwoman! What a missed opportunity to counter the lies with which we’ve been showered for weeks. I’m wondering if “Labor strategist” is an oxymoron.
    I love the logic of the latest Liberal ad. It tells us that Labor’s going to tax pensioners, small business, retirees etc then suggests that the little kiddies at the bottom of the screen will pay for it.
    If the tax has been collected, I would have thought that there would be no future debt.
    But then they ARE illogically able to give tax concessions to everyone, increase funding AND magically still pull a surplus out of the hat.
    I wonder where & how Labor recruits its focus group participants.

  4. Keitha Granville

    If Treasury and Finance provide the figures for them to do their costings, both LNP and Labor, then who is to blame ? If Bowen adjusted the figures down, the LNP would claim they were trying to be sneaky, they cannot win. They have to use the same figures, this isn’t a choice.

    Of course, when it falls to the lower set, the new Opposition will scream that it proves Labor cannot manage. Once again, they can’t win. We can only hope the RBA is wrong.

  5. Kaye Lee

    Keitha,

    I agree that, for comparison’s sake, they should use the same figures, but a smart shadow treasurer (or dare I say, honest) would leave himself some room by, rather than stressing the size of his surplus, pointing out that his figures are based on current treasury forecasts and if they get into government and find those forecasts to be “optimistic”, they will make adjustments accordingly. A government has to have the flexibility to do what is required, not lock itself into comparisons with the other guys.

    Today, on the Drum, the women representing the business sector spouted the line about the economic record of Libs being surpluses and Labor being deficits. It’s like the last six years never happened. One of them even raised the “carbon tax” saying it raised zero revenue as a supposed reason to mistrust Labor’s projected savings from tightening tax concessions for the wealthy. The carbon price actually raised $15.4 billion which was largely redistributed to us via the substantial raising of the tax free threshold, increased payments to pensioners, and subsidies to trade exposed industries.

    It infuriates me when they have these commentators on who seem to not have a clue about the facts.

  6. Paul Davis

    Absolutely Kaye and above posters. Labor on a flogging to nothing with this silly mine’s bigger than yours game. The next three years will be bitter and frustrating as Bowen pushes the Liberal Lite fiscal responsibility nonsense while being howled down by a vicious opposition and hounded by the media dogs of whore. One term of missed opportunity at the end of which will be an increased army of down trodden unemployed and underemployed poor homeless angry punters whose lives won’t have improved. No changes to the corrupt job network, disability service scammers, welfare card victims for a start. Bill and Co will be reviled and his Centre Right Party won’t see government again for a generation.

  7. Kaye Lee

    Paul,

    Whilst I think they are making mistakes in messaging (AGAIN), their policies are a country mile in front of the other mob’s.

  8. Wam

    I wrote on his page how a great treasurer and prime members mister got sucked into a ridiculous game by the rabbott who got the morning shows to ask the simple question that required complex answers and this idiot started it up again I was attacked as a government troll by people who cannot brook criticism KISS is the way of bill will blow it

  9. Zathras

    At this point in the sideshow I think Bowen is simply preaching to the converted just as Freydenberg is talking to rusted-on Liberal voters – just telling them what they want to hear.

    Those who are still undecided at this stage are as likely not to vote for a party on the basis they don’t like what sort of tie the leader is wearing and are probably leaning toward Independents anyway.

    The aim now is to hold onto existing supporters and not have them panic and defect to the enemy by reassuring them that their support is well-placed.

    Once in Government many things can change besides the PEFO forecasts and hopefully Bowen has made allowance for some adjustment.

    Hockey claimed that he would deliver a surplus in his first Budget and in every Budget thereafter but voters were kept distracted by other matters and the so-called Debt and Deficit Disaster was quickly forgotten.

    It’s more a matter of vision and direction the voters may be looking for than a continuation of the same old circus and Labor should be vigorously challenging the “Liberals are better economic managers” lie.

  10. John Hermann

    Somebody should point out to Chris and Josh that to attempt to run a regime of budget surpluses in the present circumstances will most certainly plunge the economy into an almighty recession. The reality is that neither of them are competent economic managers. Their obsession with playing the infantile game of surpluses is clear evidence of that.

  11. ChristopherJ

    Thank you, Kaye. I agree it was a mistake, but not a biggie.

    Today, the caravan came up here. Cairns.

    Channel 9 was frothy about the sneaky little man and had nothing good and plenty bad to say about him. Pause, Scott Morrisson, however….

    Even H, nearly spat out her Sav Blanc.

    Channel 7 was much less biased.

    I was listening to the undecided voters on the ABC, yesterday too.

