tag:theconversation.com,2011:/fr/topics/peter-costello-5407/articlesPeter Costello – The Conversation2023-09-21T06:47:52Ztag:theconversation.com,2011:article/2140682023-09-21T06:47:52Z2023-09-21T06:47:52ZView from The Hill: Josh Frydenberg puts political ambition aside to remain in business<p>Former Treasurer Josh Frydenberg’s decision to put a business future before an attempted political revival is a blow for the Liberal Party, but a relief for the teal member for Kooyong, Monique Ryan. </p>
<p>Opposition Leader Peter Dutton might regard his former colleague’s decision with mixed feelings. Frydenberg would probably have increased the chance of the Liberals regaining Kooyong in 2025. </p>
<p>But if elected, Frydenberg would have become an obvious choice for party leader (on the very reasonable assumption the Coalition was still in opposition). More immediately, speculation about that prospect would have dogged Dutton in the run-up to the next election.</p>
<p>For Frydenberg, this must be a bittersweet moment. As he said in a note to Kooyong branch members, telling them he wouldn’t be seeking preselection, “It is a difficult decision and one I have been weighing up for some time”.</p>
<p>His aspiration to be prime minister has been long-standing, strong and obvious. He was indefatigable as treasurer, a quality shared by his successor Jim Chalmers, who also aspires to the top job. But business gives him a bright, lucrative, family-friendly future, without the pressures and uncertainties that politics bring. </p>
<p>Anyway, winning back Kooyong (which Frydenberg held from 2010-22) would have been no shoo-in. Ryan is regarded as more vulnerable than some of the other teals, but the demographics of the seat have been changing and there is a boundary redistribution to come. </p>
<p>After joining Goldman Sachs following his defeat, Frydenberg will now become chairman of the investment bank in Australia and New Zealand. </p>
<p>The firm said: </p>
<blockquote>
<p>In this role, Josh will focus on further deepening and strengthening client coverage across the A/NZ region. He will continue to offer advice on economic and geopolitical issues as the firm’s senior regional advisor for Asia Pacific.</p>
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<p>While it’s possible Frydenberg, 52, might consider running in the election after next – and he hasn’t closed off that option – it would seem unlikely. </p>
<p>The 2025 election was the logical time to try for a comeback. A term on and much water will have gone under the bridge – in his own life and in politics. The Liberal line-up would be different, the road to leadership potentially harder. Perhaps the fight in Kooyong (or some other seat, if that were back in Liberal hands) would be more difficult.</p>
<p>Frydenberg became of a victim of the teal wave. He had stuck very close to former Prime Minister Scott Morrison: loyalty is an admirable character trait but not always a political advantage. </p>
<p>If he, rather than Morrison, had led into the last election, the Coalition might have done better; on the other hand, a leadership change carries its own costs. In any case, it was never on the cards. </p>
<p>Frydenberg, a conservative who became more centrist as time went on, was treasurer in extraordinary circumstances, confronting the economic challenges and demands imposed by the pandemic. He oversaw the wage subsidy JobKeeper program that, while it had its flaws which have seemed more significant in retrospect, was critical to keeping many businesses and workers afloat. </p>
<p>Independent economist Chris Richardson says JobKeeper “wasn’t perfect but it was bloody beautiful”. He praises Frydenberg’s COVID performance, saying, </p>
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<p>The key thing was to make the wheels of government move faster than they had ever moved before. I give him high marks for that. </p>
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<p>Another independent economist, Saul Eslake, agrees Frydenberg did a good job during COVID, with the only serious mistake being in some of the detail of JobKeeper.</p>
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<p>He was right to throw overboard all the Coalition rhetoric about debt and deficit. He was honest, thoughtful and consultative. </p>
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<p>Morrison, Eslake says, was a “huge handicap” because he was not an effective communicator of economic ideas, “in contrast to the prime ministers who backed Paul Keating and Peter Costello, the two most successful treasurers of recent history”. </p>
<p>But for the pandemic, Frydenberg would have seen the budget back in black. That achievement now belongs to Chalmers, who is savouring the moment.</p><img src="https://counter.theconversation.com/content/214068/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While it’s possible Frydenberg, 52, might consider running in the election after next, it would seem unlikely. The 2025 election was the logical time to try for a comeback bidMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1515762020-12-31T20:19:58Z2020-12-31T20:19:58ZCabinet papers 2000: the Coalition before climate denialism, but on the path to offshore detention<figure><img src="https://images.theconversation.com/files/376059/original/file-20201220-15-jsysuy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>Australian Cabinet papers from 2000, released today, reflect a relatively quiescent Australia where Islamic militancy and offshore detention were barely glimpses on the horizon, and climate science denialism was not a factor in cabinet considerations at all. </p>
<p>It was the year before the “<a href="https://insidestory.org.au/the-year-of-living-anxiously/">year that changed everything</a>”: 2001, when <a href="https://www.reuters.com/news/picture/defining-images-from-the-9-11-attacks-idUSRTS2Q0UX">Al-Qaeda attacked the United States on September 11</a>, and the Howard government created its “<a href="https://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/bn/2012-2013/pacificsolution">Pacific Solution</a>” asylum-seeker deterrent. They would both become prisms through which Australian politics would be refracted for many years to come.</p>
<p>In contrast, in 2000, <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=ZD4">John Howard</a> (prime minister 1996-2007) later mused, “we had no conception of the challenges which would engulf the world in the next few years”.</p>
<p>The government’s concerns half-way through its second term, with a 14-seat majority, were overwhelmingly domestic. The approach to global issues mostly prioritised local implications over international obligations. </p>
<h2>Minchin throws a stick in the wheel of an ETS</h2>
<p>On climate change, the papers reveal a working consensus among cabinet ministers, with one exception, that an emissions trading scheme (ETS) was not only a possible but a likely route by which Australia would eventually fulfil its international environmental obligations.</p>
<p>The market-based nature and sectoral neutrality of an ETS made it the quality choice, cabinet submissions and departmental co-ordination comments make clear. The papers show early work being done on an ETS within the government. </p>
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<img alt="" src="https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=513&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=513&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=513&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=645&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=645&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376060/original/file-20201220-15-1u1fz3o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=645&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Senator Nick Minchin stood alone in his objection to an ETS to tackle climate change.</span>
<span class="attribution"><span class="source">Alan Porritt/AAP</span></span>
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<p>Industry and Resources Minister Nick Minchin stood out against the ETS consensus. Advocating a massive expansion of the gas industry, Minchin pushed for compensation for carbon-intensive industries so large and across so many sectors that it would have massively blunted an ETS’s impact. This drew sharp adverse comments from across the key departments. </p>
<p>Treasurer Peter Costello and his department supported expansion of the gas industry, but drew the line at Minchin’s proposed emasculation of a future ETS. Costello would unsuccessfully bring an ETS proposal to cabinet three years later, in 2003. Howard announced one in the lead-up the 2007 election. </p>
<p>So the 2000 papers contain foundational documents at the heart of this policy arc. They show Minchin as central in swerving cabinet from its consensus ETS support in 2000, to hostility by the time he helped install Tony Abbott as Liberal opposition leader in 2009.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/bushfires-wont-change-climate-policy-overnight-but-morrison-can-shift-the-coalition-without-losing-face-129354">Bushfires won't change climate policy overnight. But Morrison can shift the Coalition without losing face</a>
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<h2>The GST takes flight</h2>
<p>Costello’s implementation of the <a href="https://treasury.gov.au/sites/default/files/2019-03/Whitepaper.pdf">goods and services tax (GST)</a> was the centre of heavy cabinet deliberations ahead of its implementation on July 1 2000.</p>
<p>It was the culmination of a textbook exercise in conceiving, publicly advocating for and then successfully implementing a major, complex public policy – an object lesson for governments today. </p>
<p>It begs the question whether, had the Coalition won the 2007 election, an ETS might now be an unremarked-upon aspect of public finance in Australia too, just like the once controversial GST.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/S-DrA4gnuFA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
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<p>Rural and regional Australia was a major focus, with cabinet submissions generally including rural impact statements. </p>
<p>Howard benefited from a congenial relationship with the National Party leader and deputy prime minister, <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=4K4">John Anderson</a>. </p>
<p>Anderson was the best-educated Nationals leader since <a href="http://adb.anu.edu.au/biography/page-sir-earle-christmas-7941">Earle Page</a>. He was aligned with the National Farmers Federation (NFF) push for market-oriented policy over the old Country Party “deal-making” policy style, to which the Nationals later reverted. </p>
<p>Howard could count on Anderson’s support in cabinet. In exchange, Anderson ran a massive infrastructure program bringing concrete benefits to the bush and regions and kept its voters welded to the Coalition.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=435&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=435&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=435&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=546&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=546&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376061/original/file-20201220-13-n7xg18.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=546&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Howard had a strong relationship with Nationals leader John Anderson (right), which offered advantages to both men.</span>
<span class="attribution"><span class="source">AAP/Alan Porritt</span></span>
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</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/cabinet-papers-1998-99-how-the-gst-became-unstoppable-128844">Cabinet papers 1998-99: how the GST became unstoppable</a>
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<h2>On many issues, little has changed in 20 years</h2>
<p>Women are barely mentioned in the papers and were almost non-existent in Howard government decision-making. There was only one woman in the 17 strong cabinet: the family and community services minister, <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=BE4">Senator Jocelyn Newman</a>. </p>
<p>In the outer ministry, the aged care minister, <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=SE4">Bronwyn Bishop</a>, came under pressure when it emerged <a href="https://www.theage.com.au/national/kerosene-bath-nurses-banned-20020329-gdu35d.html">residents at Riverside Home in Melbourne were being subjected to kerosene baths</a>, with lethal consequences. Problems in other aged care homes quickly emerged.</p>
<p>Bishop’s cabinet submission in the wake of the crisis trumpeted the government’s Aged Care Act 1997 as “the basis for a sound and sustainable aged care system” and “the most significant change for the industry in its history”.</p>
<p>There was no need to restore nursing ratios, she argued. A “return to ratios would return the industry to detailed input regulation and reduce its efficiency” the submission, which cabinet backed, said.</p>
<p>Indigenous Australians are little mentioned other than in relation to workforce disadvantage and the Northern Territory’s move to mandatory detention for minors.</p>
<p>Cabinet supported only a fraction of the assistance requested by Aboriginal and Torres Strait Islander Affairs Minister <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=VW4">John Herron</a> to address deep and worsening Indigenous unemployment.</p>
<p>The government decided not to override the NT government’s mandatory detention move. Instead, it asked Attorney-General <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=7V5">Daryl Williams</a> to write to his NT counterpart about its concerns. A week later, cabinet was outraged when it found a United Nations committee investigating potential human rights breaches in Australia against Indigenous citizens, without consultation.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=498&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=498&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376063/original/file-20201220-13-o4dtrb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=498&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Indigenous Australians receive little mention in the 2000 cabinet papers.</span>
