Friday, January 11, 2013

Howard was your most wasteful sprendthrift in modern history - IMF

Not Whitlam. Not Rudd. Not Gillard

Australia’s most needlessly wasteful spending took place under the John Howard led Coalition government rather than under the Whitlam, Rudd or Gillard Labor governments, a major international study has found.

Entitled A Modern History of Fiscal Prudence and Profligacy the new International Monetary Fund study bills itself as the first to examine 200 years of government financial records across 55 leading economies.

It identifies only two periods of Australian “fiscal profligacy” in recent years, both during John Howard’s term in office - in 2003 at the start of the mining boom and during John Howard’s final years in office between 2005 and 2007.

The stimulus spending of the Rudd government during the financial crisis doesn’t rate as profligate because the measure makes allowance for spending needed to stabilise the economy.

The Whitlam Labor government of 1972 to 1975 also escapes censure.

The economists from the IMF’s fiscal affairs department found the only other years of profligate spending during the past six decades took place during the conservative government of Robert Menzies, in 1960. It says the Menzies government was notably prudent in 1950.

In the postwar years of 1947 to 1949, the Chifley Labor government was deemed prudent as were the Scullin and Lyons Labor and Coalition governments between 1931 and 1935. John Curtin’s Labor government was profilgate in 1942...

The study finds that in broad terms Australia’s government debt has been falling since 1932 when it peaked at 98 per cent of gross domestic product. Across all levels of government it is presently just above 20 per cent after climbing since the global financial crisis.

The budget balance has been broadly stable for half a century.

The key finding is that Australia has few examples of economic recklessness compared to other developed nations. Canada’s government debt peaked at 143 per cent of GDP in 1946, Japan’s reached 233 per cent in 2011, Israel’s reached 284 per cent in 1984. Australia’s neighbour New Zealand recorded government debt of 226 per cent in 1933 and a budget deficit of 7.5 per cent of GDP in 1995.

Developed nations were generally their most prudent before the First World War and during the 1990s, the study finds. They were generally their least prudent during the mid-1970s and in some cases after the global financial crisis.

The IMF study mirrors findings in a 2008 Australian Treasury study that found real government spending grew faster in the final four years of the Howard government than in any four year period since the 1990’s recession.

The number of big spending decisions worth more than $1 billion climbed from one in the first Howard budget to nine in the last. The proportion of savings measures fell from one third of budget measures at the start of the Howard era to 1.5 per cent at the end.

Responding to the IMF report Coalition Treasury spokesman Joe Hockey said the Howard government left Labor with a $20 billion dollar surplus and no net debt.

“It was not John Howard and Peter Costello who wasted billions of taxpayer dollars on dangerous pink batts and overpriced school halls - it was this Labor Government,” he said.

In today's Sydney Morning Herald and Age

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