Tuesday, January 11, 2011
Here's that Rainy Day
To be fair, successive governments have brought this on themselves by making a fetish of having the budget in surplus and instilling an irrational fear among the population of the 'D' word to the point that individual political leaders do anything to avoid mentioning that very possibility.
Nevertheless, there is no reason for informed journalists to play along with the myth. Indeed, the nadir of this book-keeping mentality among the nation's elite political reporters came when the first question at a prime ministerial press conference to announce initiatives on one of the worst natural disasters in the country's modern history was what it meant for the surplus promise; this at a time when scores of people were either dead or missing and when the disaster was still unfolding.
If any further proof were needed of the lazy pack mentality of the press gallery, here it was. While the normally astute Bernard Keane of Crikey moved to defend his colleagues' questioning as legitimate, the general response on Twitter was that the deficit-related questioning was inappropriate at this time.
Of course, media scrutiny of government finances is entirely appropriate. But this would be easier to take seriously if it were not suspected that the questioning was purely a tactical ruse aimed at extracting a "gotcha" quote from Gillard - in effect getting her to admit, even in the slightest way, that the surplus goal might be compromised by the size of the demand on government from a disaster of this magnitude. The headlines at The Australian - 'Deficit Looms as PM Loses Grip on Budget' - will be ready to roll for the slightest trip, which is why Gillard chose her words carefully.
As to complaints from Keane that this criticism is unfair on the press gallery, one wonders whether journalists would have the temerity to ask Gillard, during a press conference to announce the death of another Australian soldier in Afghanistan, as to what the escalating financial cost of this war meant for her surplus projections.
The big lie about Australian government finances, as informed journalists like Ross Gittins have repeatedly shown, is that the public sector is drowning in debt or that we are running an unsustainable deficit. That is simply not true. Yet not matter how many times this is pointed out, the press gallery continue to play the 'debt and deficit' card - simply because it suits their purposes to play word games with politicians to keep themselves entertained and to avoid having to ask themselves tougher questions; like how political journalism became a type of ersatz accounting (except in this case the practitioners can't add up).
Here is a chart from the OECD. It shows that Australia is extremely well positioned relative to most developed economies in terms of net government liabilities (how much the government owes after assets are taken into account). Japan has net liabilities of more than 100 per cent of GDP, the US nearly 70 per cent, the Euro area 59 per cent and the total OECD 58 per cent. Australia has net liabilities of 0.4 per cent of GDP - negligible.
Is it too much to ask the press gallery to get a sense of proportion over this and point it out to the Australian public that we are not up to our eyeballs in debt and that our public finances are the envy of the rest of the developed world? And is it too much to ask political journos to consider for just a moment that the very reason governments run surpluses in good times is so the budget can play its role as a shock absorber in bad? Remember the rainy day we're saving for? It's here.
One final observation: Notice from the chart above that oil-rich Norway has the best public finances in the world? Psst. They run a resource rent tax.
Posted by Mr D at 10:28 PM