As I’ve commented before, it’s always a bit difficult to keep track of Malcolm Turnbull’s economic narrative du jour. At least with Emo Man Brendan Nelson, we could always rely on undiluted populism with not even a minimal pretense at making any sense. Turnbull’s supposedly better than that, but in the lead up to the budget we had accusations that Labor were wimping out by not cutting spending aggressively enough, followed in very short order with claims that the surplus was unnecessarily large. We’re being treated to something comparable now, with the switch apparently flicked randomly between solemn appeals for bipartisanship, insinuations that the fiscal stimulus package is too big, loose language – subsequently repeated – about the global financial crisis being “hyped”, and now I think the beginnings of a “don’t spend the surplus” theme.
Jacques Chester, I suspect, has pinged what’s going on with all this:
It’s a lawyerly way of arguing. Pick an argument, any argument, that might be plausible, and throw it at the judge. You never know, it might stick.
There are certainly some straws blowing in the wind over the past few days, which in the way of these things, either represent columnists in The Australian flying kites for the opposition to grasp, or reciting lines fed to them by the Coalition. The always all over the place Malcolm Colless, whose stream of consciousness writing is valuable precisely because the multiplicity of disconnected thought bubbles probably do act as a barometer of right wing thinking, opines:
With a solid financial background under his belt, Turnbull must not fall for the politically correct line that opposing government policy makes the Opposition guilty of economic vandalism. He needs to counter this with firm leadership and conviction.
There’s also a bit of blah in there about the fiscal stimulus package not representing “macro-economic reform”, whatever that might mean. However, the dots can be joined by reading Michael Sutchbury in the same paper:
KEVIN Rudd and Wayne Swan’s emergency fiscal stimulus is unlikely to end up being a good investment of $10.4 billion of taxpayers’ money.
The great bulk of the “economic security strategy” package won’t improve Australia’s economic security because that would require supply-side measures to improve productivity.
This, obviously, ignores the fact that infrastructure spends take a very long time to stimulate demand, and the package is all about short term stimulus in order to forfend a recession. Supply side interventions were, of course, very thin on the ground under Howard and Costello, and improving the skills base and economic infrastructure (both soft and hard) is a medium term rather than a short term project. But what’s important about all this is that it neatly articulates with the anti-deficit argument that the Liberals are starting to run.
Former treasurer Peter Costello also criticised Labor’s move to drive the budget surplus into a potential deficit, as financial analysts predicted tax revenue generation would slow as the economy grinds down.
Mr Costello, who engineered a strategy to allow the budget windfall from the revenue boom to build, said it was better economic policy to operate a surplus.
“When the economy is growing the budget should be in surplus,” Mr Costello told The Australian yesterday.
Costello has apparently forgotten that he once understood that counter-cyclical fiscal policy implied being comfortable with deficit budgeting during turbulent economic conditions, and that the whole point of a fiscal stimulus at this stage is to boost economic growth, which is in danger of slowing to a halt.
Mr Turnbull urged the Government not to squander the savings of “a decade of responsible financial management”.
There are more than a few echoes of the Keating legacy in all this.
First, the “defend the last government’s legacy” line – initiated by Keating himself – which was rapidly transformed through its appropriation by pundits such as Paul Kelly into some sort of conventional wisdom: that the Labor party cruelled its chances of escaping opposition early by allegedly trashing Keating’s legacy. The holes in that argument as a political story should be too gaping to need spelling out. But it’s been seized on – at the instigation of another former PM, John Howard – as an iron law for the Liberals in opposition. Never walk away from John Howard. So we get all sorts of bizarre positions all unified by a desire to preserve the “Howard legacy” – in this case a preciousness about the surplus that was in fact created as much by serendipitous movements in commodity prices and an addiction to bracket creep coupled with election winning handouts as by “responsible financial management”.
Secondly, we have some resonances of Keating’s “recession we had to have” position lurking around. It’s as though, at some level, Liberals and pundits expect Labor to bring on another recession to further the cause of reform. Bizarre. The praise for the Keating government’s One Nation stimulus package from the opposition benches seems to completely elide the fact that it was too late and too slow. And the argument about the Treasury numbers – which is as much about attempting to give the political line that “Rudd is wasting the surplus” legs as any real desire for accountability – ignores the fact that the formulation of growth projections is a time consuming and deeply bureaucratic exercise. Ken Henry’s much more likely to have relied on his best reading of the circumstances than set Treasury minions to work on a full scale forecasting exercise. If we waited for that, in the current climate, it would almost certainly not be worth the paper it was written on by the time it arrived.
