During the global financial crisis, Mathias Cormann said Labor’s budget debt was ‘panic stuff’
And just like that, debt and deficit no longer really mattered.
On Thursday the treasurer and the finance minster announced that the deficit for 2019-20 would be 4.3% of GDP, and the current financial year would see a $184.4bn deficit – 9.7% of GDP. Consider during the GFC, the biggest deficit was less than half that size.
Then there was debt. Rather than previous estimate of gross debt levels of $558bn in this financial year, now treasury predicts $851.9bn.
But who cares?
He replied to one journalist when asked about debt: “What is the alternative? Are you suggesting that we should not have provided the support we did to boost our health system, to protect jobs, to protect livelihoods? I mean, in the circumstances what was the alternative.”
It is an excellent point, and one dripping with as much hypocrisy as any statement that has ever been uttered by a finance minister in our history.
It is exactly the same reasoning that was behind the stimulus undertaken by the Labor government during the GFC.
What was Senator Cormann saying then?
In February 2009, he told the senate: “We have got this $42bn cash splash. What is this going to do? It is going to end up with us having $111bn worth of debt for starters, and even up to $200bn of debt, with a $9,500 debt for every Australian. This is absolute panic stuff.”
"The problem with Cormann’s question of “what is the alternative” is not that is it wrong now, but that it was never wrong"
On Thursday, the treasurer while standing next to Cormann said: “Without the government’s economic support, unemployment would have been five percentage points higher.”
In 2009 Cormann told the Senate, “governments cannot inject new money into the economy. All that governments can do is take money from taxpayers – either today’s taxpayers or, after borrowing money, tomorrow’s taxpayers”.
He also argued back then that “Senators opposite are going to go down in the history of Australia as having been complicit in taking Australia into the largest debt ever in the history of the commonwealth. In 20 years time people will look back at this chamber’s members and they will say, ‘What did those senators do? Why didn’t they do their job? Why didn’t they hold the government to account? Why didn’t they stop this from happening?’”
Now – just over 10 years later – when asked about debt, the finance minister is quick to interject and note that the government’s debt is “lower than many other countries”. This, I don’t need to point out was not an argument he ever took back in 2009 or 2010 or 2011 or ...
The hypocrisy is utterly galling, but that does not mean the ALP should buy into it, not only because the Coalition will always be hypocrites on debt but because the last thing to worry about now is whether the budget deficit is too big.
The important thing from the economic statement is not the debt or deficit, but that even with its rosy assumptions of no further lockdowns and the opening up of international travel, the government still sees unemployment at 8.7% by June next year – that means at least 1.1 million people unemployed.
And rather than see that as a poor result requiring greater stimulus and announcement of further action, the treasurer and finance minister came on Thursday with no new big programs. Instead, the ministers boasted of their performance.
Josh Frydenberg trumpeted that “the economy was 16% larger pre-Covid than it was when we came to government” and ignored just how utterly pathetic that amount is.
That is the worst six-year growth period for 37 years.
It is a story of inept economic management bounded to ideological beliefs about budget surpluses which have now (for the time being) been ditched.
The problem with Cormann’s question of “what is the alternative” is not that is it wrong now, but that it was never wrong – not just in a time of crisis.
The government should have been doing more than it has for the past six years, and it is clear it will need to do more in the future.
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