This is an Ozzie example from The Toad, JWH
Paywalled so..
Exposing Howard’s Big Lie
ByRoss Gittins
A SURPRISINGLY successful technique of John Howard, Peter Costello & Co is to repeat untruths about the economy so often the punters come to accept them as true.
They get away with this partly thanks to their chorus of sycophants in the Murdoch press – various of whom have been rewarded with appointments to government boards – but mainly because, with notable exceptions such as Rory Robertson of Macquarie Bank, honest men and women stay silent.
Admittedly, except for people in privileged positions like mine, economists do have to be brave to stand up to the Howard Government with its behind-the-scenes bullying.
Any business economist who once worked for a Labor government can expect that the most innocuous observation may draw an ominous phone call to his CEO from Mr Costello. Just ask Dr Barry Hughes, now associated with a different part of the Credit Suisse empire.
Or the highly respected, straight-shooting Saul Eslake, whose survival as ANZ Bank’s chief economist is a testament to the courage of his CEO, John McFarlane. But hang on – hasn’t Eslake been associated with the Liberals rather than Labor? Yes, but with the wrong faction of the Victorian party.
Eslake’s other offence is to work in Melbourne, not Sydney. That’s why Mr Costello puts far more pressure on the editor-in-chief of The Age over the views of his economics editor, Tim Colebatch, than he puts on my boss about mine.
Then there’s the way Mr Costello has “dissed” Access Economics for having the temerity to sell its services to the Labor Opposition, even though in providing Treasury-like technical advice to the opposition of the day (including the Libs when Labor was in power) it was doing a public service.
One isn’t supposed to write about such behind-the-scenes bullying, of course, but that’s how it persists. And while I’m most familiar with Mr Costello’s efforts, I suspect it’s endemic to the Howard administration.
But back to the untruths. The latest is that Peter Beattie and the other Labor premiers are claiming the credit for the economy’s outstanding performance that is owed to Mr Howard and Mr Costello.
Tony Abbott wrote in his Herald column last week that “the principal political beneficiaries of Howard and Costello’s successful management of the economy have turned out to be the state Labor governments, all of which have been able to buy themselves out of political trouble and anaesthetise voters against their administrative shortcomings”.
And also that “the Howard Government will actually deserve most of the credit for Australia’s continued success”.
It’s true that our economy is essentially a national economy, which is managed at the national level. The differences in the performance of the state economies arise far more from differences in the structure of their industries – Western Australia and Queensland have most of the mining, for instance, while Sydney is Australia’s only truly global city, it gets most of our migrants in the first instance and is more hemmed in topographically – than in differences in state government policies.
It’s true, too, that premiers find it easier to get re-elected when the national economy’s going fine and that premiers of all colours have always claimed the credit for the national economy’s good performance.
So what’s the lie? That Mr Howard and Mr Costello should get the credit for the national economy’s performance.
Nonsense. As any but the dopiest voter should know, the day-to-day management of the economy is undertaken by the Reserve Bank, acting independently of the government.
This was the big lie Mr Howard perpetrated in the last election with his scare campaign over interest rates. He implied that his Government set interest rates, blotting out eight years of media stories about the Reserve doing this and the Reserve doing that.
As Reserve governor Ian Macfarlane revealed in his round of pre-retirement interviews, this dishonesty greatly displeased the Reserve, being a denial of its independence.
He held his peace to avoid getting the institution embroiled in the campaign, but it’s to be hoped his remarks deter politicians from pulling that stunt again – or at least embolden more commentators to say the obvious.
So most of the credit for the economy’s good management over the past 15 years should go not to the politicians, but to Mr Macfarlane and his predecessor, Bernie Fraser. It was they who raised interest rates many times over the objections of the politicians.
It’s true that Mr Costello can claim credit for giving the Reserve its independence and accepting its decisions. But that’s a much smaller claim. And what he did was to formalise an arrangement that had existed de facto under Labor, using a “framework” – the inflation target – formulated by Bernie Fraser.
It’s true that fiscal policy remains under the Howard Government’s control, but its role is much less significant than that of monetary policy. The budget’s been in potentially heavy surplus for 10 years mainly because of the Reserve’s success in keeping the expansion phase going so long and, latterly, because of the resources boom (how exactly did Mr Howard and Mr Costello engineer the global resources boom?).
So the best you can say on fiscal policy is that its conduct could have been worse. The Government has spent most of the potential surpluses, but not all of them. This laxity has often run counter to the direction of monetary policy and so probably caused the official interest rate to be a fraction higher than otherwise.
The delayed benefits of micro-economic reform have played a significant part in the economy’s good performance, including by making it less inflation-prone. But Labor undertook far more reform than the Howard Government has – as witness, our return to no more than long-term trend growth in productivity during the noughties.
In his column, Mr Abbott repeated Mr Costello’s big lie about the states’ bonanza from the goods and services tax – “a $4.5 billion revenue windfall over the past three years”.
The bonanza is fictional for all states except Queensland; it’s furthest from the truth in NSW. While it’s true collections from the GST have grown strongly – more strongly than originally expected – they’ve grown only a little faster than the grants formula they replaced.
And because the states were guaranteed no less than what the old formula would have given them, the benefit has gone mainly to the feds, not the states.
Consider this rebuttal from the NSW Treasurer, Michael Costa, in a letter the editor wasn’t able to publish.
The NSW Government’s total revenue (of which proceeds from the GST account for not much more than a quarter) grew by 5.6 per cent a year in the pre-GST period and by 5.3 per cent a year in the post-GST period.
It’s actually the feds, not the states, that have received the tax windfall: $39 billion above projections from 2001-02 to 2005-06. This financial year, NSW will receive $380 million less in GST revenue than was forecast when the tax took effect in 2000.
And, of course, the small fact no Liberal, federal or state, will acknowledge: this financial year NSW taxpayers will get back roughly $3 billion less GST than they pay.
Finally, there’s the inconsistency of the Howard Government’s line that it, rather than Mr Beattie, should get the credit for the strong growth in Queensland, whereas the blame for the weak growth in NSW should go not to it but to Morris Iemma.
Truly, these guys know no shame.
Ross Gittins is the Herald’s Economics Editor.