    I want to say, hang on, haven’t we just lived through 6 years of the worst Australian government in my entire adult life (40 plus years)? Why would any Australian vote for them? Name one achievement that we can all point to,,,,,

    Perhaps they get their news from Channel 9 as that would explain the disconnect

  12. Peter F

    When people are saying ‘we can’t afford more of Labor’s debt now that we are back in surplus’, and actually mean it, what chance the truth?

    I believe that if Bowen had used different figures from those used by the Government they would have attacked him on that basis. What a mess. Really, he was putting forward a comparison. Perhaps he was being set up?

  13. Terence Mills

    I accept that the RBA is independent of government but bringing out their growth downgrades on the same day as a political party announces its budget costings – which had the sign off of the Parliamentary Budget Office – throws all forecasts out of the window.

    Does this now give the incumbent government ammunition to shoot down Labor’s economic modelling ?

  14. Terence Mills

    Whilst on the subject of economics, I note that Trumps base are applauding the increase in tariffs from 10% to 25% on $US280 billion imports from China.

    Perhaps these folk need to pause and ponder who actually pays for these tariff increases : a clue, have a look in the mirror !

  15. Kaye Lee

    A strong economy????

    Wages growth, despite a recent small pick-up, has been weaker during the past six years than at any time since World War II.

    Home values and household wealth have plummeted amid one of the biggest property slumps in Australia’s history.

    The inflation rate is at a historic low of just 1.3 per cent and has languished below the Reserve Bank’s target range of 2 to 3 per cent for more than three years.

    Although employment growth has been reasonably strong, driven by the public sector and community services, key sectors that drive the economy are shrinking.

    Manufacturing, construction and retail trade have all shed tens of thousands of jobs over the past year — the building industry layoffs are a product of a massive slump in dwelling investment, which the RBA reckons will continue for years.

    Only high rates of immigration have stopped Australia lapsing into a formal recession.

    The continued expansion — now in its 28th year, the longest period without a recession in recent world history — disguises a “per capita” recession that is driving down living standards.

    Similarly, an unemployment rate mired at 5 per cent, which is not high by the standards of recent decades, disguises the true weakness of the labour market.

    More than 13 per cent of the workforce is underutilised — either unable to secure work at all or the hours they need — and a disproportionate share of the jobs growth in recent times has been poor quality: casual and contract jobs in relatively low-wage, low-productivity sectors.

    https://www.abc.net.au/news/2019-05-11/reserve-bank-and-the-political-rhetoric-of-the-strong-economy/11102998?section=politics

  16. Hotspringer

    No economist, even I know (unlike party treasurers) that household economies and economies of sovereign states are not the same.
    However, even a household can have a surplus, as long as they do not care their children are malnourished and wearing rags, their roof leaks and power’s been cut off.

  17. Kaye Lee

    What Bowen should be doing is pointing to the weaknesses in the economy and stressing how Labor intends to address them.

    eg Restricting negative gearing to new properties should help boost construction. Labor has also promised to spend $102 million over the next three years and $6.6 billion over the next 10 years to support the creation of 250,000 new affordable homes. In return for investors setting rents for eligible tenants at least 20 per cent below market rates, the scheme will provide an annual incentive of $8500 over 15 years.

    The McKell Institute’s modelling of Labor’s proposed national rental affordability scheme has backed it to save the federal budget up to $11 billion over the next 10 years.

    It also predicts the policy will create $40 billion worth of economic activity and create 46,000 jobs every year for a decade.

    The McKell Institute and Pricewaterhousecoopers found for every person who moves from crisis care into the new affordable homes, the government will save $11,935 in 2019 terms, every single year.

    A previous scheme to encourage affordable housing was shut down by Tony Abbott in 2014.

    https://www.moreechampion.com.au/story/6114927/labors-housing-plan-creates-jobs-report/?cs=9397

  18. Wam

    It will be a bigey’ when an ad of Gillard and swan on surplus appears with ‘remember these clowns’ as for lies the surplus ad that scummo said was wrong is still on cable. Has Bowen reported it???
    Yes, Kaye he should have been niggling about debt for 6 years and whacking the loonies with their compliance.

  19. Harry

    I suspect that Labor is mindful of the attacks on Wayne Swan when his surplus did not eventuate. Abbott was able to use this to relentlessly and effectively depict Labor as the “debt and deficits” party.

    At the very least as others have commented, Chris Bowen could have given himself some wriggle room, though even that would allow the Coalition to accuse Labor of being soft on surpluses, doing a Swan etc..