Nicholas Gruen puts the politics of all this into perspective neatly:
But back in Australia wouldn’t the Opposition give the government hell if it took the Coalition’s string of surpluses and started running deficits? Too right it would, just as the ALP would with roles reversed. But, if another fiscal stimulus proves necessary the government will have to decide. Politically they’ll need to choose between a faltering economy, rising business failures and unemployment – or giving their opponents some ammunition that they’ll use. Economically, one way spells misery, the other hope and a better chance of success.
I’ll bet some of the Government’s political advisers counselled against the bold approach the Government took last week. “Couldn’t we keep more of the surplus?; Have two bob each way?” Now they’re eating their words. Using the economic textbook to manage the economy decisively is a political winner.
I’m only an economist. But if I were a Government politician I know which path I’d choose. If the economy falters I’d fight recession. I’d take some nasty hits from the Opposition rather than die the death of a thousand cuts while I waited for recovery to come in its own good time.
That takes me to my third instance of Keating’s least impressive legacies. The opposition appears to be banking on their “Labor = deficits” line being available for revival, under the illusion that it was some sort of killer blow to post-Keating Labor rather than shadow boxing. People were always (and rightly) much more concerned with crippling interest rates and job losses rather than some arcane argument about fiscal policy. In a way, it was also an artefact of Keating’s wonkery – mistaking political narratives for political and social facts. I’m 100% certain that Australian electors today would rather have a government staving off recession than being able to sit around patting Peter Costello on the back for his record of surpluses.
Ps: Incidentally I’m inclined to completely ignore the “what did Kevin Rudd say about what Ken Henry said about what Glenn Stevens said” furore – total beatup in my view. Although, I’m surprised that the omniscient Malcolm Turnbull didn’t use his own purported financial expertise to spot the problem which is the occasion for the said furore. But I suppose his credit claiming for the bank deposit guarentee is so last week’s media cycle.
Because governments making policy on the run, without taking advice from the relevant people, which they subsquently have to change because of the unintended concequences ……… does not reflect badly on the aforementioned government?
Methinks you need to disengaged your brain from poltical hack mode – The Libs have nothing to do with the governments mistakes, which needs to be supported or criticised on its own merits. In particular, this “beatup” goes to the process of decision making in the government, which was supposed to be a self-promoted strength of Rudd team.
Through of course, shifting into my own poltical hack gear, it will mean nothing electorally. Such issues do not directly impact on sufficient numbers of people.
‘Supply side measures to improve productivity’ doesn’t only refer to infrastructure I suspect – it’s also code for our old friend industrial relations reform. I’m sure large numbers of conservatives are just busting to tell us how individual employment contracts would be the solution to our looming economic woes. Only the memory of the WorkChoices debacle is holding them back but it can’t be long before we see the argument being run by the Liberals’ think tank and MSM mouthpieces.
Nobody seems to want to talk about IR at the moment but of course it’s impossible to have a sensible discussion about a response to a financial crisis without including labour costs in the mix. It will be fascinating to read the submissions from various parties to next year’s minimum wage review.
“Such issues do not directly impact on sufficient numbers of people.”
They do if the government consistently makes such mistakes, if not necessarily because the public see them as making mistakes, but because of the negative consequences that arise from them.
The move to fully guarantee all deposits is something that Turnbull should have come out and strongly criticised when it was announced. Instead the one time the government has made an obviously poor decision, he’s been strangely silent.
He wasn’t quite silent – he was claiming credit for extending the guarantee above 20k.
I’ll repeat what I said – if Turnbull is so on top of these issues, and his admirers in the press were making this point, it’s odd that he didn’t foresee these circumstances he now says were foreseeable. In any case, this isn’t the thrust of the Liberals’ attack – it’s a silly claim that Rudd misled parliament. Julie Bishop couldn’t sustain this in any real sense on Lateline last night – it’s based on a story in… wait for it… The Australian, and that’s as far as it goes.
Ken – that’s probably right.
To some extent my judgement of political events relies not only on evidence, but intuitive leaps informed by the evidence I can glean. And to put it bluntly, despite his impressive charisma, under Turnbull the Opposition is beginning to look like theey’re chooks running round with their heads cut off. You never know what oputrageous claim they’re going to dream up next. Mark, I think the Hendry/Stevens brouhaha is more significant than you allow for, but not because of what it tells us about the way Rudd operates, but because of what it tells us about how the Opposition operates. The frankly incredulous spectacle of Turnbull demanding Hendry’s resignation in the Parliament demonstrates despite Turnbull’s elevation to the leadership, these guys/gals are still as much all over the shop as they were under Nelson. They’ve just got a little bit better, and only a little bit better, at hiding it.
I agree, Paul, that it’s par for the course, and it’s a significant indicator of Turnbull’s scattergun and irresponsible approach. But I think there’s about zero substance behind it. I wanted to focus on the enormous inconsistency in Turnbull’s economic statements because – to the best of my knowledge – no one else in the country has been! The best we get is “Turnbull has restored the opposition’s competitiveness on economic management”. Why? Because that’s the media narrative? This stuff is so circular it isn’t funny.
