Poor Joe Hockey! One could be sucked in to feeling sorry for him … not! The Government’s election promise, the much touted public service staff cuts of 12,000, has vaporised. Joe can’t implement this promise because Labor beat him to the punch. The public service efficiency dividend, a mechanism governments of both persuasions have been using for the past 30 years, has already factored in cuts of 14,500. There is no more efficiency room left unless huge chunks of government delivered services are contracted out to private companies. What a blow! You would think Joe would be happy about that. Labor has inadvertently fulfilled one of the Coalition’s election promises. Is he happy? Not our Joe. He now has to look for other cost saving measures to avoid an increase in the budget deficit and further borrowings. You would have thought the Coalition, these economic gurus, would have known this long before they announced their pre-election promise. It’s not as if it was a secret. It was in the previous government’s budget papers. Someone in the Coalition was sleeping on the job.
So, where to now?
Sooner, rather than later, Joe and the Government are going to have to own the budget. They will have to accept responsibility for the state of our finances. By next May when the next budget is handed down it will belong to Joe and blaming Labor just won’t wash anymore. Then we shall see the cut of his jib. The May budget will certainly show yet another deficit of around $40 billion; one similar to what we have become use to under Labor. I suspect, also, it is going to contain some unpopular cuts involving broken election promises for which there will be a myriad of excuses. Why? Because Joe and the Coalition will be seen to be no better at raising revenue than Wayne Swan and Labor and that’s going to hurt him, personally. Joe spent a lot of time and energy telling us about fiscal mismanagement, budget emergencies and other bits and pieces. To be cast as just another Wayne Swan won’t go down well.
Economics is not an exact science. It relies on a whole host of uncertainties. There’s a lot of guesswork, estimating, crystal ball gazing and most important of all, events not yet known. Kevin Rudd learned that the hard way; his unexpected event was the GFC. Perhaps another GFC-like event is just around the corner, who knows. But whatever happens, it will belong to Joe Hockey. He won’t be able to blame any subsequent economic ills on Labor. It will be a good test of the false public perception that the Liberals are the better economic managers.
Who started that rumour anyway?
Matt Wade from the Sunday Age in his article, ‘Our National Journey to Prosperity‘ (24 Nov ‘13) highlights the beginning of Australia’s rise to world prominence in wealth, health and education which began when Bob Hawke became Prime Minister in 1983. Just prior to that, we were a basket case under the former Coalition Treasurer, John Howard. Paul Keating became the new Labor treasurer and over the next decade restructured our economy in five critical areas. It was the floating of the Australian dollar, which Reserve Bank governor Glen Stevens recently described as, ‘‘one of most profound economic policy decisions in Australia’s modern history’’, together with tariff reductions, de-regulation of the banking system, the trade union and labour market accords and the independence of the Reserve Bank that changed the Australian economic scene and our way of life, generally.
When talking about events, the next foreseeable one is the Indonesian Presidential elections in 2014. By the time that is decided, Tony Abbott will know just how good a friend President Susilo Bambang Yudhoyono was to us and how difficult it is going to be with the incoming president, whoever that might be. None of the candidates are particularly disposed toward us. This will create additional problems for Joe Hockey because he will have to re-visit all of our foreign aid commitments and find some grovel money albeit after just cutting the foreign aid budget to the bone. Tough times lay ahead for Joe and they have nothing to do with the six years Labor was in office. The repeal of the carbon tax might get through the senate next year although that is not a certainty. If it does, all revenue from that will cease as will the pittance coming from the mining tax. This is, of course, the government forsaking revenue to honour a promise they think helped win them office. But, most painful of all, as the Indonesian economy continues to gather strength and our near neighbour becomes the third Asian tiger, Australia will be denied access to valuable markets in favour of other friendlier nations. That is going to hurt us … big time.
So let me do a little crystal ball gazing of my own. Joe Hockey is the new John Howard (the 1982 version). Over the next six years the Coalition is going to systematically stuff up the Australian economy and re-define the parameters of fiscal ineptness pushing the national debt out beyond $500 billion. Why? Because they don’t have a vision for the future. They govern for today; they think tomorrow will take care of itself. Well, this time they won’t have a mining boom to mask their collective lack of ability which will translate economically into a probable recession and massive unemployment. Consequently, around 2019, if not before, Australia will be back where it was in 1982 and Labor will once again be invited back into office to clean up the mess.
And those misguided voters who thought the Coalition were the better financial managers, will scratch their heads and seek psychiatric counseling. History doesn’t lie.
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