Monday, 19 May 2014

Labor's Debt and Deficit Disaster

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Tony Abbott made a rare appearance on the ABC this morning, in a telephone interview with Alison Carabine for Radio National’s Breakfast program (transcript below). 

Listening to it, having just read Tim Dunlop’s article about how the Coalition’s rhetoric has been normalised by the media as fact or common sense, was very interesting. Carabine is a good political journalist, but, experienced and knowledgeable as she is, even she fell into some of the traps Dunlop described.

Eight times in a fifteen minute interview, the Prime Minister referred to “Labor’s Debt and deficit disaster”. Eight times. More than once every two minutes. But not once did Carabine challenge him on this, she either ignored it or accepted it as the premise of the answer.

To be fair, if you got bogged down in an argument with Tony Abbot about whether the Rudd/Gillard governments were the worst thing to ever happen to him Australia, you’d never get anywhere in an interview. However, because Abbott and other Coalition ministers are so rarely challenged when they talk about Australia’s “debt and deficit disaster” it has become a premise on which they can base so many flawed arguments, and a belief that is too widespread in the electorate. Thus, the basis on which they then justify a budget that is punitive rather than corrective is already established and tacitly agreed.

It’s certainly true that taxation receipts as a percentage of GDP have fallen in recent years. (with thanks to Greg Jericho for the graph, because apparently you can’t ask him a quick DM question without getting at least two graphs in response).

graph

This however, is an entirely different proposition to a “debt and deficit disaster”. That myth has been pretty well debunked here and here and here and here and here and, well, you get the idea. 

The economic challenges Australia faces is that revenue is decreasing, which is mostly due  to the GFC, the slowing of the mining boom and the decline of manufacturing. While it is true that no budget, no matter how healthy, can withstand decreasing revenue and increasing expenditure for too long, the only solutions proposed in the recent budget are about decreasing expenditure. There are no moves to increase revenue beyond the debt levy on the highest income earners – which is a temporary measure in that it does nothing to increase the revenue base, despite a minor increase in the actual revenue amount. 

This is a problem for the way voters understand the budget because, yet again politics trumps policy in political media. Not just from the politicians, but from the journalists who are meant to be analysing and explaining the actions of government. It’s frustrating and depressing because we know that these journalists are intelligent, talented, knowledgable people. We know that they certainly have the capacity to do far better by their audience than they do. So why do they let the politics outweigh the policy? Why do they let the government drive the agenda when they are the ones asking the questions? Why is a response that is not an answer left to just lie there, with no recognition that it's just words with no meaning?

Why, in this interview, when the Prime Minister tacitly agreed that decreasing funding to the states was a wedge to force them to demand an increase in the GST, was he not called on this?

AC: But with regards to that source funding that you’ve mentioned, the states are feeling cornered. They believe you have engineered a funding crisis to flush them out on the GST. But they’re not biting, they won’t go there, so that tactic seems to have flopped?

TA: Well, let’s wait and see, we’ve got 3 years before the rate of increase drops, we’ve got 3 years of funding as agreed by the Rudd/Gillard government and that’s, as we promised at the election, and then in the 4th year, funding will continue to increase, it’s just that it will increase at a slower rate. So there’s plenty of time to come to grips with all of this and work out the best possible way to deal with it.

Yes, she asked the question, but when the answer clearly said that the tactic has not in fact “flopped” because “let’s wait and see, we’ve got 3 years”, he was allowed to step back from the question. Because the follow up was on the politics not the policy. 

I have a very good understanding of how difficult it is to get it right all the time, how hard it is to fund it and how dispiriting it is when you do a good job at something and cop a shellacking for not doing a perfect job. So while this might look like an attack on Carabine, it isn’t. She is a good journalist and this is not even close to the worst I’ve ever heard, it’s just the most recent and years of feeling frustrated and let down by a profession I so admire is really starting to bite. 