<span class="attribution"><span class="source">AAP/Marianna Massey</span></span>
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</figure>
<p>What the 2000 cabinet papers reveal concerning the growing issue of unauthorised boat arrivals in Australia, and in particular the “deterrent” approach Immigration and Multicultural Affairs Minister <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=0J4">Philip Ruddock</a> recommended, and cabinet adopted, is historically significant. </p>
<p>They show a government under increasing pressure and moving quickly down a particular path. Departmental comments show this rang increasingly loud alarm bells in the major departments, even as they broadly supported the “deterrent” approach. </p>
<p>There are, and likely always will be, different opinions about the deterrent strategy, and public discussion usually turns on the binary question of whether it was right or wrong.</p>
<p>The 2000 papers are important, not least because they open up critical additional questions, even for its supporters, about whether this strategy could have been implemented differently and better.</p>
<p>Anglosphere politics had begun to make a particular kind of shift to the right, and the Howard government was in the vanguard. It was still relatively early days in that shift, as the fact the government had a cabinet position that included “multicultural affairs” in its title attests.</p>
<p>To put this shift into international context, media mogul Rupert Murdoch would not appoint Roger Ailes CEO of his Fox News channel in the United States until the following year.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1019&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1019&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1019&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1280&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1280&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376062/original/file-20201220-57963-z5xrgn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1280&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Pauline Hanson’s arrival in Canberra in 1996 marked a shift to explicitly nativist politics in Australia.</span>
<span class="attribution"><span class="source">AAP/Alan Porritt</span></span>
</figcaption>
</figure>
<p>Australia’s insurgency of explicitly nativist politics was marked by the arrival in Canberra in 1996 of One Nation’s <a href="https://www.aph.gov.au/Senators_and_Members/Parliamentarian?MPID=BK6">Pauline Hanson</a> as the member for Oxley. Internationally, this wave may have peaked in the election of another nativist redhead, US President Donald Trump, 20 years later. </p>
<p>The fierce conduct of the “<a href="https://www.evatt.org.au/post/the-history-wars">history wars</a>” in Australia from the 1990s, the prominent role of <a href="https://theconversation.com/with-friends-like-these-just-how-close-are-the-liberal-party-and-ipa-60442">conservative think tanks</a> in it, and the early challenge and ongoing political consequences of unauthorised boat arrivals in Australia – which has only relatively recently emerged as an issue in Europe – make Australia an early example of a phenomenon that shifted mainstream conservative politics to a distinctly different place from that occupied before.</p>
<p>In 2000, elements of it were evident but not yet fully activated. The following year, from September 11, they would be supercharged.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/pauline-hanson-built-a-political-career-on-white-victimhood-and-brought-far-right-rhetoric-to-the-mainstream-134661">Pauline Hanson built a political career on white victimhood and brought far-right rhetoric to the mainstream</a>
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<p><em>Chris Wallace is the official historian for the 2000-2001 cabinet papers release from the National Archives of Australia. You can read her full essay on the 2000 papers <a href="https://www.naa.gov.au/explore-collection/cabinet/latest-cabinet-release">here</a>.</em></p><img src="https://counter.theconversation.com/content/151576/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Wallace has received funding from the Australian Research Council. </span></em></p>In the Howard government, there was near-consensus in Cabinet that an ETS was eventually likely. A spike in asylum-seeker arrivals stimulated the hard “deterrent’ strategy” that would morph into the “Pacific Solution” in 2001.Chris Wallace, Associate Professor, 50/50 By 2030 Foundation, Faculty of Business Government & Law, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1288442019-12-31T13:27:26Z2019-12-31T13:27:26ZCabinet papers 1998-99: how the GST became unstoppable<figure><img src="https://images.theconversation.com/files/307389/original/file-20191217-58321-l6ielv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">John Howard called an election a fortnight after announcing the GST on August 13 1998, which he only narrowly won.</span> <span class="attribution"><span class="source">National Archives of Australia</span></span></figcaption></figure><p>Twice the goods and services tax had been rejected, the first time by Labor, which came close to introducing something similar in <a href="https://www.smh.com.au/national/how-the-hawke-keating-team-unravelled-over-tax-20121231-2c2t8.html">1985</a> and then by the Australian electorate, which rejected the Coalition’s Fightback tax reform package in <a href="https://www.smh.com.au/politics/federal/the-fightback-lesson-how-politics-can-stymie-good-public-policy-20111225-1p9aq.html">1993</a>.</p>
<p>It had been recommended to the government by the <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/Background_Papers/bp9798/98bp01">Asprey Tax Review</a>, which reported to Prime Minister Gough Whitlam in 1975 after being set up by Prime Minister William McMahon in 1972. </p>
<p>By the end of the 1990s, there was a GST in almost every other developed country, including New Zealand, which had introduced it at 10% in 1986 and increased it to 12.5% in 1989.</p>
<p>The cabinet records for 1998 and 1999 released this morning by the National Archives don’t give us much of an idea about what made Prime Minister John Howard try one more time, within a year or so of being elected on a promise that there is “<a href="https://www.smh.com.au/opinion/lets-have-the-honest-truth-once-and-for-all-20040818-gdjkkl.html">no way a GST will ever be part of our policy</a>”.</p>
<p>“<a href="https://www.youtube.com/watch?v=ZNyYeyUeKSg">Never ever?</a>” the interviewer asked Howard. “Never ever. It’s dead. It was killed by voters at the last election,” Howard replied.</p>
<p>Some of the momentum came from a series of <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/Background_Papers/bp9798/98bp01">High Court decisions</a> in 1997 that made it illegal for Australia’s states to continue taxing petrol, alcohol and tobacco. </p>
<p>The Commonwealth had to step in. And according to cabinet historian Paul Strangio, who has reviewed the papers released this morning, part of it came from a feeling the government had lost its way, amid “rumblings about the security of the prime minister’s leadership”.</p>
<p>But the <a href="https://www.naa.gov.au/">papers</a> do give us a good idea of how the momentum became unstoppable. </p>
<p>Once Howard set up a taskforce in August 1997 and asked it to come up with a plan to cut income tax, introduce a broad-based indirect tax and reconfigure Commonwealth-state financial relations, he had a sense of direction.</p>
<p>He called an election a fortnight after announcing the GST on August 13 1998, which he only narrowly won.</p>
<p>His ministers found themselves sidelined, being reduced to offering suggestions for presentation, given that the direction of the policy was already public.</p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=682&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=682&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=682&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=857&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=857&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307337/original/file-20191217-187581-1sjc73c.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=857&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cabinet decisions JH1998/253.</span>
<span class="attribution"><a class="source" href="https://cdn.theconversation.com/static_files/files/820/32319235.pdf?1576550819">National Archives of Australia</a></span>
</figcaption>
</figure>
<hr>
<p>“Were there doubters in the cabinet? Of course there were,” Howard’s treasurer, Peter Costello, said today’s release. “But by that stage we had said several times we were doing it, there was no point in saying let’s not do it.” </p>
<blockquote>
<p>So I’d walk out of cabinet meetings with lists of suggestions, one goes on for several pages, instructing the treasurer to do better in explaining the role of the tax on this sector, do better on explaining the exemption for diesel fuel, it went on and on.</p>
</blockquote>
<p>Costello made history by presenting to the cabinet on PowerPoint, using slides that have long-since been lost. He also displayed computer modelling of the effect of every income group and family type of every proposed variation in rates and thresholds. He said:</p>
<blockquote>
<p>You’ll find one minute in there that says the treasurer presented a proposal for tax reform, which was adopted. That’s the minute of a meeting that went on for seven hours saying how every group would be in front or behind. I became the government’s PowerPoint guy. </p>
<p>As we were coming out of that cabinet meeting after seven hours I asked one of my senior colleagues, how do you think this is going to go? He said he didn’t know, but he liked the colours.</p>
</blockquote>
<p>The cabinet made a momentous and expensive decision; that on average no income group of family type would be made worse off. </p>
<p>It lifted pensions and other payments by 4% in order to “overcompensate”, and found itself overcompensating even more when fresh food was excluded from GST in order seal a deal with the Australian Democrats.</p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=681&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=681&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=681&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=856&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=856&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307351/original/file-20191217-164429-6ecc4n.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=856&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cabinet decisions JH1998/253.</span>
<span class="attribution"><a class="source" href="https://cdn.theconversation.com/static_files/files/820/32319235.pdf?1576550819">National Archives of Australia</a></span>
</figcaption>
</figure>
<hr>
<p>Costello had been determined to get the tax in by July 1 2000, just before the Sydney 2000 Olympics. This would allow him to tax hoards of overseas visitors, most of them from countries that already had goods and services taxes.</p>
<p>He admits to nervousness in the lead-up to the date when almost every price in Australia had to change, some coming down as higher wholesale taxes were revoked, and some going up by as much as 10% which was to be the new standard rate. By design, the GST was to be hidden from consumers, incorporated in new prices.</p>
<blockquote>
<p>I remember having having a meeting in the cabinet room. We called in (Chief Executives) Peter Bartels from Coles Myer and Roger Corbett from Woolworths. One of them I think it was Roger, said to me: ‘you are telling us to change one billion prices on June 30. One price at a minute to midnight, another on the stroke of midnight. How we do that?’ </p>
<p>I had never thought of it in those terms, I began to wonder whether it was a good idea. </p>
</blockquote>
<p>The GST created millions of tax collection points, making it far more complex than other attempts at reforming taxes such as the Rudd governments mining tax and the Gillard government’s carbon price.</p>
<p>Each had to be issued with an Australian Business Number.</p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=723&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=723&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=723&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=908&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=908&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307363/original/file-20191217-164409-1iubwr0.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=908&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cabinet decisions JH1998/253.</span>
<span class="attribution"><a class="source" href="https://cdn.theconversation.com/static_files/files/820/32319235.pdf?1576550819">National Archives of Australia</a></span>
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<hr>
<blockquote>
<p>We thought there were 800,000 businesses in Australia. By the time we finished, we had issued two million Australian Business Numbers, including many businesses that had never been known before. </p>
</blockquote>
<p>It didn’t go smoothly at first. Businesses, like the cabinet, were new to computerisation. But by the time Labor’s Kim Beazley was defeated in the 2001 election on a platform that included a “rollback” of the GST, it had come to be accepted as part of the Australian way of paying our way.</p>
<p>Costello’s biggest surprise is that it didn’t go up. It remains at 10%, in part because of a deal that <a href="https://www.smh.com.au/politics/federal/whatever-their-real-plan-coalition-could-increase-rate-of-gst-20130813-2rukk.html">lacks legal force</a> requiring every state to agree before it does. </p>
