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Political Groundhog Day - Fear as an Electoral Weapon

Saturday, 1 June 2013
Author: John Spoehr, The Adelaide Review

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Generating fear in the electorate about the policies of your political opponents is a national pre-election past time. The latest is Tony Abbott's claim that Australia faces a "budget emergency". The problem, he claims, is not that revenue has fallen dramatically but rather spending has been excessive. For this reason he indicated that the Coalition would support the Government's proposed budget cuts. In his Budget reply speech the Opposition Leader confirmed that he would establish a Commission of Audit to undertake a major budget review if elected on September 14.

The Coalition's script is a familiar one. It goes something like this.

Labor has mismanaged the Budget and has been spending like a drunken sailor. That's why we backed the cuts int he Federal Budget. Much more will need to be done to bring the Budget back into balance. We will appoint a Commission of Audit to advise how to cut our cloth to wear when elected. Government waste will be eliminiated. there are 20,000 more public servants now than there were 10 years ago. We are committed to smaller government, less taxes and individual reward for individual effort.

What we are about to watch is a political Groundhog Day - days that are uncannily like the ones that preceded them, where the misatkes of the past are frustratingly repeated. The script has been written, the scenes look familiar and the end is predictable. It is a story about debt and surpluses, a tragic comedy of erros built on economic fallacies, fantasies and folly.

Scene one sets out to portray government budgets like household budgets - all must live within their means or suffer the consequences of imprudence. Conveniently ignored are minor matters like the fact that households, unlike sovereign states, are not able to levy taxes, fees and fines on their neighbors. It is of no real consequence that governments have the capacity to create debt and amortise the cost of repayments over generations. The productivity enhancing benefits of public debt as a source of investment in infrastructure are largely overlooked.

Scene two is high drama - public debt is out of control and sharp expenditure cuts are necessary to save us from calamity. Austerity measures are required to regain control of the crisis.

Back in the real world austerity measures are fuelling rather than solving the devastating impacts of the GFC. More frustrating for the scriptwriters is the fact that stimulus spending has proved to be a successful part of the policy solution in countries like Australia, which have avoided plunging into a generalised recession. What must the scaremongers make of the fact that public debt remains very low in Australia? Don't let facts get in the way of a scary political story.

The Australian Parliamentary Library often reminds honourable members of inconvenient truths. One of the most unpalatable for budgetary dooms day merchants is that public debt in Australia was just six percent of GDP in 2012-13. In other words Australia has one of the lowest government debt levels of any nation. The average for the G7 group of nations (Canada, France, Germany, Italy, Uk and USA) is projected to reach 94 percent of GDP by 2015. Tellingly the International Monetary Fund has recommended a benchmark of 60 percent of GDP.

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Associate Professor John Spoehr (email)
Executive Director
Australian Workplace Innovation and Social Research Centre (WISeR)
The University of Adelaide
Business: (08) 8313 3350