Economist and sometime Labor apparatchik Stephen Koukoulas has put the sword to John Howard's nominally impressive legacy of wiping off government debt today.
One thing the Kouk doesn't mention is that Howard was only able to raise the tax take and draw down on investment without causing a demand-side recession because Australia was undergoing a long boom, after Keating had instituted a number of reforms to make the country competitive and open it up to global markets. Howard surfed the tsunami that Keating had started, in short (Bermuda shorts?). But that wasn't necessary to say in the article I suppose, no need to run up the score when the win is so decisive!So how did the Howard government do it? It was very simple, with a three-pronged approach to debt elimination:- A record high tax take - the Howard government was the highest taxing government in Australia's history.- Record low spending on infrastructure - the level of public construction work done as a percentage of GDP reached a record low under Howard.- A large-scale asset sale and privatisation program.
Why do we care about this now? Because the prospective Liberal front bench in the current election is made up mostly of Howard era recalcitrants, most notably leader Tony Abbott and treasurer Joe Hockey. Their policy on economics - and pretty much everything else - hasn't changed much since then, due to the failure of Arthur Sinodinos to single-handedly develop new policy as he was parachuted in to do.
This dose of economic reality underpins the recent attacks on the Libs for secretly desiring to raise the GST. There has been no significant renewal of the Liberal caucus to flush out the Howardist mindset, so voters can be excused for refusing to believe the protestations coming from Hockey and Abbott.
The Kouk's point about lack of infrastructure investment causing inflation and lost productivity will most likely be lost behind the shouting about tax increases, but it is no less important. The Libs could even adopt the NBN model of public-private partnerships (albeit once removed via bonds) to keep infrastructure investment off the budget balance sheet, if they want to maintain the fiction that they aren't big-government tax-hungry statists. Abbott has shown a willingness in this campaign already to adopt Labor's policies, but that one might have to wait until after the election.
Or, if Abbott really wants to win big, he could embrace the Howard legacy to the fullest. Advertise himself as the man with the Big New Tax that will fund all of the social programs that Gillard introduced but we can't afford due to revenue problems with the budget. Want Gonski? GST goes up to 11%. Want the NDIS? 12%. Want the full FTTP NBN? 13%. Want the baby bonus back and an increase in the dole up to somewhere near the poverty level? 14%. Want a fair dinkum paid parental leave scheme for everyone, not just the rich? 15%. Want the third airport for Sydney and the East-West Link in Melbourne? Hmm, well maybe not.
Joe Hockey could be the new Oprah Winfrey. "You get a per cent! YOU get a per cent!!" Now that's the Liberal Party I remember.