Lots of things about this election were rubbish. The
machinations of the Labor party, Abbot’s painful attempts to appear
woman-friendly that just made him look like he was pimping his daughters (and
then he did on Big Brother), and a media that was about as useful as a cricket
bat in a tennis match. But what irritated me the most by far was the disregard
for facts, reason or even logical consistency among ALL the parties, and the
half-baked policy we are getting as a result.
In this article I will have a go at the right, specifically Tony and the Liberals, because they have
been the chief offenders. Next week I will talk about the left.
Tony doesn’t care about accurate reporting because focus
group data suggests ‘cost of living pressures’ is a hot button issue and
claiming they are out of control is a great way to discredit a government. The
truth is that the cost of living has risen by just over 2 per cent a year under
the Rudd and Gillard governments. Prices have risen by only 1.6 per cent per
year, even with the carbon tax. Since 1996, the real income of households has risen by $275 a week. That is one of
the best results in the world. Yet in the
last week of August the Liberal party released a Facebook app called the
Cost of Labor Calculator that suggested cost of living had increased under
Labor by 31 per cent per year! How did it manage this blatant falsification? It
only covers those items that have gone up (utilities, rent, education and
medical expenses), rather than the entire basket of goods used by the consumer
price index, and gives you the price rise over the entire five and half years
of Labor as though it was a one year value!
What this kind of campaigning does is destroy any prospects
of a sensible policy discourse. The carbon tax has problems, but none of them
are the tax itself. I’ve
written elsewhere about how the carbon tax actually improves economic
efficiency because it is a Pigovian tax, and will facilitate our transition to
a more high tech economy by adjusting economic incentives away from imminently
outmoded industries. To say that it is
bad economic policy per se is fallacious. However, there are plenty of
arguments worth making about its design. In particular, there are serious
problems with the degree
to which high polluting industries are able to pass through the price to
consumers, effectively mitigating the effects of the tax on economic
incentives. One could argue in general, I think, that the compensation to the
supply side is too generous and poorly designed. One could also argue, I think,
that the compensation to households excessively exceeds the financial damage of
the tax. For example, because I’m on student welfare, I recently received a c.
$500 ‘clean energy grant’ from the government to compensate me for the Carbon
Tax. That is more than the cost of my entire $492 annual power bill. I suspect
that this is an attempt by the government to throw money at potential votes, but
the Abbot campaign hasn’t pick up on this particular piece of stupidity
because doing so would suggest Australian household’s aren’t ‘doing it tough’.
Next on the hair-brained list is the coalition’s rhetoric
around the level of public debt. Australia’s debt situation is one of the best
in the world, as Joseph
Stiglitz pointed out recently, yet Abbot has consistently suggested that
the budget absolutely must be in surplus. This hasn’t stopped him from setting
a staggering ten year timeline to return the budget to surplus (or committing
to his expensive paid parental leave scheme), which would seem to contravene
his statements earlier this year that stalling on the return to surplus will
set us up for a recession. That claim was stupid. Saul Eslake, whose note
from Merrill Lynch first set off the chorus of recession mongering (he said
there was a 25 per cent change of a recession in the second half of 2015)
underlined that the Reserve Bank may need to engage in an Australian version of
Quantitative Easing (a form of stimulus) to ward off a recession. This would
involve getting into more debt, not less. This sentiment is echoed by Stiglitz
and National Australia Bank chairman Cameron Clyne, who point out that debt is
a fundamental requirement of quality long term infrastructure development,
something this country needs to ride out of the end of the mining boom and
continue our tradition of steady, modest growth. Clyne makes the point, that of
this article, that Australia’s debt discourse is very immature.
Again, the inadequacy of the debate leads to poor policy
design. The stimulus package of the Rudd government at the start of the GFC was
arguably not so good. There are arguments to be made both ways about the effectiveness
of short term cash handouts. There are even better arguments to be made about
whether the money spent on the home insulation scheme and the school halls
scheme could not have been more effectively spent (in terms of net economic
benefit) on other infrastructure projects, like rail projects in Sydney’s West,
the East-West link in Melbourne, another lane on the pacific highway, light
rail in Sydney or any of the other infrastructure projects promised by the
coalition in the lead up to the election (that nobody is talking about, as
usual). All these infrastructure projects are sorely overdue, and basic
economic theory suggests that government is the best entity to build them
because they cost so much and government can get loans much cheaper than private
enterprise.
Next week I will direct my ire at the left; please tune in.
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