Mark,
What has happened to the Opposition is they have an effective spokesperson on the collapsing stockmarkets around the world and on the international financial markets. Fine. Nobody’s denying Turnbull’s experience and expertise here, especially Turnbull. Its when one extends that to broad economic management (which looks like it doesn’t go beyond “Don’t spend the surplus – stuff Keynes Theory of Money”) that ones forced to wonder.
I mean, let’s just spell it out so everyone understands – we a currently experiencing the worst and greatest world economic crisis since the Great Depression and its a long way from over yet, even if the markets are stabilising. And, so far, the only way we know out of that kind of mess is massive Government intervention, including pump-priming and deficit budgeting if necessary. Unless we all want to go to hell in a handbasket.
What I’m wondering about, Paul, is why – given this supposed financial expertise – Turnbull didn’t pick up the problem with deposits in non-guaranteed entities. I suspect his experience in Goldman Sachs was more about lawyerly deal making than finance per se – that would be consistent with his previous career.
John Quiggin on why the Oz’ beatup on the bank guarantee deposits is nonsense:
http://johnquiggin.com/index.php/archives/2008/10/22/meltdown-continues-at-the-oz-2/
Buggered if I know, Mark. But then again, nobody picked it up until there was a run on the banks. The anarchist/socialist in me then is forced to ask the question – do the pollies (regardless of party) actually know what they’re doing, or if what they’re doing will get us out of this mess? And if the answer to that question is no,they don’t, maybe its time to learn some new life skills in survival.
“do the pollies (regardless of party) actually know what they’re doing …”
No, Paul, in these matters noone does. We’re in uncharted waters.
Reminds me of a dinner conversation I once had with someone who’d been seconded from academia to work in Clinton’s White House. He was horrified to discover that the world was being run “as ignorant as us. They’re all flying by the seat fo their pants!”
‘The praise for the Keating government’s One Nation stimulus package ‘
- er, was that ‘Working Nation’ ??
“please explain!”
No, Ambi, it was One Nation – Working Nation came later. One Nation was the infrastructure stimulus.
So Pauline wasn’t original.
Crikey today on the stuff about the RBA:
apologies, Mark
So Keating’s haunting the Tories ‘ey? Well that’ll be welcome news to the ALP. They’ve been trying to exorcise him for over a decade now.
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Turnbull seems to be reaching around for whatever turds are handy. It won’t do. He really should just be quiet and consolidate. It’s a branding issue. Sorry ’bout the PR bullshit but it’s true.
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He needs to cultivate his political persona. One that irons out his little difficulties with being perceived as an arrogant, elitist swine who makes you want to throw up. He doesn’t have to offer alternatives to Kevvie’s plans. He just has to wait for him to fuck up. He will. They always do.
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If I was Turnbull, I’d be chanting impressive but vague mantras viz economic responsibility and the plight of the ‘battlers’ (as if anyone in this country seriously battles). Stand up for the little guy Malcolm and shit on bankers and lawyers in general. If you do it often enough they might forget you are a banker and a fucking lawyer.
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And if I was Turnbull you could all come round and kick three types of shit out of me. I’d have it coming.
Sorry Adrien but someone always battles, that’s what makes it easy for the rest.
someone always battles, that’s what makes it easy for the rest
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A. Not necessarily. Wealth doesn’t always come at someone else’s expense.
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B. My idea of battler comes from my 6th birthday. The old man took me to Rawlapindi for the afternoon. I got spoiled: cowboy stuff for presents, Chinese restaurant. On the way home a kid about my age was begging for change. He had one arm. The other was shriveled thanks to some disease.
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That’s my idea of a battler. In this country battler means we haven’t much by way of beer money after paying off the house, the car, the plasma screen blah blah blah.
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Yeah there are poor people. But not that poor. Unless you count the indigenous fringe (and we only do that when someone makes a fuss on the teev).
So it’s only Howards battlers you don’t think are for real. They’re out there Adrien and they may not necessarily have missing limbs and they may also be reluctant to beg but they do go without. It’s very hard to see them from a prism of fortune.
Everyone goes without – something.
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Your ‘prism of fortune’ riff may or may not be some sort of inference based on the assumption that I’m enclosed in a leafy green bubble with baby leather seats on the Saab or whatever. If so don’t assume – ASS – U – ME etc.
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Yes there are people who struggle. I have struggled. Maybe right now I am struggling. Considerin’ the floor fell thru the economy two weeks back I reckon I might soon be if I ain’t already.
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But it’s not the same as someone in Darfur or Karachi okay. Just not. At all. Ever. And everytime I hear Aussies moan I can’t help despising their fat-arsed self-indulgence.
