On Monday night, when Leigh Sales pressed Scott Morrison about his claims of having delivered a surplus when we are actually still in deficit, the PM told her that PEFO was an independent document from Treasury and Finance that had confirmed that the Liberal Party would produce a surplus in 2019-20.
It is worth remembering that, when Chris Bowen produced an economic statement before the 2013 election, the PEFO released 11 days later suggested he had underestimated the predicted surplus in 2016-17, increasing the projection from $4 billion to $4.2 billion.
That was, of course, before the Coalition gifted an unnecessary $8.8 billion to the RBA, got rid of the revenue from the carbon price and the mining tax, spent billions on Direct Action resulting in increased emissions, spent billions on offshore detention and Operation Sovereign Borders and failed resettlement deals, embarked on unprecedented spending on an arms race, and entered into free trade agreements which slashed revenue from tariffs and destroyed the car industry and made local producers compete with cheap imports.
Morrison said that the Coalition were paying down Labor’s debt, but Sales pointed out that the debt has more than doubled under their watch. Once again, Morrison blamed Labor for spending it had supposedly locked in.
Yet in 2007, treasurer Peter Costello expressed concerns at the “sustainability” of the amount of money the Government was spending at Howard’s insistence.
“I have to foot the bill and that worries me,” Mr Costello said. “And then I start thinking about not just footing the bill today but if we keep building in all these things, footing the bill in five, and 10 and 15 years and you know I do worry about the sustainability of all these things.”
This is exactly the problem that Labor is attempting to address by winding back the overly generous tax concessions for investors and tax minimisation schemes for the wealthy introduced by the Howard government.
John Howard has morphed in the memory of the Liberal Party into some kind of economic guru, purely because he happened to be PM when the country was experiencing a resources boom.
They seem to forget what happened when he was actually in charge of running the economy during the Fraser government. At the end of Mr Howard’s treasurership, inflation was running at 11 per cent and bank interest rates for home loans were 12.5 per cent.
Much is made of the fact that there was no net debt at the end of the Howard government’s term in office, with claims they had paid down Labor’s debt – mainly by selling off our assets as it turns out. But was it Labor’s debt?
When Malcolm Fraser became Prime Minister in November 1975, the Government sector had net financial assets – that is, there was negative net government debt equal to 2.7% of GDP. The Fraser Government, with John Howard as Treasurer for the bulk of that time, ended its time in office with net government debt equal to 7.5% of GDP in 1983-84.
In reality, the government has limited influence on the economy with much of what happens beyond their control.
Chris Bowen has fallen into the trap of promising to deliver bigger surpluses than the Coalition in order to be better placed to face unexpected headwinds.
What he should be stressing is that Labor will address the structural problems in the budget, which they are doing with their taxation reform, whilst maintaining the flexibility for the government to react to unforeseen circumstances or societal need as required.
He should be stressing that by investing in education, skills training and health, and in a transition to a lower emissions economy, Labor are investing in our future. The cost of the investment will be far outweighed by the return.
He should be explaining the need to diversify the economy away from a singular reliance on resource exports.
He should be decrying the failed trickle-down neoliberal approach and extolling the virtues of lifting people out of poverty which will increase demand, stimulate growth, and improve the lives and prospects of those most in need of a boost.
Labor has the right message – they just don’t know how to communicate it to an electorate too accustomed to individual wealth creation and protection.
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