<p>He says he thought the deal would hold for a while because there would usually be a state going into an election that would veto an increase. He never thought it would hold for 20 years.</p>
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Read more:
<a href="https://theconversation.com/factcheck-is-the-gst-as-efficient-but-less-equitable-than-income-tax-45052">FactCheck: is the GST as efficient but less equitable than income tax?</a>
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<p>Today’s release of archival documents contains lessons for Howard and Costello’s successors. One is that over time, almost any change will come to be accepted as normal. In the language of tax veterans, and “old tax is a good tax”. </p>
<p>It’s what Costello’s predecessor Paul Keating discovered when he introduced the capital gains tax and the fringe benefits tax. After a while, they become normal.</p>
<p>The other lesson is that it pays to buy off likely losers. It also pays to bring in a change that at first loses more than it brings in. Overcompensation is expensive, but if the change is a good one, it can be worthwhile.</p>
<p>It sometimes isn’t enough, though, as Gillard discovered when she brought in the carbon price and overcompensated almost everybody. </p>
<p>Another secret ingredient might have been the broad support from groups that were normally opposed. </p>
<p>Business backed it as a way of getting taxes off incomes and the welfare lobby backed it as a guaranteed stream of money the government could use to provide social services.</p>
<p>It’s an agreement about means, if not ends, that doesn’t come along often.</p><img src="https://counter.theconversation.com/content/128844/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The introduction of the GST got off to a wobbly start, but has since become accepted as the Australian way of paying for things.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1072732018-12-31T21:08:22Z2018-12-31T21:08:22Z1996-1997 cabinet papers show how Howard and Costello faced a budget black hole<figure><img src="https://images.theconversation.com/files/251664/original/file-20181220-45385-17exejd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The newly sworn-in Howard ministry in March 1996.</span> <span class="attribution"><span class="source">National Archives of Australia</span></span></figcaption></figure><p>On the morning of Monday, March 4 1996, the young treasurer in the Howard government, Peter Costello, and his press secretary, Tony Smith – now the speaker of the House of Representatives – took an Ansett flight from Melbourne to Sydney for their first departmental briefing. The treasury secretary, Ted Evans, who had initially asked to see Costello privately, offered his resignation in light of the change of government. Costello assured Evans he wanted him to stay on. </p>
<p>Once the meeting began, Evans had some startling news for his new boss. The budget had an underlying deficit of about A$9 billion. “Costello appeared genuinely shocked”, <a href="https://catalogue.nla.gov.au/Record/2585991">his biographer</a>, Shaun Carney, has reported. The size of the deficit probably did take him by surprise, even if the existence of a deficit of some kind did not. John Howard recalls that he had wind of it before his <a href="http://www.nma.gov.au/explore/features/prime-ministers/john-howard">March 2 election victory</a>.</p>
<p>A submission released today by the National Archives of Australia in its 1996-1997 cabinet records sets out the nature and scale of the problem that the new government saw as its most serious during its first term. But problem would become opportunity. In his autobiography, <a href="https://www.harpercollins.com.au/9780730499640/">Lazarus Rising</a>, Howard would call the 1996 budget “the most important of all budgets” delivered during his almost 12 years in government, as well as “the best and bravest in 25 years”.</p>
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Read more:
<a href="https://theconversation.com/an-evening-with-the-treasurer-how-governments-belt-out-budget-hits-and-hope-someone-is-listening-95929">An evening with the treasurer: how governments belt out budget hits and hope someone is listening</a>
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<p>Howard is hardly a disinterested party. Nonetheless, there is a persuasive strand of opinion among commentators that the fiscal decisions taken in 1996, while creating political pain for the government and economic pain for voters, were foundational for Howard and Costello.</p>
<p>Some have credited this early decision-making for Australia’s economic resilience in the face of turbulent global winds: the <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/CIB9798/98cib23">Asian financial crisis</a>, the <a href="https://www.businessinsider.com.au/heres-why-the-dot-com-bubble-began-and-why-it-popped-2010-12">bursting of the dot-com bubble</a>, even the <a href="https://www.rba.gov.au/education/resources/explainers/the-global-financial-crisis.html">global financial crisis</a>.</p>
<p>The cabinet submission of March 18 1996 predicted economic growth of 3.75% for 1995-96 and 1996-97, on the back of improved performance from the farm sector as the drought ended. Weak demand was likely cyclical, a “temporary slowdown of the type which often occurs at this stage of the business cycle and that growth should strengthen in subsequent quarters”, as business investment again took off. </p>
<p>Howard’s <a href="https://trove.nla.gov.au/newspaper/article/133336005?searchTerm=five%20minutes%20of%20economic%20sunlight%20John%20Howard">quip</a> from opposition in 1995 – that the recovering economy was “five minutes of economic sunlight” – was effective politics. But it was not supported by the new government’s own records, which referred to a “generally favourable outlook”.</p>
<p>Compared with the skyrocketing interest rates and then the recession the Hawke and Keating governments faced in the early 1990s (or the recession the Hawke government inherited in 1983), these were happy days. </p>
<p>However, unemployment remained high at well over 8% and was projected to stay there in the following year. </p>
<p>The government was also concerned about the drag on economic performance of continuing budget deficits and rising government debt. This was running down national savings, undermining investment and worsening Australia’s current account deficit – the difference between the value of imports and exports of goods, services and capital.</p>
<p>Costello committed the government to reducing the underlying deficit of 3.5% of gross domestic product to 0.5% over three years, thereby reducing public sector lending, relieving pressure on the current account deficit, and returning the budget to a structural surplus. The government rejected the idea of a single massive cut of A$8 billion in the 1996 budget as running the risk “of knocking the economy off course”. It therefore committed to cuts of A$4 billion in each of the budgets of 1996 and 1997, with an eye to less pain in the 1998 budget leading up to an election.</p>
<p>With defence spending quarantined from the cuts, the August 1996 budget was indeed a tough one. The usual suspects – health, welfare, the public service and tertiary education – bore much of the load. Nonetheless, the government’s own polling suggested most voters thought its measures “tough but fair”, dispensing necessary if bitter medicine.</p>
<p>Howard remarked at the December launch of the latest cabinet records release that the government applied to the budget a “fair go” test, although he would ultimately bear pain for his too-clever distinction between “core” and “non-core” election promises.</p>
<p>Tony Abbott was a young parliamentary secretary in 1996, on his way up but still some way from the real levers of power. By 2013, however, he had his own government and with his treasurer, Joe Hockey, faced the problem of framing his first budget.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/251663/original/file-20181219-45385-31p8vp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The 1996 effort would have provided a strong clue for Tony Abbott and Joe Hockey to frame their first budget after their 2013 election win.</span>
<span class="attribution"><span class="source">AAP/Lukas Coch</span></span>
</figcaption>
</figure>
<p>The 1996 effort would have been a powerful precedent for a new Coalition government in 2013 and, at a superficial level, the Abbott government did many similar things. As Howard and Costello had done, it established a <a href="https://www.ncoa.gov.au/">National Commission of Audit</a>.</p>
<p>Costello had complained of the <a href="http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=speeches/2006/008.htm&pageID=005&min=phc&Year=2006&DocType=1">“Beazley black hole”</a> – the deficit bequeathed by Labor’s finance minister, Kim Beazley. Conveniently for the government, he was also the new opposition leader. The phrase lived on as a way of reminding electors of the Labor Party’s weaknesses in economic management and the Coalition’s achievements and strengths. </p>
<p>In 2014, Abbott and Hockey spoke of a <a href="https://www.smh.com.au/politics/federal/what-budget-emergency-abbott-government-ministers-ditch-doom-and-gloom-talk-20150302-13soit.html">“budget emergency”</a>. But whereas the public seems to have bought the “black hole” image – although <a href="https://www.newsouthbooks.com.au/books/howard-government/">described recently</a> by economist Warwick McKibbin as more like a temporary “pothole” – voters appear to have regarded the Abbott government’s “budget emergency” as invented.</p>
<p>One reason for this failure ironically lies in legislative changes that Costello announced at the very time he drew public attention to the black hole. This was the <a href="https://www.finance.gov.au/publications/charter-of-budget-honesty-policy-costing-guidelines%3F%3D1/">Charter of Budget Honesty</a>, which mandated more rigorous reporting on the national finances, including the alphabet soup of MYEFO (Mid-Year Economic and Fiscal Outlook) and PEEFO (Pre-Election Economic and Fiscal Outlook), as well as five-yearly intergenerational reports. </p>
<p>These initiatives, which a Costello cabinet submission of August 2 1996 said were intended to promote “responsible fiscal management”, made it well nigh impossible to spring the surprise of a large deficit on an unsuspecting public and successor.</p>
<p>Unlike Hawke and Keating in 1983, and Howard and Costello in 1996, Abbott and Hockey could not stoke panic to implement unpopular measures and back out of difficult election commitments. The Charter of Budget Honesty meant they could not claim to have been blind-sided by an unanticipated budget deficit.</p>
<p>Howard and Costello also faced a much more helpful set of parliamentary numbers than their Coalition successor. With a massive 94 seats in a House of 148, they had political capital to burn. While few imagined the government would last almost 12 years, equally few considered it could be defeated after one term. </p>
<p>But it is in the Senate that the differences between 1996 and 2014 become clearer. There, the Howard government held 37 seats in a chamber of 76. After the defection of disgruntled Labor senator Mal Colston in August 1996, the government could get its legislation passed without the support of the Australian Democrats if it had Colston and the other independent senator, Brian Harradine, on side.</p>
<p>By way of contrast, the Abbott government faced a Senate cross bench of considerable complexity and diversity. And, as Howard has remarked, dealing with the Australian Democrats was notably easier for a Coalition government than getting Greens support.</p>
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Read more:
<a href="https://theconversation.com/grattan-on-friday-budget-blues-as-government-reels-under-the-blows-27081">Grattan on Friday: Budget blues as government reels under the blows</a>
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<p>In 1996, Howard and Costello got the politics right. They still paid a political price, but it did not prove fatal. <a href="https://www.newsouthbooks.com.au/books/howard-government/">McKibbin argues</a> that <a href="https://www.abc.net.au/news/2014-05-20/john-howard-introduces-the-gst-2000/5464730">the introduction of a GST in 2000</a> was made easier by the reduction of government outlays and the elimination of the budget deficit in the government’s first term.</p>
<p>By dealing with spending in 1996, the government was able to turn its attention to revenue and taxation in a more favourable fiscal environment for politically difficult reform.</p>
<p>The image remains: as they contemplated their own horror budget, Joe Hockey and Mathias Cormann <a href="https://www.smh.com.au/politics/federal/treasurer-joe-hockey-and-finance-minister-mathias-cormann-pictured-smoking-cigars-ahead-of-tough-budget-20140509-zr8i3.html">relaxed with cigars</a>. Trivial in itself, this clumsiness epitomised the Abbott government’s muddled budget politics.</p>
<p>In 2014, after decades of strong economic performance, few believed that the drastic measures the Abbott government proposed in 2014 were either necessary or fair. Hockey declared <a href="https://www.smh.com.au/national/the-end-of-the-age-of-entitlement-20120419-1x8vj.html">the “age of entitlement” over</a>, but voters suspected this did not extend to politicians or their friends.</p>
<p>The contentious measures in the <a href="https://theconversation.com/federal-budget-deficit-climbs-to-40-4bn-experts-react-35481">2014 budget</a> – such as the Medicare co-payment and the winding back of unemployment benefits – did not pass Howard’s “fair go” test.</p>
