Tuesday, February 17, 2009

What if Joe Hockey is Julie Bishop in new clothes?

The Coalition's new economic supremo may not be the ticket to credibility it urgently needs.

His predecessor Julie Bishop was ineffective not only because of what she calls the "ongoing commentary" about her role, but also because she didn't understand economics.

Within weeks of last year's May budget she was calling on the Prime Minister to "explain the reasons behind the budget forecast that 134,000 jobs will be lost in Australia by June next year."

But the budget hadn't made such a forecast. Quite the opposite. It had forecast a continuing increase in the number of Australians in jobs, albeit a smaller one that would be needed to stop the unemployment rate climbing.

The Shadow Treasurer had failed to understand the relationship between employment and unemployment. And she appeared not to have read the forecasts in the May budget...

She kept making the claim until November.

In December as the government began running down its projected 2008-09 surplus she said it had "spent virtually the entire reserves of the budget, the $21 billion that was built up over ten years - that money has now gone".

But the reserves that had been built up over ten years (far more than $21 billion) hadn't gone. They were still sitting in the Future Fund where the Coalition had left them. She had confused one year's budget surplus with an accumulation of budget surpluses. She had confused part of a flow with a stock.

It's the sort of confusion common among people who have difficulty getting their heads around mathematical concepts - people who have chosen not to specialise in the study of mathematics or science or economics.

This doesn't mean that the rest are innumerate, but it does mean that they haven't been drawn to the study of mathematical concepts.

As Julie Bishop said yesterday, she asked for the Treasury portfolio because "it had been something of a tradition in the Liberal Party for the Deputy Leader to hold that portfolio".

An astonishing 13 of the Coalition's 17 tertiary-educated frontbenchers are lawyers, among them Julie Bishop and Joe Hockey.

Lawyers can master economics, although it may not come easily. Peter Costello managed it. But it requires a different way of thinking and a genuine feel for mathematical relationships.

A week ago on Lateline Joe Hockey failed to demonstrate that feel. Confusing the current account deficit with the budget deficit he insisted that it had never reached 6 per cent of GDP, which is where it is. He's looking like a Julie Bishop.

The man he pipped at the post for the top economics job, Andrew Robb is one of the few Coalition frontbenchers to have an economics degree.

HT: Anonymous commenter

Edited, see