A nice juxtoposition in this mornings paper:
What they Say:
MALCOLM Turnbull will base his push for the prime ministership in next year’s federal election on a promise to axe government spending by billions of dollars a year.
And the Opposition Leader will blame Kevin Rudd’s economic mismanagement for the need to take a razor to spending, proposing cuts that on current levels would be worth at least $14billion a year – the equivalent of 70 per cent of the nation’s annual defence budget.
Mr Hockey refused to nominate which services would face the axe, but said there was a strong argument that government spending as a proportion of GDP should be no more than 24 per cent.
This financial year, spending is worth 28.6 per cent of GDP, with the government’s budget forecasts reducing the level to 28 per cent in 2010-11, 27.1 per cent in 2011-12 and 26.4 per cent in 2012-13.
What they do:
THE Senate has dealt a $1.9billion blow to Kevin Rudd’s health budget by rejecting plans to means-test taxpayer rebates for private health cover and increase levies on the non-insured.
The Coalition, the Greens, independent Senator Nick Xenophon and Family First senator Steve Fielding combined to defeat the three budget bills, which would have raised health fund premiums for more than two million middle- to higher-income Australians.
Manager of Government Business in the Senate Joe Ludwig appealed to balance-of-power crossbenchers ahead of the vote to pass the savings measure, which the Coalition had long vowed to oppose.
“This is a hard decision and one that was not taken lightly, but it is the right decision for Australia’s long-term economic future,” Senator Ludwig said. But the government offered no compromises, which sealed the package’s fate.
It’s easy to say you will cut immense amounts, but significantly harder to actually do so. In this case the Coalition had a case of spending that could be reduced with the cover of the Labor Government championing the bill, and in line with their major principles of individual responsibility (Private health insurance is a benefit above and beyond the norm, so those who want it should pay for it) and reducing government dependence and spending.
But they have chickened out for short term and almost pointless political benefit. No MP will keep his seat next year because of this vote, but Labor will be able to cut holes in their claims to financial competence by putting up similar bills and watching the Coalition act to keep high spending levels in place.
There’s also an intriguing claim by Hockey that Government spending as a GDP ration should be at 24% (which seems both his comfortable norm and his “emergency maximum level”). Theres no real reason why 24% should be the magic figure. There is the obvious argument that lower is better, but why 24%. It was the most common figure during the last 32 years, but hardly tracks to economic well being. (1)
Personally I think big cuts do need to be made to our welfare levels, but that should be a question of total spending vs need, rather than based around trying to hit supposed magic numbers. As the chart shows, some very successful economy’s have significantly greater Govt spending as a % of GDP, and some have quite a bit less. What’s more important is where and how that is spent, and the capacity of the country to pay for that spending.
When the coalition starts supporting the simple introduction of means-testing welfare and benefits for the middle class we will know they are beginning to be serious about cutting spending (I’m not sure the ALP is either, so we shouldn’t yet take their support for the bill as evidence of it). Until then Hockey is just using bluster and bullshit. But lets leave the final word to his predecessor as Treasurer in the Liberal Party: Peter Costello
don’t think that reducing expenditure to GDP ratios is easy. Every pressure in a democratic system is to increase spending. Resisting calls for increased spending on worthy causes (and all causes are worthy in the eyes of those who want it) is a daily struggle – week in week out, month in month out, year in year out.
(1) Whilst trying to find a good graph illustrating the difference I ran across this 2006 speech by Peter Costello claiming that “In the OECD Australia has the second lowest level of government spending as a share of GDP at 35.7%, lower even than the United States.”. Whilst the 2009-10 budget records a level of Government Payments as % of GDP at 24.2 for that year (Which also matches the figures Hockey cites for current spending at 28%.)
Update: The wise and civil Sinclair Davidson from Catallaxyfiles suggests this may include state spending, or counting the GST as Federal rather than State spending.
In chess terminology, when a player abandons or sacrifices a piece so another of theirs can occupy the same space its called a “Vacating Sacrifice”. It’s typically not regarded as a very wise move, and usually reserved for abandoning mere pawns so your queen can steamroll through. It’s hard not to regard the news of Bishop’s fall from treasury as the Coalitions own attempt at the same strategy.