<p>But the tough spending cuts Costello announced in 1996, while hardly provoking an outbreak of national joy, were an early taste of the professionalism and toughness that he and Howard brought to their long years at the helm.</p><img src="https://counter.theconversation.com/content/107273/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frank Bongiorno does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The latest release from the National Archives reveals how the Howard government managed a budget deficit, and presents a striking contrast with the Abbott government’s framing of the 2013 budget.Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/959292018-05-07T20:18:18Z2018-05-07T20:18:18ZAn evening with the treasurer: how governments belt out budget hits and hope someone is listening<figure><img src="https://images.theconversation.com/files/217873/original/file-20180507-166887-1q5sby7.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Emil Jeyaratnam/AAP/Shutterstock.com</span></span></figcaption></figure><p>Governments, these days, tend to put a lot of political eggs in the budget basket. But this was not always so. The economic historian, Boris Schedvin, reported that the budget speeches of the treasurer for much of the 1920s, Earle Page, “read more like a chairman’s address to the annual meeting of a large public company than the nation’s principal document on economic policy”. Dull as ditchwater and full of facts and figures, issues of policy were effectively obscured.</p>
<p>The rising importance of the federal government as macroeconomic manager provided the budget with greater status and importance – not least as a projection of the image and priorities of the government. Another economic historian, Alex Millmow, has suggested that the <a href="https://treasury.gov.au/publication/economic-roundup-issue-2-2011/economic-roundup-issue-2-2011/percy-spender-an-early-keynesian/">November 30 1939 revised budget</a>, delivered by acting treasurer Percy Spender in the early months of the second world war, was the country’s very first Keynesian budget.</p>
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Read more:
<a href="https://theconversation.com/budget-policy-check-does-australia-need-personal-income-tax-cuts-94500">Budget policy check: does Australia need personal income tax cuts?</a>
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<p>Some budgets lived on in legend decades after being delivered. Arthur Fadden’s <a href="https://treasury.gov.au/publication/economic-roundup-issue-4-2011/economic-roundup-issue-4-2011/arthur-fadden-treasurer-in-a-golden-age/">1951 budget</a> – designed to deal with runaway inflation – is recalled as “the horror budget”. Perhaps it endured in memory because it turned out to be an aberration in an age of rising affluence. What followed was 20 years of remarkable prosperity, with just a brief blip in the early 1960s.</p>
<p>Budgets are sometimes remembered with a degree of irony. There is no shortage of irony in the responsible budget delivered by new treasurer Bill Hayden in 1975 being the one that the coalition would block in the Senate and use to bring down the Whitlam government, before then relying on that very same budget in its first year in office.</p>
<p>Some historians now recognise in the <a href="http://www.naa.gov.au/Images/economy-1_tcm16-45403.pdf">1975 budget</a> the first hints of “<a href="http://www.uq.edu.au/economics/johnquiggin/JournalArticles99/econrat99.html">economic rationalism</a>”; Hayden’s budget prefigured the more cautious fiscal approach of Labor during the Hawke era. I’ve previously described it as “the granddaddy of pretty much every federal budget ever since”.</p>
<p>The budget of the Hawke era that is best remembered, Paul Keating’s “bring home the bacon” <a href="https://www.sbs.com.au/news/this-was-the-year-to-bring-home-the-bacon">budget of 1988</a>, with its delivery of a surplus, also comes with a large dose of retrospective irony – because what came next was the worst recession in Australian history since the 1930s. That budget can all too easily be seen as a marker of hubris; it is the older sibling of “the recession we had to have”.</p>
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<p>The 1980 budget is recalled because it was <a href="https://theconversation.com/the-art-of-the-leak-how-the-budget-is-strategically-doled-out-for-maximum-effect-77157">leaked to journalist Laurie Oakes</a>, but who can now recall what was actually in it? It was not the first time a budget had been leaked to a journalist, either. Fadden disclosed key details of the 1954 papers to a young press gallery journalist, Hal Myers. But The Sydney Morning Herald boss, Rupert “Rags” Henderson, refused to print them as the lead story, believing such a leak too good to be true. </p>
<p>Governments, early in their term, look to a budget to define their identity, fulfil some election promises while throwing others overboard, and register their seriousness of purpose in tackling the failings of an invariably hopeless and profligate predecessor. John Howard and Peter Costello did this with <a href="https://www.theaustralian.com.au/opinion/coalition-fixed-the-budget-in-1996-it-can-be-done-again/news-story/fdda6cd495e81fa572534d33d91b6704">brutal success in 1996</a>; Tony Abbott and Joe Hockey perpetrated a <a href="https://theconversation.com/federal-budget-2014-the-days-of-borrow-and-spend-must-come-to-an-end-26627">political disaster in 2014</a> on a scale of miscalculation comparable with Ben Chifley’s decision to nationalise the banks in 1947. </p>
<p>Faltering governments – and we have one of those at present – look to a budget to rescue them as they approach an election. They hope for a budget “bounce”. That might involve hand-outs to key constituents. </p>
<p>Sometimes – like Howard and Costello in 2001 – they get their bounce. On other occasions – like Howard and Costello in 2007 – they don’t; or at least not enough of a bounce to turn around a lengthy bad run in the polls and stop an opposition with the wind in its sails.</p>
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Read more:
<a href="https://theconversation.com/the-art-of-the-leak-how-the-budget-is-strategically-doled-out-for-maximum-effect-77157">The art of the leak: how the budget is strategically doled out for maximum effect</a>
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<p>Malcolm Turnbull and Scott Morrison will this week, of course, be hoping for a reprise of 2001 rather than 2007. Being a historian rather than a prophet, I hesitate to venture my opinion of what they’ll get, but it’s at least debatable whether the budget boost alone – combined with the other concessions that the government of the day rolled out – would have been sufficient to get Howard over the line against Kim Beazley in 2001 without Tampa and 9/11. The <a href="https://researchdata.ands.org.au/australian-election-study-survey-2001/14139">Australian Election Study of the time</a> certainly pointed to the significance of national security as an issue for voters. </p>
<p>The present government is helped by a healthier flow of revenue than any recent government has enjoyed, which should allow some electorally strategic spending. The policy concern must be that a short-term improvement in government revenues gives rise to commitments that are unsustainable and become a burden down the track, rather as the Howard government’s mining boom-funded hand-outs did in the early years of this century.</p>
<p>It is also perhaps rather late in the day for the government to be able to recraft for itself an appealing image via a budget. That said, even the most battered, jaded, drug-addled rock star can make a comeback and play a few of the old hits for the entertainment of an ageing fan base. Whether that comeback is worth the price of admission is, of course, another matter entirely.</p><img src="https://counter.theconversation.com/content/95929/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frank Bongiorno does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some have set the course for electoral victory, others have tanked. In any case, federal budgets are important moments in the life of governments – especially those that are a little wobbly.Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/414942015-05-14T20:02:30Z2015-05-14T20:02:30ZThree missing letters say it all about Hockey’s budget pitch<p>Call me old-fashioned, but if there’s one phrase I like to hear in a federal budget speech it’s “GDP”. I don’t mind if it’s the abbreviation, or the full monty: Gross Domestic Product.</p>
<p>Hockey is the first treasurer since at least 1981 not to use this crucial measure in an annual budget speech. He may well be the first Australian treasurer since <a href="http://www.amazon.com/GDP-Brief-but-Affectionate-History/dp/0691156794">GDP was invented in the 1940s</a> not to need the expression in <a href="http://www.budget.gov.au/2015-16/content/speech/html/speech.htm">his speech</a>; my collection of federal budget speeches only goes back to 1981, when John Howard was treasurer.</p>
<h2>The budget speech should tell us about the economy</h2>
<p>So how is it that Treasurer Hockey didn’t, anywhere in his speech, utter the term “GDP”? And should anyone care?</p>
<p>As Diane Coyle writes in her book, <a href="http://www.amazon.com/GDP-Brief-but-Affectionate-History/dp/0691156794">GDP: A Brief but Affectionate History</a>, GDP is “a made-up entity”, which is “artificial, complicated, and abstract”.</p>
<p>But it has also become the standard way we “measure or compare how well or badly countries are doing”. GDP indicates, however imperfectly, “innovation and human possibility”.</p>
<p>Its absence in a federal budget speech is telling, if not alarming. Hockey’s two budget speeches so far have lacked something that all his predecessors, however partisan, have deemed an essential part of the budget speech: a distinct statement of economic outlook or forecast.</p>
<p>Typically a forecast, based on Treasury advice, would set out the rate of growth of our GDP, the best guess about what was going to happen to rates of inflation and unemployment, predictions about our terms of trade, and so on. </p>
<p>Hockey’s speech made only vague and disparate references to the standard measures of the health of the economy. <a href="http://www.budget.gov.au/2014-15/content/speech/html/speech.htm">Last year’s speech</a> (which mentioned GDP once, but only to boast about a rise in defence spending) was even thinner with respect to these key measures.</p>
<p><a href="https://theconversation.com/in-government-a-mantra-is-not-enough-to-control-the-narrative-26827">Last year I wrote</a> that the absence of an economic forecast was a rhetorical lost opportunity for Hockey. By bypassing this standard ritual, I suggested he lost a certain gravitas that befits the role of federal treasurer. But this year I’ve taken umbrage.</p>
<p>I take politicians’ public rhetoric seriously. Rome’s greatest orator, <a href="http://en.wikipedia.org/wiki/Cicero">Cicero</a>, understood that rhetoric can be used for good or for ill. Which is precisely why political oratory must be examined and critiqued.</p>
<p>In the narratives around our annual budget, billions of our tax dollars are at stake, and theories and ideas about what the economy is and how it is best managed – and in whose interests – are made manifest.</p>
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<figcaption><span class="caption">Keynes versus Hayek, in rap.</span></figcaption>
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<h2>A rhetorical reversal from the first budget</h2>
<p>As the budget speech has become a more public performance, it increasingly tells “the Australian people” what the government thinks of us. And Hockey thinks we either don’t want, or don’t need, the cold hard facts of how we are travelling. </p>
<p>The absence of the traditional measures of economic performance, as complex and flawed as they are, set Hockey free for the complete rhetorical reversal from his first budget speech.</p>
<p>In 2014, Hockey recycled the “debt and deficit” meme, so loved by the Coalition that Ross Gittens <a href="http://www.smh.com.au/business/and-with-a-wave-of-the-wand-debt-disappears-20101126-18at6">gave it the patronym “Costelloism”</a>, and defined it as the belief that all public debt is bad.</p>
<p>As I found in <a href="http://www.tandfonline.com/doi/abs/10.1080/10361146.2015.1034237?journalCode=cajp20&">a study of the budget speeches</a> of the two previous treasurers, for 12 years Costello was totally singular, and relentlessly partisan, <a href="http://www.tandfonline.com/doi/abs/10.1080/10361146.2015.1034237?journalCode=cajp20">in his budget rhetoric</a>. Costello created our “surplus fetish”, seen in its glory in the <a href="http://corpus.byu.edu/glowbe/">Global Corpus of Web English</a>, which sampled nearly 2 billion words of internet English from 20 different countries in December 2012. The frequency of “surplus” in our public discourse in Australia was off the chart by comparison to the other 19 countries sampled. </p>
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<a href="https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=348&fit=crop&dpr=1 600w, https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=348&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=348&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=437&fit=crop&dpr=1 754w, https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=437&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/81626/original/image-20150514-28586-1pjlusg.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=437&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">‘Surplus’ per million words in 20 countries, December 2012, via the Global Corpus of Web English.</span>
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<p>This surplus fetish had practical consequences. In Gittens’ view, it <a href="http://www.smh.com.au/business/and-with-a-wave-of-the-wand-debt-disappears-20101126-18at6">created an infrastructure deficit</a>.</p>
<p>Rhetorically, Costello could do as he pleased. As <a href="http://www.tandfonline.com/doi/abs/10.1080/10361140701320059">Professor Alan Fenna has argued</a>, the Howard government enjoyed “almost ideal conditions for governing that no party in power has experienced for decades”.</p>
