Beyond all the programs and policies it takes to
the next election, Labor’s biggest challenge will be selling its
economic credentials. While their record in health, education and
foreign affairs is admirable, future policies will always be threatened
when the media and the Coalition ask the question: How will you pay for
Labor’s record of managing the economy from 2007 to 2013 was much
better than most people think and they have every reason to be proud of
what they achieved, particularly when the GFC is factored into that
assessment. Their weakness, however, is public perception. For some
inexplicable reason, the Coalition have been able to convince many that
Labor were economic vandals.
As false as that was, and is, it remains an issue that needs to be addressed.
That means the next federal campaign must be planned in such a way that
any repetition of that scare mongering which will, no doubt, be based on
false premises, can be cast aside with superior economic arguments that
treat it with the contempt that it deserves.
opinion polls, then and now, suggest that clever politicking by the
Coalition has contributed to a misunderstanding of how successful that
period was for Australia economically. We were the only OECD country not
to experience a recession, yet the perception was one of impending
When in opposition, Tony Abbott and Joe Hockey demonstrated how easy
it was to attack a government’s credibility in economic matters,
particularly when a compliant media gave them plenty of exposure. It
didn’t seem to matter that their claims, e.g. ‘budget emergency’ and
‘debt and deficit disaster’, were false and misleading.
Mud tends to stick and polling today still shows that the Coalition
is seen to be the better economic manager. This defies the comparative
record of the two and says more about the myth than it does about the
Coalition’s tactics, but, at the moment, the perception and the myth are
As many of us expected, over the past year the government’s own economic
credentials have been put under the microscope and they have been found
wanting. They are failing to produce the results they boasted of in
opposition and failing to reduce the debt and deficit disaster they
claimed was so damaging to the economy. They are now fending off
criticism from nearly every neo-liberal economist in nearly every
mainstream newspaper in the country.
Joe Hockey’s foolish claim that he would deliver a surplus budget in
his first year and each year thereafter has come back to bite him. He is
staring down his worst nightmare. He can cut as much spending as he
likes but he will never deliver a surplus budget without an increase in
If he was any good at his job in opposition, he would have known that.
Worse still, he cannot see that the major stumbling block to
sustained national growth, higher tax revenues, increased demand and a
positive terms of trade, is unemployment and underemployment.
This is where his problem lies and where the real waste lies. It is a waste to the tune of $4.7 billion per month.
Deficit spending is not the problem. Nor are ballooning health or
education costs. It is the under-utilisation of the available work force
that needs to be addressed.
Deficit spending on value-adding projects is good for the economy.
Eighty-two of the last 100 years of Federation involved deficit
spending, a body of fact that has contributed to where we are today. Are
we burdened by those deficits? Are we cursing our parents and
grandparents for making us the beneficiaries of this debt? I don’t think
This is where Labor needs to concentrate its efforts because when the
public understand this, everything else becomes possible. When a
nation’s workforce is fully or near to fully engaged, healthy GDP growth
is assured. This enables proper funding for health and education. But
to achieve near full employment job creation programs are required and
that will require deficit spending.
do this, they need to explain the nature of government debt, the
issuance of bonds and treasury notes, the time frame over which these
issuance’s are dealt with, how the interest is paid and where it comes
from; that buying bonds from government is no different from opening up a
term deposit account at your local bank.
They need to consign the ‘debt and deficit disaster’ to the garbage
bin once and for all. But most importantly, they need to demonstrate in
simple terms how deficit spending creates demand.
They might also take a serious look at tax expenditures like
superannuation concessions and the private health insurance rebate, but
that won’t create employment.
The Coalition will, of course, cry more debt and deficit disaster.
They will demand to see it fully costed. It will be an utterly
hypocritical cry but it will be loud and it will resonate. Labor has to
make its case with vigour and conviction, but most of all, with facts.
They need to show how important deficit spending has been over the
past 100 years and the importance of the workforce in realising a
nation’s potential. The Coalition doesn’t understand this simple
principle, or if it does, it is so beholden to its financial backers
that it ignores it and won’t deliver what is best for the people.
It will only deliver for those who have the money and lobby the hardest.
If Labor could succeed in exposing the deceit that accompanies the
government’s surplus objectives, they could render neo-liberal
conservative governments extinct. To achieve this they need superior
economic minds whose sympathies lie with social cohesion. It doesn’t
involve any policy changes, just a simple explanation of how this system
They cannot do it alone.
Engaging the assistance of people like Bill Mitchell,
Professor of Economics at the University of Newcastle, and director of
the Centre of Full Employment and Equity would give them an enormous
boost. Steven Hail
is another from the University of Adelaide. These are individuals who
can clearly articulate the fallacy of supply side economics.
The sheer simplicity and logic they demonstrate will silence the
pseudo economists within government ranks and embarrass right leaning
media economists into silence. The rest will follow and fall into line.
Those who have blindly followed outdated textbook theories and think
as we did when sovereign economies were based on the gold standard will
be forced to confront the reality that these theories no longer apply
and have, in practice, been seen to fail time and time again. They are
failing now, in Europe, the UK and the USA.
This is also where people like Joe Hockey and conservative think
tanks the Institute of Public Affairs can be made to look so far out
date they are drowning in their own ignorance. The challenge for Labor
is to articulate its credentials convincingly and do it with
authoritative voices in support.