With confirmation that the surplus is dead, buried and cremated — as the ERC plans to put a multi-billion dollar budget blowing stimulus package to Cabinet tomorrow — we can examine what that means for the government.
In terms of raw politics it means nothing. The Coalition will be forgiven for its failure: partly because people want the stimulus spending to help stave off recession, partly because the Coalition won’t be held to account for over-promising and under delivering.
That’s because research tells us that voters trust the Coalition when it comes to the economy and economic management.
But should they really?
The economy hasn’t exactly been firing on all cylinders since the Coalition came to power. Far from it in fact. Despite all the promises to repair the budget after Labor’s six years in power, in the six plus years the Coalition has been in office national debt has more than doubled.
Think about that.
And that is without a Global Financial Crisis and before the forthcoming stimulus spending and economic shocks from the coronavirus and the bushfires even hit the budget bottom line.
Equally, when the GFC concluded the Reserve Bank still had the cash rate at three per cent (six times what it is now). Since that time it has continually lowered interest rates, to the point where they are now at a record low of just 0.5 per cent.
The only reason rates have kept coming down is because the Reserve Bank sees systemic weaknesses in the economy, and government’s have failed to fiscally reform to correct the slow and low growth.
And don’t forget, given the hot property market in most parts of the country, the Reserve Bank would rather be putting rates up not down, but it simply can’t. Not with such a weak economy.
So, the government has presided over low growth, high under employment, record low interest rates courtesy of a weak economy and the doubling of national debt for no good reason. All while failing to have the guts to embrace economic reforms that might have done something to fix the situation.
But it did have one thing (and one thing only) it was planning to crow about: finally returning the budget to surplus. It was always a largely symbolic and meaningless effort, but they put one hell of a lot of stock in the goal nonetheless.
So much so, in fact, that the Coalition got ahead of itself. In a desperate bid to have something to brag about going into last year’s election the budget was brought forward to April so the Treasurer could announce we were “back in black” thereby allowing the Prime Minister to campaign on the “achievement” in May.
An achievement we not only had not yet reached, but now won’t reach this year nor probably for years after that. Despite the promises. Despite the claims it had already happened. Despite the coffee mugs Liberal HQ produced to perpetuate the brag.
So while they will get away with it, and they know they will, they really shouldn’t. Because this country has been painfully bereft of leadership, especially when it comes to the economy, for too long now. And the current mob are as hopeless on this scorecard as any government in recent years.
But mark my words, using stimulus spending the government will (like Labor before it) claim credit for avoiding a recession, assuming that’s what we do. Avoiding recession is not rocket science. The finance team get weekly mud maps on how the economy is travelling. Unless they are late to the party it’s not hard to flood the system with taxpayers dollars via debt to lift growth marginally above negative territory.
Even if doing so means eating humble surplus pie.
Don’t forget what Scott Morrison said last year in one of the leaders debates during the election campaign: “we returned the budget to surplus, next year”. His mangled English a lesson in over-promising and under-delivering. Indeed, a lesson in claiming credit for something he hadn’t actually achieved.
Peter van Onselen is Political Editor for Network 10 and professor of politics and public policy at the University of Western Australia and Griffith University.
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