<p>But if good economic management requires more than cooling your heels while the money rolls in, it became much more difficult in Swan’s time, and the task of selling the budget enormously more complex. Labor <a href="http://www.tandfonline.com/doi/full/10.1080/10361146.2013.837426">let the surplus bandwagon roll over it</a>.</p>
<p>Late in Swan’s period as treasurer he found his voice. And it is to his great credit that his speeches <a href="http://www.tandfonline.com/doi/abs/10.1080/10361146.2015.1034237?journalCode=cajp20&">were far less partisan</a> than either Costello’s or Paul Keating’s. In his budget speeches, he did not once blame his predecessors for any of the problems he faced. </p>
<p>Swan tried to balance direct and frank discussion of the state of the economy, with the need to maintain confidence and optimism. In opposition, the Coalition was unrelenting in its attacks on him.</p>
<h2>Words – and issues – missing in action</h2>
<p>Now Hockey is in the chair. And his 2015 speech has another innovation: he is the first treasurer to directly address “the Australian people”. He is not the first to say “you” – Costello was first to use the second person pronoun. But Hockey is the first to use it to address “the people” collectively.</p>
<p>There were other words and phrases I would have liked to hear Hockey say on budget night 2015. </p>
<p>It would have been great to hear him say “<a href="https://theconversation.com/mental-health-care-spending-saves-money-and-thats-worth-investing-in-40444">mental health</a>”. If he had, it would have been only the sixth time in 35 years that this expression had turned up in a budget speech. Ralph Willis used it first, in 1994. Peter Costello said it in three speeches (2000, 2001 and 2006) and Wayne Swan in two of his speeches (2011 and 2013).</p>
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<span class="caption">Education turns up only as a money-spinner in the economy.</span>
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<p>And, with the growing awareness of how many women and children are killed each year by their partners and fathers, it’s more than a great pity that Hockey didn’t think to include some reference to the scourge of <a href="https://theconversation.com/budget-brief-where-is-the-new-help-for-domestic-violence-41428">domestic violence</a>. </p>
<p>He would have been only the second treasurer since 1981 (quite possibly, the second ever) to raise this issue in a budget speech. Costello was the first.</p>
<p>Both mental health and domestic violence are surely a drag on the economy, even if you don’t care to consider their social costs – though it is not so unusual that the treasurer didn’t mention them. It seems we are going to need an even more concerted campaign to make mental health and family violence part of our national story about where we are, and where we are going.</p>
<p>There are no rules for how one should give a budget speech: it is only by dint of collective expectation that a genre of this kind takes shape. We need to collectively raise our expectations of the annual budget speech.</p>
<p>Big reforms and difficult problems require courageous public conversations. That is why Hockey’s abrupt shift in rhetoric from one budget to the next is worrying.</p><img src="https://counter.theconversation.com/content/41494/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Annabelle Lukin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A budget speech that fails to discuss basic measures of how the economy going is revealing in itself. Joe Hockey is the first treasurer since at least 1981 not to mention GDP.Annabelle Lukin, Senior Lecturer, Linguistics, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/403792015-04-17T01:37:25Z2015-04-17T01:37:25ZVIDEO: Michelle Grattan on Joe Hockey’s waning popularity<figure>
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<p>University of Canberra Acting Vice-Chancellor Professor Nicholas Klomp and Michelle Grattan discuss the week in politics including former treasurer Peter Costello’s criticism of Treasurer Joe Hockey’s handling of tax reform, the Prime Minister’s promise to get taxes down and the first COAG meeting for 2015.</p><img src="https://counter.theconversation.com/content/40379/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>University of Canberra Acting Vice-Chancellor Professor Nicholas Klomp and Michelle Grattan discuss the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/401642015-04-14T12:01:04Z2015-04-14T12:01:04ZWho thinks adults don’t fight over (tax) money?<figure><img src="https://images.theconversation.com/files/77878/original/image-20150414-24658-k8gt78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Peter Costello believes the Liberals are destroying their economic credentials. </span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>It’s no secret that Peter Costello doesn’t give a high mark to the Abbott government, and every now and then he uses his <a href="http://www.dailytelegraph.com.au/news/nsw/peter-costello-blasts-prime-minister-tony-abbott-over-taxation-says-coalition-promise-of-fairer-taxes-is-a-morbid-joke/story-fni0cx12-1227302508463%26memtype=registered#itm=newscomau%7Cfinance%7Cncam-story-body-link%7C2%7Chttp%3A%2F%2Fwww.dailytelegraph.com.au%2Fnews%2Fnsw%2Fpeter-costello-blasts-prime-minister-tony-abbott-over-taxation-says-coalition-promise-of-fairer-taxes-is-a-morbid-joke%2Fstory-fni0cx12-1227302508463%2526memtype%3Dregistered%7Cstory%7CCostello%20slams%20Abbott%26%238217%3Bs%20%26%238216%3Bjoke%26%238217%3B%20plan&itmt=1429012508129">column in News Corp</a> papers to call it out. The former treasurer understands how lethal his written bullets can be.</p>
<p>Costello on Tuesday waded into Treasurer Joe Hockey’s tax “conversation” to say the government’s discussion paper had talked about “lower, simpler, fairer” tax but had prompted a flood of demands for higher and more complicated taxes.</p>
<p>“‘Lower, simpler, fairer’ is looking like some kind of morbid joke,” he wrote.</p>
<p>He also emphasised the burden of bracket creep – there had been no adjustment to the tax thresholds for five years.</p>
<p>“The government needs to restart the conversation about getting taxes down, not up,” he said.</p>
<p>Costello is partly defending his own record: much of the current debate is critical of the generous superannuation concessions he put in place. But he also believes the Liberals are destroying their economic credentials.</p>
<p>Certainly it’s clear that the government doesn’t have much control over the tax “conversation”.</p>
<p>Unsurprisingly, the former treasurer gets under the skin of the present one (who knows he’ll forever suffer in the comparison). Joe Hockey responded from New York that people should “stop looking back to what it was and focus on the challenges of today and the challenges of tomorrow. No matter who they are, we’ve got to look to the future rather than longing for yesterday.”</p>
<p>And “I really wish I had the revenue coming into the budget that Peter Costello had”, he said. “If I had the same revenue as he had then I’d be getting $25 billion extra each year to be able to spend on things.”</p>
<p>There is no doubt the iron ore price fall has created a major revenue problem for the federal government - and for the state of Western Australia, which is also facing a cut in its GST share.</p>
<p>But, when it comes to winning sympathy, to an extent it’s a matter of what goes around comes around, in both Hockey’s case and that of WA.</p>
<p>Hockey didn’t cut the Labor any slack when it had to announce revenue revisions. And WA did very well out of the national tax pie in earlier times.</p>
<p>When Tony Abbott tells the states to be “adults” and sort out the stoush over WA’s GST share, he is apparently forgetting the joke about not getting between a premier and a bucket of money.</p>
<p>The other states are showing no sign of giving in to the anger of WA, which is contesting the recommendation from the independent Grants Commission.</p>
<p>Although Abbott and Hockey want WA accommodated the Prime Minister, who will discuss the row with state and territory leaders at the Council of Australian Governments this week, is reluctant to wear the odium of the federal government imposing a position. </p>
<p>“The states and territories really should sort this out amongst themselves,” he said on Tuesday. “It’s money that belongs collectively to them and collectively they should make a decision and being the grown-up adult governments that they are, that’s what I expect them to do.”</p>
<p>If it is up to the states alone, WA can expect to be voted down.</p>
<p>The other states argue that WA benefited for a long time under the Grants Commission’s recommendations and should accept the outcome when circumstances change.</p>
<p>As NSW Liberal Treasurer Gladys Berejiklian said on Tuesday: “The process needs to be respected. You simply can’t make exceptions which ultimately jeopardises the integrity of the process.”</p>
<p>Her point is backed by economic commentator Tim Colebatch who, <a href="http://insidestory.org.au/the-true-story-of-western-australia-and-the-gst">writing for Inside Story</a>, outlines the “good reasons for the apparent injustice” to WA.</p>
<p>“First, the rule Western Australia wants to change is the one that’s given it more than $7 billion over the past four years that would have gone to the other states if the GST money had been distributed in the way it now urges.</p>
<p>"Second, the system it wants to overthrow – in which the Commonwealth Grants Commission proposes how federal money should be split among the states, based on their relative needs – has subsidised Western Australia by tens of billions of dollars (in today’s money) over the decades, and that money has come from the taxpayers of New South Wales and Victoria.</p>
<p>"Third, Western Australia’s actions since 2011 suggest that once it saw that the system would begin working against its interests, it set about escalating the stakes to the point where the distribution of grants would seem manifestly unfair and the system would be scrapped.”</p>
<p>In light of this, wouldn’t other states be mugs to give in to WA?</p>
<p>Hockey’s line that the situation can be used to put pressure on WA to make reforms in areas such as shopping hours and assets sales doesn’t wash. Why should other states have to forfeit revenue to bribe WA to do what it should do anyway?</p>
<p>Abbott didn’t want to be drawn on what would happen if there were no consensus. When asked, Hockey’s office repeated what he said after the fractious meeting of treasurers last week. “The Treasurer is in consultation with the states and will make a determination after those consultations.”</p>
<p>The GST is not the only money matter premiers will have on their minds at COAG. There is the ongoing row over federal cuts in future health and education funding, which NSW plans to push. These cuts were flagged in last year’s budget.</p>
<p>Berejiklian says: “We have always said there are funding gaps in health and education over the medium to long term that we aren’t even close to fully funding, and we will continue to make it very clear that we want our fair share.”</p>
<p>NSW says that in health, at budget time last year its cumulative funding loss from the Commonwealth changes was estimated at around $16 billion per annum by 2050-51 (in 2014-15 dollars).</p>
<p>Whatever way you look at it, Friday’s COAG is likely to see a good deal of unco-operative federalism.</p>
<p><strong><a href="http://michellegrattan.podbean.com/e/ian-macfarlane/">Listen to the latest Politics with Michelle Grattan podcast, with Industry Minister Ian Macfarlane, talking the energy white paper, nuclear power and more, here.</a></strong></p>
<iframe id="audio_iframe" src="https://www.podbean.com/media/player/5jzw9-554621/initByJs/1/auto/1" width="100%" height="100" frameborder="0" scrolling="no"></iframe><img src="https://counter.theconversation.com/content/40164/count.gif" alt="The Conversation" width="1" height="1" />
It’s no secret that Peter Costello doesn’t give a high mark to the Abbott government, and every now and then he uses his column in News Corp papers to call it out.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/389002015-03-18T02:06:30Z2015-03-18T02:06:30ZMaking Australia Great despite themselves: PMs stake rival claims<figure><img src="https://images.theconversation.com/files/75164/original/image-20150318-2136-16ixcnt.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Journalist George Megalogenis takes an affectionate journey through the milieu of Australia’s economic reform in a new ABC documentary, Making Australia Great.</span> <span class="attribution"><a class="source" href="https://www.youtube.com/watch?v=Q6-fXpigMRk&feature=youtu.be">ABC TV</a></span></figcaption></figure><p>Six prime ministers. Four decades. Two recessions. Australia: 24 million Not Out.</p>
<p>Not out in the cold, that is. As Singapore’s former prime minister, Lee Kwan Yew grimly warned Bob Hawke, a few more decades like the ‘70s and Australians would wind up “the poor, white trash of Asia”.</p>
<p>Lee was wrong. Australia became rich, multicultural and deeply integrated with the Asian economy. Not by accident. But not strictly by design either.</p>
<p><a href="http://www.abc.net.au/tv/programs/making-australia-great-inside-our-longest-boom/">Making Australia Great: Inside our longest boom</a> (ABC 2, Tuesdays, 8.30pm) is journalist George Megalogenis’ affectionate, politico-cultural journey through the milieu of Australia’s economic reform and renewal, from Menzies to the present.</p>
<p>The first episode, “Bad Hair Decades”, commences with a brief look at Australia as it was under Menzies. Complacent. Sheltered. White. Protected. Full employment. When a single-income families had dad as the sole breadwinner, mum in the kitchen, and a house with a white picket fence. It was an image that resonated so strongly with John Howard that he made it the centrepiece of his ill-fated 1988 “Future Directions” strategy.</p>
