Eight years later, how do our Coalition economic management gurus stack up?
âIt is only at low tide that we find out who swam naked. This is what Warren Buffett said. And the tide has ebbed on the Coalition’s claim to be senior economic managers. Exposed by its botched response to the pandemic, both in providing health protections and economic safety nets, the government has proven Buffett’s aphorism. Alan austin crunch the numbers.
The Coalition added $ 600 billion to the national debt with barely a whisper from the corporate media. Even today, with the release of the Mid-Year Economic and Fiscal Outlook 2021 (MYEFO), the response to a seemingly endless horizon of record deficits has been toned down in the pro-government journal The Australian and Australian Financial Review.
Both had sharply criticized Labor debt, but now they are obediently accepting the coalition’s vows to cut taxes at a time when the nation can hardly afford it. The double stallion sounds loud.
The Treasury’s Financial Management Office announced that Australia’s gross debt reached $ 871.4 billion. This is a significant figure when one remembers that the gross debt was $ 271.2 billion when the Labor government lost the September 2013 election.
The Coalition – which was elected mainly on pledges to drastically reduce ‘the Gillard debt catastrophe’ – has now added $ 600 billion to Labor’s modest debt.
The differences between Labor debt and coalition debt are not just about quantity.
Labor borrowed $ 213.2 billion in five years and nine months. This averages out to $ 37.1 billion per year. The Coalition borrowed $ 600.2 billion over eight years and two months. That’s $ 73.5 billion a year, close enough to double the rate.
Loans to build infrastructure
Most of the $ 213.2 billion in labor borrowed went directly to durable assets. These include roads, railways, port facilities, energy and water infrastructure, insulation, modernization of sports facilities, school and community buildings, defense housing, national parks and ‘other national assets.
In calendar year 2011, for example, Labor borrowed $ 48.6 billion and spent $ 37.2 billion on infrastructure. It was 77%.
In contrast, far fewer Coalition loans have gone into bricks and mortar. In 2017, the Coalition borrowed $ 80.6 billion and spent $ 36.5 billion on infrastructure. It was 45%.
Money borrowed and invested through labor prevented Australia from going into recession during the Global Financial Crisis (GFC) by targeting households, creating productive assets and maintaining tax revenues. Australia was one of only three OECD members to avoid a catastrophic recession thanks to the GFC and the only one to avoid widespread job losses. In 2009, Australia had the highest annual GDP growth rate in the OECD.
In contrast, when the global Covid-induced slowdown hit last year, the Coalition handed money back to businesses, slashed infrastructure spending, lowered the tax rate, and allowed widespread corporate tax evasion. Australia then faced one of the worst recessions of any OECD country and saw âemployeesâ working zero hours soar to 8.5% of the labor force. Australia currently ranks 31st in annual GDP growth among the 38 members of the OECD and is also close to the tail when it comes to unemployment.
Debt repaid in good times
Gross debt stood at $ 58.7 billion when Labor won the 2007 election. In the few months leading up to the global financial crisis that hit the developed world, Labor steadily reduced this figure, the dropping to $ 52.4 billion in August 2008. Labor also cut the amount by $ 5.7 billion in the first five months of 2013 as the GFC shrank. .
In contrast, the Coalition continued to take on debt every year during the post-GFC boom.
To take 2017 as an example again, New Zealand reduced its debt from 24.0% of GDP to 21.6% that year. Iceland made a reduction from 79.9% to 69.3% and Ireland from 74.1% to 67%. Another 25 OECD members significantly reduced their debt that year, while five others have changed little. Only Chile, Luxembourg and Australia increased their debt to GDP significantly in 2017. Australia’s borrowing increased from 25.3% to 28.4% of GDP, despite the strength of the economy. global economy and booming exports.
Biggest drop in world ranking
When Labor left office, Australia’s gross debt was 16.8% of GDP. It was the third lowest in the OECD. Only Chile and Estonia were lower. Today Australia’s gross debt is 39.5% of GDP. This eruption – of 22.7% of GDP – is close to the worst of any member of the OECD.
Federal debt was the critical issue used by the media to destroy the last Labor government. The headlines appeared day after day, week after week, shouting “Debt Out of Control”, “Labor Debt Time Bomb”, “Soaring Debt”, “Debt Spiraling,” increasingly deep “and” the budget in free fall “.
The mediacloud.org databases show us how frequently the term âbursting of public debtâ has appeared in national media over the years.
The red line shows the actual gross debt, using the scale on the right. The blue lines indicate the frequency with which the âpublic debt burstâ has been released, using the scale on the left. As the graph shows, there is no relationship.
Interest on debt
Treasurer Joe Hockey was horrified ahead of the 2013 election that Australians were paying “$ 35 million a day in interest.” It’s $ 13 billion a year. He and his successors have not solved this problem.
Interest paid in October (latest figures) was $ 1,522 million, or $ 49.1 million per day. With interest rates now at historic lows and ready to rise, this could rise quickly.
The Ministry of Finance’s monthly report for October shows that the Coalition has spent more on interest on debt so far this fiscal year than on housing and community amenities, recreation and culture, natural disaster relief and public order and safety combined.
Net debt is also exploding
When the Coalition took office, Australia’s net debt – gross borrowing minus interest-bearing loans – stood at a modest $ 161.3 billion. This was accompanied, however, by the sharp increase over the previous five years in domestic assets, as noted above.
Net debt was recorded in October at $ 597.5 billion, almost four times as much. But without significant infrastructure or other advantage to show for it.
Such is the fate of Australia.