A deficit of over $210b might be justified this financial year, courtesy of the spending needed to combat the economic impacts of the virus, coupled with the lost budget revenue from so many people losing their jobs and so many businesses losing their profitability.
But what about the 10 years of deficits the budget also predicts? Including a $66.9b deficit four years from now.
That figure is in the final out year of the four years of forward estimates.
How do fiscal conservatives justify such a lacklustre effort to fix the books?
Especially when the budget says this calendar year’s drop in economic growth of just under four per cent will be followed up by growth of over four per cent next year. Yet four years from now the Coalition thinks it’s OK to still hand down a $66.9b deficit?
I see hypocrisy all around me when it comes to the blind eye some are willing to turn to debt building up on the Coalition’s watch.
Rewind just over a decade when Labor Treasurer Wayne Swan blew the budget to combat the Global Financial Crisis.
He did so on the advice of Treasury, which told him unless he racked up debt and acted quickly, a million Australians would lose their jobs.
Dwarfed by pandemic
Josh Frydenberg is falling back on the same Treasury advice to justify his stimulus spending.
Swan did rack up debt, and he certainly acted quickly, and for doing so he was attacked. Including by the current crop of ministers within this government spending so much more for the same purpose: saving jobs. They like to point out that the GFC has been dwarfed by this crisis, which is true. But the spending back then has also been dwarfed by the spending now. I attacked Swan for the slowness of his projected return to surplus in his budgets in the aftermath of the GFC. So did a conga line of conservative commentators. And they were right when it came to the then Labor government’s willingness to keep spending beyond when it needed to.
Where are they now that a Liberal government has included virtually no effort to fix the books in the out years of its budget? I can’t hear them.
Four years from now a forecast deficit of nearly $67b? With that number predicated on a vaccine being fully rolled out next year. How is that acceptable to fiscal conservatives? How can they keep a straight face having slammed Labor for not getting stuck into budget repair post the GFC quickly enough, but letting this budget blow out slide by?
I texted, called and spoke this week to many fiscal conservatives, in and outside the parliament, expressing my utter dismay at the government’s downright refusal to even consider budget repair until the unemployment rate comes down to pre-COVID levels. The Treasurer said as much in his speech. The unwillingness to commence fiscal repair work until the unemployment rate goes below six per cent is spelt out in black and white in the budget! Just imagine how loud the howls of complaint would be in conservative quarters if a Labor treasurer and government tried that on.
Back to my attempts to phone a friend.
Some laughed at the fiscal joke that the debt build up for so many years into the future now is. Some sighed gratefully that at least interest rates are low, albeit noting that when they rise again this debt burden could become overwhelming. Others just didn’t respond. Commentators, MPs, Senators, you name it. The cat has got the collective tongue of these one time critics of deficits and spending over surplus budgeting and fiscal conservatism. Keep in mind that the debt Labor accrued in government from 2007-2013 was doubled by the Coalition in government from 2013-2019 before the coronavirus even started. And there was no GFC during the latter period.
The sudden tolerance for lazy fiscal profligacy is a sign of how much things have changed, and how much hypocrisy exists in the economic debate among the political class in this country. Yes, I’m looking at you “fiscal conservatives”. A title you no longer qualify to hold.
Peter van Onselen is a professor of politics and public policy in the business faculties of the University of Western Australia and Griffith University.
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