    The voters are probably not ready to accept the reality that sovereign governments do not need to fund themselves,
    (as distinct from non-sovereign entities such as state and local government, businesses and households)

    that there is no inherent economic imperative to issue debt to cover deficit spending, that a surplus means taking more funds out of the economy than is put in, that since Federation there have been deficits about 75% of the time,

    that deficits are almost always needed to prevent high unemployment, business failures and recession,

    that the focus should be on outcomes such as general well being rather than accounting “scorekeeping” which have no inherent validity.

    that federal ability to spend in only limited bu resoures, which are finite.

  20. Kaye Lee

    Harry,

    I wish they would focus on the outcomes they are trying to achieve rather than the numbers.

  21. Joseph Carli

    What’s missing from your “astute” argument, Kaye…is the “need to deed” identifying that Labor is introducing into the new political language…Labor is now framing a political need to examing the top end of town and their tax avoidance deeds…THAT is where the proposed surplus’s will come from. I have never heard such targetted language coming from Labor since the Whitlam years..Talk of re-instating such demeened demographics as ; “working people, the aged, child-care, wages” and methods of “cracking down on tax avoidance”, not to mention the filthy Murdoch press….into the language of electoral provisions along with the talk of future budget surpluses gives provision to point the guilty finger at those tax avoiders and will allow a future Labor government to go after the “Cayman Island Consorters” if there is shortfall in tax revenue.

    It would seem that for too long there has been a blind eye turned toward “legitimate tax arrangements” that have allowed the upper-middle classes to milk the economy dry…but Labor cannot just call a pogrom and send in the dogs on these “hard working retirees”…instead, one must first introduce the language of identifying the culprits and then..: “Softly, softly, catchee monkey” …..you allow a re-invigorated ACCC or ASIC to do their job…then it could be guaranteed that no more would you have the likes of one : K.Packer bragging about tax avoidance without the ATO “garroter” quietly adjusting his slip-knot!
    Time to turn the language of class control back upon the bastards themselves!
    Joe Stalin WAS too soft!

  22. Harry

    Oops forgot a key point: Federal taxes are needed to control overall demand to minimise the risk of demand inflation, to encourage behaviour change (eg carbon tax etc) and to destroy some cohorts spending power in the interests of a more inclusive, cohesive and less unequal society.

    Federal taxes should be fair, ie lowest on lower income groups ( ideally one should pay zero income tax until one’s income reaches say $50,000).Tax loopholes should be closed, companies who operate in Australia should pay tax in Australia.

    We should also be critical of the Coalition mantra of “those who have a go should get a go” because its codefor : the well of should be further rewarded by lower taxes when there are plenty of lower income earners who work very hard, pay a comparative large amount of tax on the their modest income due to low tax thresholds but they never figure in the Coalition’s ideology.

    The Coalition is of course trying to also appeal to the “aspirationalists” who in earlier times would be called “two bob liberals”.

  23. Diannaart

    Always have considered Chris Bowen as a weak link in the ALP team, although I do wonder WTF his advisers are doing.

    Agree with Kaye Lee and commentators, Labor needs to get itself off this dead-end economic theory; that governments can predict economic future and actually control that future.

    Wouldn’t an honest plan for the future be extraordinary?

    Standing up to LNP economic rubbish is not that fraught when 6 long years of nothing have resulted in largest deficit (ever?).

    Labor, grow up, wake up and harden up. You have the opportunity for a landslide victory, but if I look into my crystal ball, I see a marginal win and even that can change.

  24. Kaye Lee

    Diannaart,

    Bowen is smart enough but has been sucked into the surplus wars. I guess that happens when you are focused on making things add up. I do like Jim Chalmers though.

    Let’s hope that the simple message about climate change is enough to get them the majority they need.

    And I am sick to death of hearing from greedy old people about franking credits. You are NOT a self-funded retiree if you are taking large amounts from government handouts.

  25. totaram

    I agree with John Hermann. I said almost the same thing in a previous post. My biggest fear is how Labor will manage “expectations”, when the surplus does not eventuate. There will be an almighty ruckus about how “Labor cannot manage money”. Labor will never be able to fight this off without demolishing the “surplus fetish”.

    For those wishing to understand “Franking credits” Michael West has an explanation but it leaves me confused about a small detail (not that that changes my view on the issue).

    https://www.michaelwest.com.au/the-facts-of-life-qantas-the-cba-and-the-franking-credits-factory/

    In this matter, I’m with Chris Bowen. If you can’t reorganise your affairs to cover the loss, don’t vote for Labor.
    These people would have never voted for Labor anyway.