<p>But most of the first episode looks at the end of the long boom in Australia: the unhappy end to the optimism of Whitlamism; the gloom and doom of Fraserism; and Labor’s U-turn under Hawke and Keating, unleashing Milton Friedman-style deregulation on the Australian economy.</p>
<p>All the iconic images of the 1970s and 1980s are present: the Dismissal; Midnight Oil; and the Alan Bond-backed Australia II yacht bringing the America’s Cup to Fremantle.</p>
<p>The ABC has clearly delved deep into its impressive colour and black-and-white archives to bring the stagflationary ’70s back to life. Football, meat pies, kangaroos and Holden cars. A soundtrack courtesy of The Saints, Skyhooks and The Angels.</p>
<p>By the 1980s, Bond, Christopher Skase and John Elliot are the faces of the new, confident, wealthy Australia. The nouveau riche are the true winners under Hawke and Keating. Melbourne Bitter and Carlton Draught give way to Moët Chandon and Veuve Clicquot. The soundtrack shifts from proto-punk to New Romantic. John Farnham and <a href="http://rulefortytwo.com/2008/09/09/1988-countdown-82-icehouse-electric-blue/">Iva Davies</a> sport magnificent mullets without tears.</p>
<p>But the ALP’s champagne economy, driven by asset bubbles and credit binges, quickly runs out of fizz, resulting in a colossal hangover: the “Keating recession”.</p>
<p>Occasionally, Making Australia Great really tries to do too much. Frank Sinatra being held to ransom by Bob Hawke and the Transport Workers’ Union? Enough already. We get it: unions were powerful.</p>
<p>Even the poor old Leyland P76 is trotted out as a “symbol of a broken economic model”. Not really. It was a symbol of a broken British economic model. The UK’s most successful exports to Australia in the 1970s were poor automotive design and a militant form of organised labour. Imitation, after all, is the sincerest form of flattery.</p>
<p>As a professional pedant, I have a few nits to pick: the program doesn’t mention the UK’s entry into the EU in 1973 that blew Australia’s export markets into the weeds, halving the country’s share of world trade inside a decade.</p>
<p>I suspect Megalogenis also misses the critical link between the US, Chinese and Australian economies. It was US outward foreign direct investment and debt-financed credit expansion that drove much of the China boom. Without US Treasury notes, eagerly purchased by thrifty Beijing, Chinese industrial production would never have achieved the dizzy heights it did between 2003 and 2008. It is US debt that funded Chinese growth (if you want to be hyperbolic, you can also argue that America shipped its old industrial plant, lock, stock and barrel, to China).</p>
<p>Even more importantly, it was China’s thirst for raw materials that drove the Australian boom. If Keating, Howard, Costello or Rudd truly believe they were the creators of Australia’s economic resilience, they’re fooling themselves. Canberra claims the credit, but the budgetary surpluses were Made in Beijing, pure and simple.</p>
<p>Our former leaders are not exactly complimentary about each other’s economic management. Hawke complains that neither Whitlam nor Fraser understood economics, but Hawke’s ACTU nevertheless demanded self-defeating, inflationary wage rises. Keating labels Hawke, “the pyromaniac who nearly set the economy on fire – twice.”</p>
<p>Australia, both Megalogenis and Peter Costello claim, has something to teach the world. Like what? How to have <a href="http://www.smh.com.au/business/the-economy/australian-households-awash-with-debt-barclays-20150316-1lzyz4.html">the largest household debt in the world?</a> Locking a generation <a href="http://www.crikey.com.au/2013/01/29/is-it-any-wonder-first-home-buyers-baulk-at-whats-on-offer/">out of the housing market</a>?</p>
<p>To be fair, Australia has much to be proud of. Wealth is considerable; <a href="http://www.smh.com.au/business/the-economy/property-makes-australians-the-world8217s-richest-says-credit-suisse-20141014-1163ip.html">Australians are among the richest people</a> on earth. Multiculturalism has bred tolerance, not ethnic violence. Economic inequality is relatively low by global standards (although <a href="http://www.treasury.gov.au/PublicationsAndMedia/Publications/2013/Economic-Roundup-Issue-2/Economic-Roundup/Income-inequality-in-Australia">the wealth gap is increasing</a>). Absolute poverty is comparatively uncommon.</p>
<p>Unsurprisingly, Hawke, Keating, Howard, Costello, Rudd and Swan, stake their rival claims for engineering Australia’s reform and resilience through economic triumph, turmoil and tragedy. But they would do that, wouldn’t they? When the child turns out well, everyone claims paternity.</p>
<p>This does become faintly annoying. It’s not the political elite who are making the sacrifices or paying the taxes. Politicians are merely over-remunerated cheerleaders standing on the side lines as the real heavy lifting is done by the overburdened, hard-working Australian labour force.</p>
<p>Politicians, as PJ O’Rourke rightly reminds us, “have never done anything worth a shit. They’ve merely gotten themselves elected.”</p>
<p>But there’s much of interest to look forward to in episodes two and three. The latter features new interviews with Rudd, Swan and Ken Henry and the fear wrought by the 2008–09 global financial crisis.</p>
<p>Here’s hoping there’s a happy ending. I’ll drink to that. Make mine a Moët.</p><img src="https://counter.theconversation.com/content/38900/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Remy Davison's Chair is funded by the EU Commission.</span></em></p>A line-up of former prime ministers stake their rival claims to making Australia great, in a new series by journalist George Megalogenis.Remy Davison, Jean Monnet Chair in Politics and Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/178712013-09-05T00:15:39Z2013-09-05T00:15:39ZHidden in plain sight: commission cuts and non-core promises<figure><img src="https://images.theconversation.com/files/30718/original/bdbpnvbf-1378338473.jpg?ixlib=rb-1.1.0&rect=1%2C0%2C998%2C696&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tony Abbott has promised not to cut areas such as health, education and payments to the poor and disadvantaged, but a Commission of Audit report traditionally trumps such Liberal National Party promises.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>There has been much, and justified, criticism, of Tony Abbott’s decision to conceal the costings of his policies until two days before the election, when the electronic media blackout will be in place. </p>
<p>There’s an obvious risk that politically unappealing cuts are being saved until the last minute. But the most frightening possibility for an Abbott government is already in plain view: the promise to appoint a Commission of Audit. This has become standard operating procedure for an incoming Liberal National Party government, and the outcome is entirely predictable. </p>
<p>Over at least a dozen such Commissions, the script has never varied. The Commission will announce a discovery that the public finances are far worse than the outgoing Labor government admitted, and will advise the government to ditch many of its election promises. </p>
<h2>Promises, promises</h2>
<p>The abandoned promises won’t include handouts to business or favoured political groups - the necessary cuts will focus on health, education and payments to the poor and disadvantaged. </p>
<p>Of course, Abbott has promised not to cut these areas. But the political tradition of the LNP is that a Commission of Audit report trumps all such promises. </p>
<p>In the lead-up to the 1996 election, John Howard was asked directly whether he would stick to his promises regardless of the Budget’s state. But, with the aid of the Commission of Audit set up by Peter Costello, Howard invented the category of ‘core’ promises, which would be kept. The public was left to infer that everything else was ‘non-core’. </p>
<p>More recently, campaigning in Queensland, Campbell Newman promised public servants they had nothing to fear from an LNP government. When he took office, he turned to Costello to perform the inevitable Commission of Audit, which varied only marginally from the 1996 version Costello himself had commissioned. </p>
<p>Newman invented his own variation on the core/non-core distinction, claiming that he had meant his promise to apply only to ‘frontline’ workers. When the sackings extended to nurses and teachers, he clarified further, saying that he meant ‘frontline services’, not the workers who were supposed to deliver them. </p>
<p>It’s possible that the politics will prove too difficult for Abbott, as happened to Ted Baillieu. By the time his Commission of Audit report was ready, with its recommendations of radical privatisations, Baillieu was already on the way out and the report was too politically toxic to be released. </p>
<p>But that’s only likely in the event of a razor-thin majority, the outcome most voters would like least. </p>
<h2>A question of scale</h2>
<p>What effect would arise from the scale of cuts that the Commission of Audit typically proposes? The cuts introduced after the 1996 election were on the scale of 1-2% of GDP, equivalent to $15-30 billion today. </p>
<p>In the context of a weakening economy, as may well be the case, public sector cuts have a ‘multiplier’ effect, reducing activity by more than the amount of the original cut. The International Monetary Fund has recently estimated the multiplier at around 1.5, so that a 1-2% cut in public spending would generate a cut of 1.5-3% in economic activity, enough to turn a slowdown into a recession.</p>
<p>In terms of employment, the standard estimate, called Okun’s Law by economists, is that each percentage point reduction in GDP increases the unemployment rate by 0.5%, and reduces employment by about the same amount. In the worst case of a 3% decline, it might imply a 1.5 percentage point increase in the unemployment rate. </p>
<p>This is consistent with the experience in Queensland, where employment has declined, relative to trend, by more than the amount of Newman’s cuts. </p>
<p>Under normal circumstances, monetary policy could be relaxed to offset the effects of such fiscal austerity. But with the cash rate down to 2.5%, the Reserve Bank doesn’t have much room to move. The RBA would be very reluctant to cut rates to zero, at which point the only option would be the kind of quantitative easing that the US Federal Reserve implemented with only limited success.</p>
<p>Of course, it is possible that the Commission of Audit’s inevitable recommendations for massive cuts will be ignored and that an Abbott government will make no cuts beyond those to be announced on election eve. </p>
<p>As Winnie the Pooh’s gloomy companion, Eeyore, said in a similar situation: “That’s what would be so interesting. Not being quite sure till afterwards.”</p><img src="https://counter.theconversation.com/content/17871/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There has been much, and justified, criticism, of Tony Abbott’s decision to conceal the costings of his policies until two days before the election, when the electronic media blackout will be in place…John Quiggin, Professor, School of Economics , The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/170492013-08-18T20:24:11Z2013-08-18T20:24:11ZFactCheck: did Kevin Rudd help create the G20?<figure><img src="https://images.theconversation.com/files/29571/original/6h6rfscc-1376978252.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Crisis talks: Prime Minister Kevin Rudd and Treasurer Wayne Swan at the G20 Summit in Pittsburgh, September 2009.</span> </figcaption></figure><blockquote>
<p><strong>“I think people are all excited about the fact that when the G20 is hosted in Australia next year, the G20 Finance [Ministers] will be meeting here in Cairns in far north Queensland… of course, that exists as a possibility because our government during my Prime Ministership has made it possible for Australia to become a member of the G20, in fact, we helped create the institution.” - Prime Minister Kevin Rudd, <a href="http://www.kevinrudd.org.au/lastest5_140813">press conference in Cairns</a>, 14 August.</strong></p>
</blockquote>
<p>This isn’t the first time the Prime Minister has mentioned his role in creating <a href="http://www.g20.org/">the Group of 20</a>, better known as the G20. The Australian’s foreign editor Greg Sheridan wrote an article on 5 August criticising Rudd for <a href="http://www.theaustralian.com.au/opinion/columnists/kevin-rudd-reinventing-history-of-g20/story-e6frg76f-1226691063697">“reinventing history”</a> on the G20: </p>
<blockquote>
<p>“Kevin Rudd’s first press conference of the 2013 election campaign contained a gross foreign policy inaccuracy. The Prime Minister said, with an apparent shrug of modesty, that he was involved in founding the G20 in 2008… Both these claims are completely ahistorical, or to put it another way, no such thing ever happened.”</p>
</blockquote>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=470&fit=crop&dpr=1 600w, https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=470&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=470&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=591&fit=crop&dpr=1 754w, https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=591&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/29297/original/ckznztkk-1376538409.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=591&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Greg Sheridan’s article, 5 August 2013.</span>
<span class="attribution"><span class="source">The Australian</span></span>
</figcaption>
</figure>
<p>Sheridan also wrote: “If any Australian was involved in the founding of the G20, it was Peter Costello, who was treasurer in 1999”.</p>
<p>So who’s telling the truth: Rudd or Sheridan? Actually, both are partially correct.</p>
<h2>Australia’s role in shaping the G20</h2>
<p>The G20 is made up of 19 major industrial nations including Australia, plus the European Union. It brings together leaders, finance ministers and central bank governors for meetings to discuss pressing global economic and financial issues.</p>
