Tony Abbott achieves the impossible: unity among economists
Economists
are refuting the three big picture claims made by the government: 1) We
have a budget emergency 2) We have a debt crisis and 3) The carbon tax
was ruining the economy
are refuting the three big picture claims made by the government: 1) We
have a budget emergency 2) We have a debt crisis and 3) The carbon tax
was ruining the economy
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There’s a joke about economists: if you ask five economists the same
question you’ll get six different answers. Granted, it's not a very
good joke, but it’s a fair call. Ours is a complex field, and a growing
number of economists are acknowledging that the theory sitting behind
mainstream economics is mostly rubbish. As a result, it’s very difficult
to find consensus on real world events.
But that's where Abbott
and Hockey have achieved what many thought impossible: a true consensus.
Unfortunately for the coalition government, the consensus is entirely
against them. The Abbott government’s agenda has been driven by three
major claims, all of them economic in nature. Let’s see how economists
view these three themes:
1) There is a budget emergency
Number of economists who agree: zero2) The federal government has a debt crisis
Number of economists who agree: zero3) Carbon pricing is an economic wrecking ball
Number of economists who agree: zeroThe
above represents a very slight exaggeration. You can find people with
some economics qualifications who agree with the government but, without
exception, they either work for the Coalition or for some entity with ideological motives (like the IPA or News Corp).
While most would agree that there are serious structural problems with the budget, none would call it an emergency. Chris Richardson, economist and partner at Deloitte Access Economics, said:
WeSaul Eslake, chief economist at Bank of America Merrill Lynch, said that to call the Australian debt situation a crisis was “to abuse the English language.”
don’t need a surplus tomorrow, we don’t even necessarily need it in
five years’ time. I’m more than happy with us getting back to
sustainable fiscal finances over the long term. The politics would tend
to suggest moving earlier rather than later but on the economics there’s
no rush.
Similarly, Nobel prize winning US economist Joseph Stiglitz
used terms such as “absurd”, “crazy” and “a crime” to describe some of
Hockey’s budget measures, and dismissed the perceived debt and deficit
problems, noting that any Australian who worries about debt “must be out of their mind.” Richard Holden,
professor of economics at the Australian School of Business, put it
this way: “First, Australia does not have a debt crisis. Or, to put it
another way, Australia does not have a debt crisis.”
It doesn't stop here. The Age recently conducted its annual economics survey
of 25 prominent economists. They select economists from a broad range
of backgrounds across the spectrum of economics and their views vary
widely on almost all issues. None of them agreed with the government on
any of the above three topics.
This unique consensus among
economists makes it clear that the entire government agenda is based on
false premises. How has this exposure affected the Coalition's agenda or
their messaging? Not at all. Not one bit. Not one iota. Let’s be clear
about this. We know they’re not being honest about their real motives
for policy. They know we know, too. They don’t care.
As I’ve explained previously,
the Abbott and Hockey budget, if fully implemented, would have taken us
a long way towards the free market social and economic model of the US,
and away from the social democracy model of much of Europe. But the
question remains as to why they would do this. Who benefits from a US
style free market system where government minimises its involvement?
The
answer of course is the wealthy and those who already wield power. The
greatest beneficiaries of Abbott and Hockey’s policies are their largest financial backers, including the financial industry, the mining and energy industries, gambling interests and real estate companies.
For
all the talk about this being the most ideologically driven government
in living memory, the reality is something much simpler and more
familiar. This government is simply delivering to big money what big
money wants.
One of the clearest examples of this is the winding back of the Labor government’s Future of Financial Advice (FoFA) reforms.
We know that many financial advisors have been preying on their
clients. They make use of clients’ lack of understanding of complex
investing and other financial options to direct them to financial
products that are not in their interest, but rather in the interests of
the advisor. This has been costing consumers huge sums of money, which
primarily flow into the hands of the banks.
Labor’s reforms were
aimed at making such conflicts of interest for advisors illegal in order
to address this complex problem. The Coalition have wound back Labor’s
changes and have provided not one defensible reason for doing so.
Compliance costs and red tape have actually increased, so that cannot be
used as the excuse. Meanwhile, we allow the banks to continue to profit
from ripping off their customers.
The same is at play when you
examine climate policy. You can't find an independent economist who
thinks the government’s "direct action" plan for tackling climate change
is more efficient or effective than a carbon tax or trading scheme. Who
likes direct action? The polluters of course. Instead of paying to
pollute, they get paid not to pollute. Here's the real con: one argument
we are given is that the carbon tax was too big a burden on consumers.
Who's going to pay the polluters to reduce pollution? The government.
Where do they get the money? From all of us. Consumers pay anyway.
The
clarity of these examples reveals the sad reality of this government.
They are not ideologues, they are just puppets dancing to the tune of
those pulling their strings.
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