In return for stepping aside voluntarily, Ms Bishop will remain as the Liberal Party’s deputy leader.
“The focus on my performance, on my role was a distraction from the scrutiny that ought to be applied to the Rudd Government,” she told reporters at a Perth press conference at 11.45am AEDT.The finance spokesman Joe Hockey will be elevated to the treasury job while Senator Helen Coonan will move from foreign affairs to finance.
Ms Bishop said she chose foreign affairs to “ensure that Australia’s international standing and reputation was maintained”.
This move probably doesn’t surprise anyone who has been watching Australian politics, but that same group must also be wondering how it strengthen’s the Coalition position. For a start, Bishop has been seriously undermined, perhaps for a full electoral cycle. You cant take one of the top jobs, fail and expect to be taken seriously in another equally demanding role. Howard’s team had much on Keatings in 1996, but in Foreign Affairs led by Downer they never got close during the election cycle, in large part because of Downers tattered reputation (and one he never really changed in office). Bishop may be saying she wants to maintain our international standing, yet if anything her sideways movement shows how un-serious the coalition is about it. (Though had anyone even heard from Coonan in the position?) Labor on the other hand has not only the benefit of incumbency, but a Foreign Minister rapidly gaining experience, and a PM who’s a former diplomat & Shadow Foreign Affairs minister.
What’s more, whilst Bishop had stumbled, these were not too significant considering the timing (the public have forgotten/don’t care about the plagurism, and it is only her opponents bringing it up these days), as the Government was always going to get the upper hand economically during the downturn. They are the one’s with a plan, they are the ones with a bank account, and an “impartial” treasury and public service to model and support their every claim. Bishop hasn’t been outstanding, but as the Government has gone from surplus to deficit and now used up/outlined most of their responses to the crisis (both policy & political), now was the time for a Shadow Treasurer to get seriously to work showing the flaws. One also cant help but feel there’s a little bit of the boy’s club at work here too, a woman being seen by some Conservatives as too weak to manage the economy in tough times (havn’t these people heard of Margaret Thatcher!).
The choice of Hockey as Treasurer seems about the only possible choice, given the lack of depth (or wilderness period of previous good performers ala Abbott or Costello), and lack of media ability for people such as Robb, or relative youth for those like Dutton. But whilst a popular figure, it should not be forgotten (and Labor will be quick to remind everyone) that it was Hockey who presided over the WorkChoices ministry. He didn’t do his homework for that, was especially bad at selling the economic implications for the idea, and largely had Howard step in to cover for him at the end. Whats more, what could better serve Labors desire to re-run the workchoices campaign, than putting the man responsible for it in charge of finances.
Q: How will Malcolm Turnbull reform the Australian Economy to avoid the recession
A: Re-institute Workchoices – Just look at his treasurer!
(Or so Labor will be hoping people come to think.)
Finally, this all raises a number of issues again about Turnbull & his standing in the party. I hope he had the good political sense to help push Bishop when it became clear the party was against her, but on Saturday he was giving her his “total confidence” in the role of treasurer.
“She is doing a great job as shadow treasurer and she is taking the fight up to Labor and exposing Wayne Swan and Kevin Rudd for their Gough Whitlam-like exercise in taking Australia deeper and deeper into debt.” Mr Turnbull Said
I cant imagine he wanted this change, and yet he has had to embarrass his Deputy Leader, submit to the will of the party for his main policy colleague, and given the liberals their third treasurer since the last election. He may be leader of the party, but more and more I am wondering if he is in charge. He needs to take action now to cement his leadership, else bad polling closer to the election is sure to create destabilizing outbreaks & leaks.
Everyone understands the need for a revival of the Coalitions economic credentials, but this seems more the sacrifice of one piece for another of potentially equal or lesser value. Every chess player, upon seeing a possible route to victory is tempted to simply throw away their unneeded pieces and go straight for the goal. But come the late game, they may be ruing such a sacrifice as their opponents shut down attacks and open new flanks. Hockey will initially do better than Bishop – the media will see to that- but it wont fundamentally change the public’s view of the better team to manage the Australian Economy in these times, and costs the Coalition an otherwise strong player.