<p>Kevin Rudd and Peter Costello have both been influential figures in shaping two separate phases of the G20’s evolution. </p>
<p>In 1999, the G20 started as a meeting of finance ministers and central bank governors in the aftermath of the Asian financial crisis. Australia was invited to join.</p>
<p><a href="http://www.theatlantic.com/international/archive/2011/10/did-china-try-to-warn-the-us-about-the-coming-financial-crisis-in-1999/247430/">The Atlantic</a> has suggested that then Australian Prime Minister John Howard had urged China to create a new leaders-level institution in 1999. But <a href="http://www.lowyinterpreter.org/post/2011/11/02/A-new-history-of-the-G-20.aspx">Howard himself</a> has never made such a claim. </p>
<p>However, then Treasurer Peter Costello was an important figure among the G20 finance ministers, as acknowledged by the University of Toronto’s <a href="http://www.g20.utoronto.ca/">G20 Information Centre</a> in their 54-page <a href="http://www.g20.utoronto.ca/docs/g20history.pdf">history commissioned and prepared by member countries</a>.</p>
<p>Costello <a href="http://www.petercostello.com.au/speeches/statement-by-peter-costello-to-the-house-of-representatives">reflected</a> on this role in his farewell speech to Parliament in 2009, and in his memoirs, where he in fact credits Bill Clinton with a lead role. </p>
<p>In November 2008, the first G20 leaders’ summit was held in Washington DC, and the group played a key role in responding to the global financial crisis.</p>
<p><a href="http://www.griffith.edu.au/business-government/centre-governance-public-policy/staff/yi-chong-xu">Professor Xu Yi-Chong</a> from Griffith University <a href="http://www.kas.de/upload/dokumente/2011/10/G20_E-Book/chapter_2.pdf">has written</a> that Kevin Rudd is often credited with bringing the leaders of the G20 together for this first summit in September 2008. She cites comments by then <a href="http://www.brookings.edu/research/opinions/2009/09/29-g20-fullilove">World Bank President Robert Zoellick</a> to the Lowy Institute’s Michael Fullilove that Rudd: </p>
<blockquote>
<p>“established himself as a catalyst for better multilateral policy-making. Much of this work was behind the scenes, a combination of smarts, humour and attention to personalities.”</p>
</blockquote>
<p>In 2009, the Obama administration’s most senior US official on Asian policy, Kurt Campbell, paid tribute to Rudd’s “decisive” role in bringing about the new G20 leaders’ summits, which Campbell told <a href="http://www.theaustralian.com.au/opinion/world-commentary/rudd-role-vital-to-g20-emergence/story-e6frg6ux-1225795163705">Sheridan in The Australian</a> was “the biggest innovation in global politics in decades”.</p>
<p>It is also clear that Rudd paid careful attention and devoted energy to the G20 leaders’ process, as noted in a 2011 <a href="http://foreignminister.gov.au/speeches/2011/kr_sp_110427.html">speech</a>. And it is true that Rudd lobbied to have the G20 held in Australia.</p>
<p>Other Australians are also seen as well-regarded figures in the development of G20 processes by their peers, including Reserve Bank Governor Glenn Stevens, former Treasury official Mike Callaghan (now at the Lowy Institute), and <a href="https://theconversation.com/what-on-earth-is-the-g20-and-why-should-i-care-16363">Australian sherpa</a>, Prime Minister & Cabinet Deputy Secretary Gordon de Brouwer.</p>
<p>Most G20 commentators would probably credit Canada’s <a href="http://www.theglobeandmail.com/news/world/how-canada-made-the-g20-happen/article4322767/?page=all">Paul Martin</a> as the key figure or “founder” of the leaders’ process. Then Canada’s Minister of Finance, Martin was chosen by the G7 to be the new G20’s first chairman for a two-year term, ending in October 2001.</p>
<p>It is not surprising that Australian leaders from both side of politics spend energy on influencing the G20, as Australia’s national interest clearly lies in strengthening the G20 and securing its membership in these key global economic discussions.</p>
<h2>Verdict</h2>
<p>Kevin Rudd is partly right. Rudd is widely acknowledged as having worked hard and played a key role in bringing the G20 leaders together in 2008, and those ongoing leaders’ meetings have made the G20 a more influential institution. </p>
<p>However, Australia was already a member of the G20 finance ministers process since 1999. The Liberals deserve credit for their role during this period, especially Peter Costello, so Greg Sheridan’s recent article was right on this point. </p>
<p><em>Susan Harris Rimmer will be attending the G20 Leaders Summit in St Petersburg in early September and will report for The Conversation.</em></p>
<hr>
<h2>Review</h2>
<p>This article is correct in saying that Kevin Rudd and Peter Costello have both been influential in shaping two separate phases of the G20’s evolution. </p>
<p>Costello was influential in Australia becoming a member of the G20 when it was established, with the first meeting of G20 Finance Ministers and Central Bank Governors held in Berlin in 1999. </p>
<p>Paul Martin, then Canadian Finance Minister, was instrumental in the establishment of the G20 process and chaired the forum for the first two years of its existence. Sometimes referred to as “the father of the G20”, in the mid-1990s Martin advocated that the G20 be elevated to a leader level process. But this did not receive traction until the global financial crisis.</p>
<p>The G20 Finance Ministers and Central Bank Governors met annually until November 2008 when US President George W. Bush called a meeting of G20 leaders. Rudd actively lobbied for such a meeting of G20 leaders to deal with the financial crisis, and he was actively engaged in the first few G20 leaders’ summits.</p>
<p>In short, Costello was involved in Australia becoming a member of the G20 - well before the Rudd government was elected - but Rudd was involved in the G20 being elevated to a leader-level summit. <strong>- Mike Callaghan</strong></p>
<p><div class="callout">The Conversation is fact checking political statements in the lead-up to this year’s federal election. Statements are checked by an academic with expertise in the area. A second academic expert reviews an anonymous copy of the article.Request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/17049/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mike Callaghan was Executive Director, International, in the Australian Treasury from 2008 until 2012 under the Rudd/Gillard government. He was also Australia’s G20 Finance Deputy and a member of the Financial Stability Board. Mike also served as the Prime Minister’s Special Envoy, International Economy.
Between 1999 and 2000, Mike served as Chief of Staff to the Australian Treasurer, the Hon Peter Costello.
The G20 Studies Centre at Lowy has received Commonwealth funding, but that was prior to Mike joining the centre.</span></em></p><p class="fine-print"><em><span>Susan Harris Rimmer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>“I think people are all excited about the fact that when the G20 is hosted in Australia next year, the G20 Finance [Ministers] will be meeting here in Cairns in far north Queensland… of course, that exists…Susan Harris Rimmer, Director of Studies, Asia Pacific College of Diplomacy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/138482013-05-07T20:42:21Z2013-05-07T20:42:21ZHoward’s end: how the Coalition’s last budget created the ground for the current deficits<figure><img src="https://images.theconversation.com/files/23188/original/8zp8vsb9-1367750474.jpg?ixlib=rb-1.1.0&rect=0%2C61%2C1645%2C1167&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What sort of economic legacy did the long-serving Howard-Costello prime minister-treasurer double act really leave?</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>The good times are over. That’s the message both parties are sending out ahead of the budget and September’s election.</p>
<p>Shadow treasurer <a href="http://www.afr.com/p/national/hockey_flags_severe_welfare_and_k97QJUdU66Ux04f3Os9XMM">Joe Hockey promises major cuts</a> to spending and welfare if the coalition is elected while the government, having been forced to walk away from its <a href="https://theconversation.com/swan-says-budget-surplus-now-unlikely-experts-respond-11448">budget surplus promise</a>, is now <a href="http://www.theage.com.au/business/federal-budget/federal-budget-takes-17-billion-hit-20130507-2j4ah.html">cutting previously guaranteed benefits</a> like increases in family benefit payments.</p>
<p>The focus on these sorts of welfare cuts begins the dismantling of policies that were central to John Howard and Peter Costello’s budgets, especially the pair’s final big-spending 2007 budget which bestowed generous tax concessions - in areas such as superannuation - and transferred income to families that came to be dubbed “middle class welfare”.</p>
<p>In my <a href="https://theconversation.com/federal-budget-2012-short-term-political-gain-or-long-term-economic-strategy-6866">comment piece</a> on last year’s federal budget for The Conversation I began with the proposition that “good policy should be free of surprises”.</p>
<p>Although governments need to pay for additional expenditure promises – like Gonski and the NDIS in this case – there is also the need to address the underlying structural problem of reducing existing expenditure when revenues fall.</p>
<p>All this is at a time when the carbon tax, the mining tax – and just about every tax – is not raising the expected revenue, and <a href="http://www.smh.com.au/national/treasury-admits-revenue-forecasts-out-8b-a-year-20130222-2ex3g.html">Treasury’s forecasting</a> performance is not looking good.</p>
<p>The point is that fiscal policy should be made in the context of a long-term vision for the economy. This includes getting everyone who wants to into work, providing the public infrastructure needed to increase productivity, the right mix of private and government provision of health and education; and reform of the regulatory environment. We should see clear lines being drawn between the major parties with regard to their philosophy. However, in recent decades we haven’t seen much of this.</p>
<p>Under John Howard, the Liberal-National Party coalition government sought to position itself as good economic managers in contrast to Labor. It <a href="http://www.news.com.au/breaking-news/budget-deficits-are-in-labors-fiscal-dna/story-e6frfkp9-1226542090974">recorded budget surpluses</a> after 1997-98 in every year except one (2001-02), with surpluses reaching around 1% of GDP during its fourth term. The record economic growth led to huge windfalls in receipts from company income tax.</p>
<p>Falls in unemployment, jobs growth and wages growth greatly increased personal income tax receipts. While government expenditure as a proportion of GDP was fairly stable, albeit rising slightly, this has to be seen in the context of a switch from public provision of services to private provision. Consequently, there was less provision of government services but increasing government expenditure.</p>
<p>In the <a href="http://www.budget.gov.au/2004-05/">2004-05 federal budget</a>, treasurer Peter Costello announced the <a href="http://www.humanservices.gov.au/customer/services/centrelink/baby-bonus">baby bonus</a>, a lump sum payment of A$3000 to parents receivable after the birth of each child. It has risen from A$3000 since commencement on July 1, 2004 to A$4000 in 2005 and to A$5000 on July 1, 2008, and is indexed to inflation. Wayne Swan <a href="http://www.humanservices.gov.au/corporate/publications-and-resources/budget/1213/measures/families/reduce-baby-bonus">subsequently reduced</a> the baby bonus to A$5000 from September 1, 2012 and to A$3000 for second and subsequent children from mid-2013.</p>
<p>In the same budget there were other significant increases in benefits to families with children as well as tax cuts for all Australians. As more than one commentator pointed out, there was an incredible degree of giving with one hand and taking away with the other, with inevitable administrative cost and waste.</p>
<p>The biggest single item of government expenditure is on social welfare. The majority of the recipients are middle income households due to the generosity of family payments. In 2007, even families with A$100,000 in income were eligible for child support. In effect, what the Howard government built up is a system of massive transfers from middle income taxpayers back to middle income consumers. It might well have been more efficient to let these middle class households keep the money instead of paying extra tax.</p>
<p>In 2007, during the election campaign, further planned personal <a href="http://www.theage.com.au/news/national/howards-tax-splurge/2007/10/15/1192300686377.html">income tax cuts of A$34 billion</a> over five years were promised by both the Howard government and matched by the ALP, with the ALP firmly in its policy-copying <a href="http://www.smh.com.au/news/business/why-rudd-says-me-too-again-and-again/2007/08/05/1186252546386.html">“me too”</a> election mode. The result of policy-matching meant that the Howard Government effectively locked in the next government to their tax reforms, including raising tax thresholds and reducing the top tax rate of 45 cents per dollar (ultimately lowered to 40 cents per dollar).</p>
<p><a href="http://www.fundsfocus.com.au/superannuation/changes.html">Significant changes</a> were also made to superannuation policy in 2007. The majority of workers could now withdraw their superannuation tax free after upon reaching the age of 60. Most self-employed can claim their superannuation contributions as a tax deduction. In addition, semi-retired people can continue to work part-time, and use part of their tax-free superannuation to top up their pay.</p>