This is the first time since the beginning of the Howard years that we have had a genuine divide between the left and right side of politics. The media, who are  (or should be) the ones explaining those differences to the voting public cannot continue to allow the government and the Murdoch press to set the baseline from which they all start, they do us and themselves a great disservice by doing so.

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(A quick aside: I was talking to someone last week about the journalists who are really getting it right on political reporting. The names that immediately came up were Sarah Ferguson, Fran Kelly, Lenore Taylor, Laura Tingle and Katherine Murphy. Only after we realised that they were all women did we try to think of some male press gallery journos who are in their class. Couldn’t come up with one. It occurs to me to wonder if, in such a male dominated industry, do those women know that and occasionally, quietly bite their thumbs at their male colleagues. They probably don’t, “getting it right” also meaning having a bit more class and dignity than that, but still, it’s  a nice mental image.)

 

UPDATE: A case in point. In this interview the Prime Minister said, on the health funding for the states:

Well, let’s wait and see, we’ve got 3 years before the rate of increase drops, we’ve got 3 years of funding as agreed by the Rudd/Gillard government and that’s, as we promised at the election, and then in the 4th year, funding will continue to increase, it’s just that it will increase at a slower rate. So there’s plenty of time to come to grips with all of this and work out the best possible way to deal with it.

Lenore Taylor pointed out a few hours later that this is completely inaccurate. Can't wait to see who will be the first one to ask him, or any Government minister, to clarify this. And how they handle the "clarification".

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This is not an official transcript from the ABC, this is my transcript from the audio file. Any errors or typos are entirely my responsibility and I am happy to make any corrections required (*waves cheerily to Mark Colvin*)

 

AC: Prime Minister, thanks for your time this morning.

 

TA: Good morning Alison.

 

AC: We’ll get to the states in a moment, but we can’t avoid the opinion polls, voters have passed judgement, they are angry and are feeling betrayed. Aren’t you now being called out by the Australian people?

 

TA: Well Alison, no one ever said it was going to be easy to tackle Labor’s debt and deficit disaster, but every day in the lead up to the last election I said to people, we are going to get the budget back under control. So I think the public were on notice that we were going to have to make some very tough decisions, we’ve made them, we’re not making them for our own political benefit, obviously, we’re making them for the long term benefit of the country. That, I believe, is what people elected us to do. They elected us to ensure that we weren’t paying the nation’s mortgage on the credit card because we just could go on spending a billion dollars a month just paying interest on the interest on the borrowing and that’s the situation under Labor.

 

AC: And that’s an argument you’ve prosecuted consistently since you were elected, but you also said yesterday Prime Minister that before  the election people heard different things. That sounds like a concession that you carefully massaged the message pre-election to tell voters what they wanted to hear. Does that amount to deception?

 

TA: (heh heh) If you go back to the pre-election mantra, which people were sick of hearing, I said in interview after interview, I said we’ll stop the boats, we’ll scrap the carbon tax, we’ll build the roads of the 21st century and we’ll get the budget back under control. Now sometimes Alison, the order was different, but they were the elements that I put forward to the Australian people every day during the election camping and we’re getting on with all of them  

 

AC: But you didn’t mention welfare cuts and tax rises, does that mean stopping the boats, scrapping the carbon tax, building the roads, getting the budget back under control, are they the only areas voters should hold your government to account, everything else is carte blanche to the government to do what it likes and not be held to anything it said before the election?

 

TA: Well Alison, we did talk about scrapping the school kids bonus, we did talk about eliminating the low income support payment, we did talk about reducing the public service by some 12,000 people. We put all of this before the Australian people and I don’t think anyone really expected that you would get a soft option budget from the coalition and obviously it’s not a soft option budget from the coalition, but it’s a budget that Australia needs at this time, if we are going to get Labor’s debt and deficit disaster under control.

 

AC: Well if you were so up front with voters before the election how do you account for these terrible polling numbers today?