  26. Kaye Lee

    totaram,

    I heard a rich Tasmanian man interviewed last night who said he would lose significantly more than a few thousand and, whilst he was wealthy and didn’t really need that money to live on, he wanted to leave it to his daughter. It is that sort of attitude that must be changed. Rich people have options on how to organise their affairs. Be content with the dividends or sell some shares. Stop taking government handouts when you patently don’t need them.

  27. totaram

    Kaye Lee: I can sell my shares and pop the money into my super – something I should have done ages ago but was too lazy to do, as there was no real need. That rich man cannot do that because his super is bursting at the seams (over 1.6 mill. per person). Hence his whinge. By the way when this government brought in the ceiling of 1.6 mill. on the pension amount in super I didn’t hear any screams of discontent. Someone on a tax-free income from 5 mill. would have been reduced to tax-free income from 1.6 mill. Can you imagine the loss? But no, they reorganised in various ways too many to go into here. Now they are whinging because one of their reorganisations will have a “cut” in the mount of income it gives them. Remember, franking credits of several thousand, implies a dividend income of at least 3 times that amount, which they will still get tax-free. Oh, and the daughter will get everything left in the super and the shareholding, too. Not enough it seems.

    The age of entitlement is indeed over, as Joe Hockey loudly proclaimed! (/sarc)

  28. David Bruce

    Is it possible Labor now realises that who ever is “in power” after the 18 May 2019 will have to deal with GFC 2?

  29. DrakeN

    David Bruce,

    whoever is in power for the next decade will have a hell of a lot more than just a GFC to contend with.

  30. totaram

    DarkeN: That is why Chris Bowen needs to have an exit plan for “bigger surpluses”. This is not just a failure of Chris Bowen but of the entire Labor government-to-be. We can’t afford that.

    Just check out what creeping neoliberalism has done across Europe (don’t even look at the USA). Even in Sweden, Germany, etc. retirees have trouble getting proper care in nursing homes, working people are paid too little to survive on, etc. All because all governments are trying to “get the budget back to surplus” and to “pay down the debt”, while carrying out labour law reform( code for undermine unions, regulation etc.). Of course the Eurozone is complicated, but the policies are based on the same mythology: large deficits, cause increased inflation, which in turn lead to increases in interest rates, causing severe problems in the economy. Greece is supposed to be the perfect example (except it is not because it does not have its own fiat currency). Just see how this government doubled the government debt and how inflation has fallen and interest rates are at historic lows. That should convince anyone that this neoliberal mythology is just that: mythology.

  31. Diannaart

    When I describe Bowen as a weak link, it is due to his being a devotee of Keating “economic reform”, reforms which enabled further privatisation by subsequent Liberal governments

    Essential public services need to be back in government guardianship, profit does not sit equally with public need. Privatisation remains a nonsense economic exercise. I do not see Bowen as having the desire to redress the inequities private ownership of public utilities entails.

    Would he, at least, support ending all the subsidies handed to private enterprise when running public utilities?

    That said, I would much prefer a Keating protégé in government than anything from the LNP.

  32. Lawrence S. Roberts

    If the backroom boys of The Labor Party were half as good as they think they are we would have had ALP governments for the last 35 years. Are there any women strategists in Ye Olde Labour Party?

    A switch to electric bikes, cars and public transport would stimulate the economy but not as much as being good for Asian manufacturers. Improving child care workers wages would create competition for low wage workers but like last time be inflationary.

    This has all the makings of a stalemate in The Senate and another three years of frustrated nothingness. We live in hope.

  33. totaram

    LawrenceSR: “Improving child care workers wages would create competition for low wage workers but like last time be inflationary.”

    In case you haven’t noticed, the RBA is trying hard to create some inflation, which is too low according to them.

  34. paul walter

    Relatively speaking, Bowen is moving in the right direction compared to the LNP.

    Anything but LNP, sometimes bad is better than worse.

  35. paul walter

    I mean, I am sorry to not endorse Kaye Lee more emphatically- she is usually very spot on- but this writer reached the stage some time back now, that even Labor must be preferable to the shot to bits lunatics that make up the current infantile shadow of a government.

  36. Kaye Lee

    paul,

    Your opinions are valued, along with other contributors here. That’s what I love about the place. We discuss stuff. We don’t always agree about everything. That’s ok.

    But in this, I am in furious agreement with you. Labor MUST win government for this country to have any hope of progressing.

  37. LOVO

    Paul,
    Wot Kaye Lee said…. 😃…. 😉

  38. paul walter

    Its way too late for the LNP. I will vote tactically, if it means getting an extra Labor seat in the House or a Greens or Labor in the Senate in front of some right wing group.

    Hard to work it of course.

    Thanks, both of you.

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