<p>Despite the relatively generous tax treatment of capital gains, the new superannuation tax treatment led to the selling off of some assets, particularly rental housing, as people sought to take advantage of the opportunity to add funds to their superannuation accounts and claim them back later tax-free.</p>
<p>People were allowed to transfer up to A$1 million into their superannuation accounts before June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous. In the June quarter of 2007, A$22.4 billion was <a href="http://www.brisbanetimes.com.au/news/national/lure-for-super-prompts-224b-splurge/2007/09/27/1190486482433.html">transferred to superannuation accounts</a> by individuals. This compares with A$7.4 billion in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23189/original/9ryd6j68-1367751055.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Treasurer Wayne Swan will deliver what is likely to be the Gillard government’s last budget in difficult economic circumstances.</span>
<span class="attribution"><span class="source">AAP/Dean Lewins</span></span>
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</figure>
<p>There was criticism of the tax and spend policies of the Howard government: much of it focused on the apparent generosity of the taxation cuts and income transfers to families. The policy was also seen to be in contrast to the generally accepted role of fiscal policy to dampen spending in times of economic boom. Giving tax cuts in 2007 and beyond coincided with a time when consumer spending was considered to be running too high.</p>
<p>The biggest criticism of the Howard government’s generous spending was its concentration on consumption rather on improving the supply-side of the economy.</p>
<p>Productivity growth had slowed considerably during the fourth term of the Howard government. Many areas of Australia’s infrastructure were showing signs of much-needed reform to enable the continuation of productivity growth and economic prosperity. Rail and road transport, ports, broadband speed, water and energy emerged as needing quite urgent reform. It has to be said, however, that the ability of the federal government to address infrastructure problems was hindered by the lack of a working relationship with state governments.</p>
<p>It is ironic that the big spending of the Howard government didn’t save it from losing the 2007 election to another <a href="http://www.theage.com.au/news/national/kevin-rudd-goes-where-john-howard-dared-not-tread/2007/11/14/1194766766200.html">supposed fiscal conservative</a>, Kevin Rudd. Indeed, it could well have been that his fiscal profligacy played a part in Howard’s election loss as voters lost faith in his economic credentials.</p>
<p>The Gillard government is now living with the legacy of two previous prime ministers but her own government’s economic management has played the major part in her inevitable election loss. Next week’s budget will do little to repair her reputation with voters and, in their current mood, is likely to damage it further.</p><img src="https://counter.theconversation.com/content/13848/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Lewis does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. He also has no relevant affiliations. During his career he has received funding from many private and public sector organisations including most recently the ARC, NCVER, DEEWR and the AFPC.</span></em></p>The good times are over. That’s the message both parties are sending out ahead of the budget and September’s election. Shadow treasurer Joe Hockey promises major cuts to spending and welfare if the coalition…Phil Lewis, Professor of Economics, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/138622013-05-01T03:52:11Z2013-05-01T03:52:11ZWhy Queensland didn’t need to sell the family farm<figure><img src="https://images.theconversation.com/files/23090/original/nwqhrh7d-1367376341.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Queensland Premier Campbell Newman announces his government's plan to outsource, rather than completely privatise, many public services.</span> <span class="attribution"><span class="source">AAP/Dan Peled</span></span></figcaption></figure><p>Back in July last year Queensland Premier Campbell Newman was in a very black mood. All was gloom and doom in the Sunshine State, as he warned <a href="http://www.abc.net.au/news/2012-07-24/qld-on-verge-of-bankruptcy-newman/4151006">Queensland was “on the way to being bankrupted”</a> without tough action. Back then, his government was shaping up to do a Jeff Kennett, painting the grimmest of pictures that would justify massive cuts to the Queensland public sector, just as the former Victorian premier did in his first term in power.</p>
<p>Yesterday was the day when it was all meant to come together, with Newman having to make the biggest call of his political life. In announcing <a href="http://www.treasury.qld.gov.au/coa-response/">his government’s response to an audit of the state’s finances</a>, he had to decide whether his Government would support the sale of major pieces of Queensland’s “family farm” - particularly the state’s multi-billion-dollar power assets.</p>
<p>To the surprise of many, and despite a lot of pressure from the money men at the top end of town, Newman declared <a href="http://www.couriermail.com.au/news/queensland/premier-campbell-newman-outlines-government-response-to-commission-of-audit/story-e6freoof-1226632086888">“we will save the farm”</a>, rather than “taking the easy way out and having a fire sale of assets”. Instead, he outlined a much quieter and in some ways craftier program of outsourcing and competitive tendering. Private operators are likely to end up leasing and running more state-owned services, from ports, trains and buses, through to health care, including elective surgeries.</p>
<p>Queenslanders are no friend of privatisation, that’s for sure. Only 14 months ago, they savagely <a href="http://www.smh.com.au/opinion/why-privatisation-killed-queensland-labor-20120326-1vugf.html">punished the Bligh Labor government for going down this path</a> without a mandate. It would need a pretty strong case to convince a seasoned politician like Newman to try that option again. So how strong was the case in favor of a fire sale?</p>
<h2>A closer look at the books</h2>
<p>Just days after being elected, the Newman government appointed former federal Treasurer Peter Costello to lead a A$2.2 million audit of Queensland’s finances. The 1000-page final report - released in full yesterday - recommended selling the state’s electricity and port assets to raise more than A$25 billion and rapidly reduce debt.</p>
<p>Costello continued the hard sell right up until the last moment, including inside the cabinet room for his final briefing to MPs. In an article in <a href="http://www.afr.com/p/national/qld_finances_could_get_worse_costello_esrShaCeBbeX2cEMypkXgO">the Australian Financial Review</a> that cited a debt figure of A$82 billion, Costello declared: “Queensland has a problem. Its credit rating has been downgraded, it’s paying higher and higher interest costs and something has got to happen… If it doesn’t change, it’s just going to get worse and worse.” </p>
<p>But just how gloomy is the Sunshine State’s budget outlook?</p>
<p>While A$82 billion sounds like a lot of debt, the picture was always more complex than Costello would have us believe.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=524&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=524&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=524&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=659&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=659&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23082/original/q86svrrj-1367373286.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=659&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">General government balance sheet, Mid-Year Economic and Budget Update, p.15.</span>
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<p>This table is taken from last December’s <a href="http://www.treasury.qld.gov.au/office/knowledge/docs/mid-year-review/mid-year-review-2012-13.pdf">Mid-Year Economic and Budget Update</a>. It shows the state’s general government balance sheet for the period from 2011/12 through to 2015/16. While it is true that gross debt or total liabilities will exceed $80 billion this financial year, the net debt figure (or gross debt less financial assets) is very different.</p>
<p>The Queensland general government sector in fact had no net debt in 2011/12. And while net debt is projected to grow to a peak of A$9.6 billion by 2013/14, it then starts to fall and then continues its downward trajectory.</p>
<p>Still, you might say, A$9.6 billion is a lot of money to owe. That would be true were we talking about a household or a business - but not for the Government of Queensland, which can tax its citizens to pay the bills and tax them more heavily if it really has to do so. Queensland is, after all, one of Australia’s lowest-taxed jurisdictions, with its per capita taxation in 2012/13 more than $450 below than the Australian average.</p>
<p>But according to Costello’s Commission of Audit, net debt is not the best measure of the state’s liabilities. It includes the financial assets that have been built up to fund the state’s super schemes and which therefore are not available to cover the gross debt on issue. It recommends a different measure, called net financial liabilities:</p>
<p>“As the net debt measure includes investments, it takes account of the large investments Queensland uses to offset its superannuation liability, it does not take account of the liabilities. Under existing Government policy, these investments are held to meet the State’s superannuation liability. Because these investments are not available to reduce gross debt, net debt is not a suitable metric to target in setting an appropriate fiscal strategy… The Commission consider that the most suitable measure of debt is the concept of net financial liabilities”.</p>
<p>The State’s net financial liabilities (A$39 billion in 2011/12) are much higher than its net debt, and it is this that needs to be paid down. But how good is this as a measure of the State’s balance sheet? The answer is not very, because it ignores the physical and other assets that are crucial to the balance sheet equation (worth a cool A$182 billion in 2011/12).</p>
<h2>What’s a worthier economic measure?</h2>
<p>Net worth is generally considered to be a better measure, for it includes all assets and liabilities and not just those that are financial. Far from being in trouble, Queensland is in fact well and truly in the black according to this measure, with a net worth in the general government sector exceeding A$170 billion in 2011/12, climbing steadily to almost A$180 billion not long after the next scheduled election.</p>
<p>All this is not to say that the Queensland budget is in fine shape. Far from it. But its problems stem not from its balance sheet but the substantial gap between operating income and expenses. Queensland’s operating budget shifted from surplus to deficit in four very difficult years, when revenues went into an unexpected spin and have yet to fully recover. This year the deficit is tipped to exceed A$11 billion, which is very large on any measure and would seem to be genuine cause for concern.</p>
<p>However, this includes one-off expenses associated with flood damage that cost more than A$4 billion. It also includes almost A$1 billion set aside for redundancies arising from Newman’s first budget. When these are excluded, the deficit is a more manageable A$6.3 billion. This is still large, but importantly is not tipped to last forever.</p>
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<a href="https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=359&fit=crop&dpr=1 600w, https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=359&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=359&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=452&fit=crop&dpr=1 754w, https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=452&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/23088/original/crgb8nny-1367375004.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=452&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Fiscal balance, Mid-Year Economic and Budget Update, p.4.</span>
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</figure>
<p>The <a href="http://www.treasury.qld.gov.au/office/knowledge/docs/mid-year-review/mid-year-review-2012-13.pdf">Mid-Year Economic and Budget Update</a> also shows that the operating account is projected to return to surplus by 2014/15, with the corrective measures already put in place being enough to turn the ship around without the need for any more drastic action.</p>
<p>If Queensland’s debt is not large, its net worth is positive, and the government by its own admission reckons it is on track to achieve its financial principles, why bother with a massive asset sales program that would antagonize the people?</p>
<p>Far better to be crafty and privatise services in other ways, through an <a href="http://www.brisbanetimes.com.au/queensland/in-plain-english-commission-of-audit-response-20130501-2irp6.html?rand=1367358381141">outsourcing and competitive tendering program</a> that can turn the public sector inside out, but hopefully jeopardise fewer MPs’ seats. For Premier Campbell Newman, who resides in a marginal electorate himself, hearing that the money men are disappointed may not be such a bad thing.</p><img src="https://counter.theconversation.com/content/13862/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Hayward receives funding from state and local government departments and trade unions for contract research. He is a Board member of Melbourne Health, incorporating the Royal Melbourne Hospital.</span></em></p>Back in July last year Queensland Premier Campbell Newman was in a very black mood. All was gloom and doom in the Sunshine State, as he warned Queensland was “on the way to being bankrupted” without tough…David Hayward, Dean, School of Global, Urban and Social Studies, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.