 

TA: Well look, we never said it was going to be easy. And I think the last government which brought down a very tough budget, the Howard government in 1996, took a big hit in the polls too. But in the end we were elected not to take the easy decisions but to take hard but necessary decisions, and that’s what we’ve done.

 

AC: But what about unfair decisions? 63% of voters according to Nielsen believe the budget to be unfair, that suggests voters are not buying the government line that the burden of budget repair is being shared equally.

 

TA: Well, if you look at the actual decisions in the budget, the high income earners, like politicians, will pay the deficit levy. That’s the top 3% of earners will pay the deficit levy, people like politicians will get a pay freeze for 12 months, judges and senior public servants likewise. Yes everyone is going to pay fuel excise indexation, but for the average family that’s about 40 cents a week in the first year. So look there are tough things in this budget, there’s absolutely no doubt about that, tough things in this budget, but it is absolutely necessary if we are going to get Labor’s debt and deficit under control. And stop paying a billion dollars a month, just in interest on the borrowings. 

 

AC: Prime Minister, I promise you, we’ll get off the polls in a moment, but your own authority appears to have been damaged. Your net approval rating has jumped as high as minus 30, how do you plan to win back people’s trust, or, once people feel that they’ve been mislead by their Prime Minister could it be that that trust is gone forever? Was that the Julia Gillard example?

 

TA: Alison, I’m just getting on with what we were elected to do. As I said we were elected to get the budget under control and you don’t reign in debt and deficit disaster without taking tough decisions, and look, ah, Labor gave us the sixth biggest deficit in our history, Labor left us with debt and deficit stretching out as far as the eye can see, debt peaking at $25,000 per Australian man, woman and child. We have to take tough decisions to tackle this, in the end, my job is not necessarily to win a popularity contest, my job is to run the country effectively and that’s what I’m going to do my best to do.

 

AC: And you’d be well aware that politics is the art of the possible, when you take into account the resistance in the Senate, plus the disapproval of voters, maybe you’ve bitten off more than you can chew with this budget?

 

TA: Oh, no, we’ve done what is absolutely necessary to tackle Labor’s debt and deficit disaster, I mean, what is the alternative? Labor’s alternative is just to keep borrowing and keep spending. The Greens’ alternative is to just whack up everyone’s taxes. What is the alternative? Now, we have put forward a careful, thoughtful, measured way to get the debt and deficit disaster that the Labor party left us under control. And there is no alternative, certainly no alternative that the Labor party have offered us and that’s why we are going to press steadily forward with the measures that we have brought forward. 

 

AC: Prime Minister, you say that it’s a careful and considered approach to budget repair, but state and territory leaders have unanimously rejected your cuts to health and education funding, they want an urgent COAG meeting to discuss the cuts, but you’ve knocked them back. Why won’t you speak to them?

 

TA: Well, I’m talking to them all the time. I talk to the Premiers all the time, I had a number of conversations with most of the Premiers last week and I daresay I’ll have more conversations this week. But the changes are not cuts, they’re just a reduced rate of growth in spending. They were clearly flagged before the election, we never said that we would honour the Rudd/Gillard government’s pie in the sky promises in the out years. The first of the out years is now coming to the forward estimates as part of the budget, we think what we’ve put forward in the budget is perfectly reasonable. It does involve, as I said, a continued growth in funding and we’re happy to keep talking to the states as part of the federation white paper process about all these issues.

 

AC: You may have said before the election that a coalition government would not be bound by the out years, but you also said there would be no cuts to health and education. Can you understand why people, including the premiers, are confused and quite annoyed with you?

 

TA: But..but..there are no cuts to health or education. In health, all of the money that we’re saving is going into the medical investment fund, the medical research investment fund. And that’s going to be dedicated to finding the treatments and the cures of the future that we need if our population is to live longer and better.

 

AC: But that reshuffling of the money will, according to the Premiers, mean hospital beds will close, no fewer than 1200 on the 1st of July. There’ll also be $300 million in cuts to concessions for the elderly, they will also be lost. And they’re not going to happen in 3 years time, that will be 42 days time according to the Premiers. And they’re saying they can’t absorb these cuts.