Malcolm is probably just providing a distracting talking point to help divert attention away from things like the precipitous fall in the dollar which could have devastating effects on the banks who get about 30% of their funds from the international money market.
Try working out how many extra AU$ they have to find to repay the US$ they borrowed on the back of your envelope.
It should be about 30% of 30% of the total credit market.
Total credit is about 170% of GDP which is about $1 trillion.
That comes to $1.7 trillion total credit.
We could easily be looking at needing an extra $150 billion to buy the US$ needed to roll over the international credit facility that we have come to rely on so heavily.
This is probably the capitalization of one or two major banks.
Quite true if every dollar they owe was borrowed back in July when our dollar momentarily reached near parity wih the US doolar. However that is not the case. The vast majority of their borrowings were when our dollar was in the range US65-75c.
They’ve lost their windfall profits from brief US dollar near parity, that is all.
“I’m surprised that the omniscient Malcolm Turnbull didn’t use his own purported financial expertise to spot the problem which is the occasion for the said furore. But I suppose his credit claiming for the bank deposit guarentee is so last week’s media cycle.”
Well, today’s news about some institutions putting a freeze on withdrawals, and the Treasurer’s advice to investors about going to see Centrelink (good advice, if an old person needs to get her assets or income re-assessed), will certainly flip this issue back INTO the meeja.
Cycle?
I think Swan caught something from Turnbull. Or is it just that all our pollies can’t touch something without stuffing it up, they’re all so incompetent.
That’s my idea of a battler. In this country battler means we haven’t much by way of beer money after paying off the house, the car, the plasma screen blah blah blah.
Wow, what part of Australia do you live in??? Of course there are genuine poor Adrien. Further these numbers are on the increase.
And believe it or not for most of these people meeting everyday living expenses has become a case of robbing Peter to pay Paul. They are constantly in deficit on utilities bills, because after all, one needs a roof over ones head and some food in the belly.
Tell any of the local charity organisations that there are no genuine poor in Australia.
In a country as ‘well off’ as we are there is no excuse for people being homeless or unable to meet there needs (food, accomodation, electricity, phone, clothing).
But it’s not the same as someone in Darfur or Karachi okay. Just not. At all. Ever. And everytime I hear Aussies moan I can’t help despising their fat-arsed self-indulgence.
Nothing in Australia is like Darfuc or Karachi, or any of the other basketcases some always drag out when trying to convince others of how wonderful life is in Australia.
You have got a damn nerve to judge the circumstances of others you clearly know absolutely nothing about.
Why is that whenever we are talking about the circumstances of low skilled wage earners or welfare recipients some invoke the third world, yet they more likely than not, make comparisons to the US when defending corporate excess? (Well until recently anyway).
Yes, Adrien’s logic is a little suspect there, which if taken to its (il)logical conclusion would suggest that nobody has a right to complain about anything when there exists someone worse off than themselves.
Maybe this is what Adrien believes, but since he’s apparently become a commenting institution don’t we have a right to expect better?:-)
“You have got a damn nerve to judge the circumstances of others you clearly know absolutely nothing about.”
hmmmm… seems to be a lot of that going on in the blogosphere.
Not sure how Mal and PJK morphed into “I know what real pverty is” but I’ll go with it.
I can tell you this: if, instead of holing up in the secluded back courtyard of the nice local upmarket bookshop ( yes I’m jealous, I admit) to have a chat with Anna Bligh, our Prime Minister and she had plonked themselves in civvies, no minders, on any of the many sidewalk seats of Barista Boulevard, (that monument to the services economy that can disappear, with it’s jobs, just about overnight when things go bad,) there’s a very good chance someone who doesn’t read the papers would have put the bite on them before the froth was off their lattes.
Yes, there is real and very public and very plentiful begging going on in the Prime Minister’s and the Premier’s own electorates. And chroming. And all manner of human tragedy in plain view if you just look to the side when you walk past the park, or at who’s out to it on the bus stop benches. This in the midst of what looks a lot like extreme capitalism: it’s not unusual for a bentley, or a maserati, even a day-glo hummer, to pull up and just duck in for a quick hard-back and a takeaway delectable or three.
At least around here they don’t get told to move on unless they create a real ruckus, which is rare, it’s civilised all round. That’s not to say that if looks could kill, we wouldn’t have our begging problem for long. Now if they’d only bulldoze that St Vinnies hostel up the road, and liberate that substantial neo-CBD site to Teh Market, and the old boarding houses that dot the suburb, ….But we don’t see Kev that much around here any more, maybe he doesn’t want to see us. He, and Anna, ‘ll just duck in quietly and, miraculously, there’ll be someone there at that very moment to get a snap for the local paper. On a semi-regular basis, for the report card.
Careful with that background Eugene.