The liars and clunkheads who messed up the the LNP budget costings in 2010 have come up with a new strategy. If they don’t tell us how they are going to bring the budget back into surplus then they can’t be wrong!
As the 7.30 Report summarised Abbott is going to add more spending hikes, give more tax cuts and bring the budget to a surplus of one per cent of GDP within 10 years, but he can’t tell us how he’s going to do it until the end of the next parliamentary term. And then it will only happen if his vision is realised. We just need to trust him. After all he’s “fair dinkum” and not a “fake” like Kevin. I believe those terms come straight out of focus groups.
Laura Tingle put it this way:
Abbott is making a virtue of promising not much at all if he becomes prime minister, beyond not being Kevin Rudd, and running a “grown-up” and “real” government.
We just have to believe Abbott when he says he has a plan.
Tim Colebatch is disinclined to trust Abbott because clearly he doesn’t trust us. Otherwise he’s tell us his plan. Maybe it’s a plan for a plan.
Saul Estlake did some figuring about a week ago and found the LNP $30 billion short over the four years of the forward estimates. Mathias Cormann reckons that there were errors, miscalculations and omissions in Estlake’s figuring, but not to the extent of $30 billion. But then Abbott has added a few things like this from his launch speech:
“Within a decade, the budget surplus will be 1 per cent of GDP, defence spending will be 2 per cent of GDP, the private health insurance rebate will be fully restored, and each year, government will be a smaller percentage of our economy.”
That last bit is staggering. Tingle points out that the the uncapped private health insurance rebate was growing exponentially before Labor cut it and will do so again. In an ageing population health costs will increase. He has foregone changes in the GST forever. Health overall will not be cut, nor will education and a series of other items.
The AFR reports that Stephen Anthony, head of Canberra-based budget forecasting firm Macro- economics, who used to give Wayne Swan curry, has now attacked the LNP:
Mr Abbott’s failure to provide a hard budget target meant “that essentially we’re rudderless for a decade”.
He estimates the so-called structural budget deficit will be between $30 billion to $40 billion in 2016-17. That year is now the nominated target date for the LNP to return the budget to surplus, the same as Labor’s. Labor’s plans are laid out and confirmed in PEFO. The LNP’s are sounding very much like a magic pudding.
Hockey’s response, I think, would be that the adults are not in charge in Treasury and Finance, which will need rectification, and then they need to do their audit of government activity. The AFR tells us:
Finance Minister Penny Wong will point to the fact John Howard and Peter Costello found savings – following a national commission of audit – in 1996-97 and 1997-98 that were equivalent to 1.1 per cent and 1.75 per cent of GDP respectively. In today’s terms, such cuts would amount to more than $40 billion over the next two years.
That was meant to be yesterday (Tuesday).
Meanwhile several economists have endeavoured to look at the economic theories guiding our leaders. John Quiggin sees Abbott’s position as
derived from the ‘classical’ free-market economic theory that held sway before the Great Depression, and was revived as ‘New Classical economics’ in the 1980s. On the classical view, recessions and depressions in a market economy are self-correcting. Government attempts to stimulate the economy can do no good, and may do positive harm by ‘crowding out’ more productive private investment.
Definitely not Keynesian. The danger with Abbott is that in the face of a downturn he is likely to prescribe austerity which would “represent a recipe for disaster next time there is an economic crisis.” Rudd needs to explain why the Keynesian is best, not just rely on his record during the GFC.
Quiggin elaborates at The Guardian.
Ian McAuley analyses both parties in some detail. First Labor:
In difficult parliamentary circumstances it has undone some of John Howard’s welfare excesses, and its policies on education, carbon pricing and broadband are those which contribute to industry adjustment and modernisation. Like tariff reductions in the past, they have met with opposition from existing businesses, but they pave the way for the emergence of new businesses.
Labor he says has “failed to underpin these policies with a well-communicated set of principles – or a “narrative” as some would say.” It’s not just a problem of communication, Labor has become too obsessed with gaining and holding power. Labor is now largely an ideology-free zone.
As for the LNP it contains a variety of conflicting and very strange views, none stranger than Abbott’s. I invite you to read the piece in full. McAulay sums up Abbott thus:
Some, such as Robert Manne, suggest that his reactionary views are out of an old stream in the Labor Party which broke away to form the DLP in the 1950s, and I have suggested that they emerge from a cult in British Catholicism known as “distributism” – anti-modernisation, anti-Enlightenment values, anti-science, anti-capitalism, anti-state, and pro an imagined pre-Reformation benign feudalism. Whatever its roots, his conservatism is out of step with both “left” and “right” thinking (and is a long way from contemporary Catholic social teaching).
He sees Abbott’s way as freezing Australia’s economic structure as an extractive economy and eventually a path to long-term economic stagnation.
So it’s a choice between muddling along with Labor’s “opportunistic progressivism”, lacking conviction, or considerable uncertainty with the LNP. McAuley finds the future of the LNP’s economic policy hard to predict because it would depend on the extent to which Abbott could hold on to his authority and on to his position. If his colleagues want to maintain a semblance of economic responsibility they’ll have to sack him or constrain him. We could be in for a wild ride.
Abbott, I think, imagines that once the adults are back in charge confidence will return and the creative juices of capitalism will flow. He will help by drastically cutting regulation, streamlining environmental approvals and returning the industrial relations pendulum back to what he calls the centre.
Only then can his ‘vision’ be realised. So don’t trouble yourself with boring costings. All will be well. Just trust him. Swinging voters may well vote him in because of the two they distrust him least.