 

TA: There was a nation partnership agreement which the Labor party hadn’t funded. There was a national partnership agreement on beds, which the Labor party hadn’t funded and we haven’t decided to renew it. This is actually a Labor cut, it’s not a Coalition cut. On the concessions, look, ah, it is true that for many years the Commonwealth have been paying the states money so the states could offer concessions to pensioners and concession card holders in various areas. We made the decision that in a very touch budgetary climate, if the states wanted to continue to offer those concessions, they should do it themselves. They shouldn’t need the Commonwealth to pay them to offer concessions to people.

 

AC: Prime Minister, you did mention the white paper into the future of the federation. Are you hoping to use that process to see a fundamental shift in who takes responsibility for funding schools and hospitals?

 

TA: Well, let’s see where it goes. What I said pre-election and what I’ve said post election is that I want the states and the territories and the Commonwealth to be sovereign in their own spheres. It’s well-known that the states run public schools and public hospitals but the Commonwealth part funds them. The states find that an unsatisfactory situation because they want funding certainty. I think most of them would prefer to have own source for this, so let’s talk all of this through and come up with a system which means that come 2017/18, which is more than 3 years away, we have schools and hospitals which are well funded, which are better run and let’s have a federation which works better as well. 

 

AC: But with regards to that source funding that you’ve mentioned, the states are feeling cornered. They believe you have engineered a funding crisis to flush them out on the GST. But they’re not biting, they won’t go there, so that tactic seems to have flopped?

 

TA: Well, let’s wait and see, we’ve got 3 years before the rate of increase drops, we’ve got 3 years of funding as agreed by the Rudd/Gillard government and that’s, as we promised at the election, and then in the 4th year, funding will continue to increase, it’s just that it will increase at a slower rate. So there’s plenty of time to come to grips with all of this and work out the best possible way to deal with it.

 

AC: So plenty of time to come to grips with a bigger and broader GST, is that what you’re saying?

 

TA: We have no plans, at the commonwealth level we certainly have no plans whatsoever to change the GST. We went into the election with that position and we’ve come out of the election with that position 

 

AC: Why not? Why won’t you show the same courage that John Howard displayed on tax reform? Why not take a lead on this?

 

TA: Are you accusing me of lacking political courage Alison?

 

AC: No, I’m certainly not doing that Prime Minister.

 

TA: (heh heh heh heh) Thank you.

 

AC: I’m just suggesting that if you did want a bigger and broader GST, you, being the Prime Minister, might be the person perfectly positioned to prosecute that debate. 

 

TA: Well let’s see what comes out of the federation white paper process. I have no plans to change the GST. All of the GST revenue goes to the states. It’s really up to the states if they want to put that stuff on the table. I don’t know whether they will, it’s really up to them and let’s just see where the federation white paper process takes us.

 

AC: Prime Minister, just finally, you’ve got the states offside, that’s clear. So too the voting public, also the senate, which will knock out some of the major budget measures, is it now time to rethink your budget strategy?

 

TA: No. Because there is no alternative to getting Labor’s debt and deficit disaster under control. We cannot go on stealing from our children to spend in the here and now. We just can’t do it. Now Labor has no answers. They are all complaint and no solutions. We have put forward a very carefully thought through, sensible, reasonable, moderate way forward and we just going to push on with it.

 

AC: So it’s crash or crash through?

 

TA: Well, it’s keep going, with a carefully thought through budget strategy. The last government that brought down a tough budget was the Howard government in 1996. That set up a decade of prosperity. Because it demonstrated that the government had political courage and economic strength and that’s what this government is doing. 

 

AC: Prime Minister, you’ve been very generous with your time, thanks so much for joining Radio National breakfast.

 

TA: Thank you Alison.

 

Jane Gilmore

Jane Gilmore is the editor of The King's Tribune.

Follow Jane on Twitter: @JaneTribune