What’s fascinating about mainstream budget punditry is that it’s essentially a fact-free zone. This is ironic, because it is one area of public policy where data is straightforward and readily available.
What cannot be disputed is that under the Coalition the deficit has blown out from $30.1 billion to $40.0 billion. Net debt has increased from $184.0 billion to $285.8 billion, gross debt from $325.5 billion to $477.0 billion.
As the budget papers show, this cannot be blamed solely on the sluggish economy. The Coalition’s policy decisions sent the budget further into the red. By contrast, decisions in Labor’s last term actually reduced the deficit. By any objective criterion, it is the Coalition who should be under interrogation over the budget.
But rather than opening the budget papers, pundits take their cue from prevailing wisdoms and gut instincts, aka the vibe of it. The dominating vibe is the so-called ‘daddy’ versus ‘mummy’ party divide. As the ‘mummy’, Labor thrives at ‘soft’ things, such as health, education. As the ‘daddy’, the Coalition leads on ‘hard’ things (being firm with finances, protecting us from baddies, etc). By some inexplicable psychological inference, pundits assume the converse to be true as well. Labor people are warm and fuzzy, so they must be bad at money. This does not actually follow, of course, but it’s the vibe. One could unpack the ideologies behind this reasoning but that is not my goal here.
For the pundit, the vibe seems to be confirmed by businesses support for Coalition economic policy. Pundits think the economy = business, because both share a money vibe. But business people are neither public economists nor impartial observers. On average they are relatively wealthy, especially those who work on financial matters and who have access to journalists. They stand to win from Coalition policy, so they back it in. Moreover, those who call the shots in media companies are themselves upper income managers.
These structural biases mean that Labor faces an uphill battle on economics. Pundits presume Labor to be wrong, until proven right.
Just today in the Australian Nikki Savva casually declares that “Labor’s costings don’t add up”. On what basis? Has she seen the costings? Has she undertaken costings herself?
Nope, no basis needed. The Coalition told her so. And it rings true because everyone knows Labor is terrible with money. This is stock-standard practice for what passes as economic “journalism” in Australia.
It gets better. The Australian’s official newspaper opinion column asserted :
It is hardly surprising a Coalition intent on exposing Labor’s spendthrift policies and habits would use the highest possible figure, based on the most generous opposition rhetoric and promises it could find. Perish the thought that politics might intrude on an election campaign. We all know the jousting at play here. But the onus is on Labor to say which promises it will honour, which cuts it will no longer oppose and which savings measures it may assist through the Senate.
This single paragraph illustrates the hilarious extent of the punditry’s double standard. The Treasurer made a specific claim that Labor has a $67 billion black hole. Within a day, more than $30 billion of errors were identified in his calculation. Humiliating. But the Australian is sympathetic to a $30 billion error when it is a political strategy against the dirty socialists. That’s a black hole they can get behind. Sometimes the only way to beat the terrorists is to fight dirty, you know.
Notwithstanding this gross error, the “onus” remains on Labor. It’s Labor’s responsibility to continue to disprove a made-up number. Such is the presumption of Labor’s economic guilt.
So much for the punditry. Let’s venture out of this parallel universe and into the real world for a moment. As I previously argued, there is a simple indicator of a government’s fiscal discipline. Sum the budget impact of a government’s policy decisions, over four years, as published in the budget papers. This has the advantage of removing the impact of economic conditions outside the government’s control, such as change in terms of trade.
The figures are telling:
(See here for the underlying data.)
John Howard’s term from 2004 to 2007 was by far the worst, costing the budget a whopping $202.2 billion. This is consistent with research from the IMF, which identified him as the most profligate Australian Prime Minister in recent decades.
Policy decisions in Labor’s second term actually reduced deficits by $45.7 billion. The Abbott/Turnbull Coalition government has abandoned this rectitude, increasing deficits by $17.8 billion.
So much for the vibe.
The sum of four-year estimates is by no means a perfect indicator. In particular, it does not capture the long-term budget position. But it is a reasonable starting point for estimating how much governments contributed to the surpluses or deficits during their time in office. That is the focus of much of the public debate.
The presumption of budget guilt should clearly be on the Coalition.