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