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Myths of the economic competency of the Howard Government

The myth of superior economic competency/performance, which has been flogged by the conservative Coalition from the time it first assumed office, involves the following assertions:

Myth 1: Interest rates are characteristically lower under federal Coalition governments than under federal Labor governments.

Reality: The fact is that interest rates were very high (12-15%) when John Howard was Treasurer under Malcolm Fraser. And interest rates are not under the control of any government - the Reserve Bank determines interest rates according to its perception of inflationary pressures, and does not take kindly to attempts by politicians to influence its decisions.

Myth 2: Inflation is lower under the Coalition.

Reality: This is obviously wrong to the extent that myth no 1 is wrong. One of the current criticisms of PM Howard is that he has a reputation for being an irresponsible big-spender during election years, and that this behaviour has contributed in no small way to current inflationary pressures [which have recently forced the RBA to raise interest rates, with a further increase anticipated in November 2007].

Myth 3: Unemployment is lower under the Coalition.

Reality: Part of the problem with this claim is that the definition of employment keeps changing. Governments seem determined to keep changing the goal posts and massaging the figures. Currently in Australia, one hour of paid work per week suffices to classify a person as "employed".

In spite of the statistical fiddle, unemployment may be lower in a relative sense, but for reasons which have little to do with the Howard Government's economic capabilities. The main reasons for lower unemployment are the ecologically unsustainable booms in mineral exports and property development and the retirement of the 'baby boom' generation from the workforce.

Also, skilled workers and professionals are expected to accept unskilled jobs, so many who would be otherwise unemployed are employed in low-paying jobs.

Myth 4: Economic growth is greater under the Coalition government, which helps to explains their substantial budget surpluses.

Reality: This claim begs a number of questions, including whether economic growth is always beneficial to human welfare and the state of the environment. It simply ignores the issue of whether it is desirable or healthy for modern economies to be driven by a financial growth imperative. The entire business community now expects and demands that the economy will grow every year, and that average investment returns will exceed 8 percent per annum, irrespective of the long-term consequences.

Moreover it is widely recognised that the recent strong growth of the Australian economy can be mostly attributed to the mining boom, in harness with China's need for the various raw materials that Australia possesses in abundance. The accession of the conservative parties to office has (from their standpoint) fortuitously overlapped with this boom. It has been cogently argued that in such circumstances any stable government could expect to enjoy a strong budget surplus. It may also be argued that substantial budget surpluses imply that many Australians are being overtaxed, and that regressive taxes like the GST should be either phased out or replaced with more progressive forms of taxation.

In any case, any budget surpluses that happen to occur could be more wisely utilised in public infrastructure investment than in pre-election hand-outs and pork-barrelling within marginal electorates. The record of the federal Coalition government on infrastructure spending is actually very poor, and everyone is suffering in one way or another from their neglect.

Myth 5: The federal Coalition is more responsible than the opposition because it has paid off "Labor's debt".

Reality: Even if there happened to be some truth in this claim, the fact is that the bulk of public debt in Australia has always resided at the state and local government levels, and that over the years this debt has accumulated under both Labor and Coalition governments. Moreover, the overall level of Australian debt and other liabilities, both public and private, has escalated out of control during the past decade. During the period of the Howard government's watch, the ratio of total liabilities to GDP has increased exponentially at a rate never before experienced. This feature of our economy is utterly unsustainable, and the consequences will hit the average Australian very hard whenever any significant global economic contraction occurs. This problem has been elaborated by David Keane, and a good summary of the situation along with the relevant statistics may be found on the Economic Reform Australia (ERA) web site

The above has been adapted from an article was posted to the ERANet Yahoo Groups mailing list by John Hermann on 19 August 2007. More information about John Hermann and Economic Reform Australia (ERA) can be found on the web site