Coalition’s debt hypocrisy trashed its economic brand – but a trap lies ahead for Labor | Greg Jericho | Australia news


Since the May budget, the Labor party has been a bit like the dog that caught the car – the government has effectively admitted defeat to Labor on a number of issues and, as a result, Labor is struggling to adjust to having won the policy debate without having won an election.

Let’s not beat around the bush – the Coalition, from the prime minister down, are utter hypocrites on the issue of government debt. After years of endless warnings of the perils of high debt, on Friday Australia’s gross debt hit $500bn – the highest it has ever been and almost double the amount it was when the Coalition took over office in 2013.

And good thing too.

This is the problem for Labor. The government has been completely hypocritical and yet it is good for the country that it has been. Not only that, its hypocrisy is implicitly welcomed by Labor as it means the government’s position on debt and budget management is now essentially that of the Labor party.

It isn’t hard to find examples of Malcolm Turnbull and others in the government being hypocritical on the issue of government debt.

On entering parliament, Turnbull quickly took to regurgitating the talking points about the debt left by the Keating government. And once Rudd took office he quickly shifted to boasting of how the Howard government left Australia with “cash in the bank”.

So drastically have the Coalition and Turnbull changed position on debt that, if we are brutally honest, they have destroyed their credibility on any economic issue.

Debt wasn’t just a side issue for the Liberal party – it was the central thesis that supported everything they stood for economically. Criticism of Labor’s economic management began and ended with talk of debt.

In 2009, for example, Turnbull argued that debt was the terror of all economic ills. He argued that “higher commonwealth debt means job-destroying higher taxes and job-destroying higher interest rates”.

When he made that claim, government net debt was around 3.8% of GDP. By the time the Coalition took office in 2013, the level had risen to 10.4% of GDP. Now it is a record 18.6% – and is projected to reach 19.8% of GDP in two years’ time.

On one level, it is not surprising that Labor this week spent parts of question time attacking the government over debt. But the problem with attacking your opponent for being a hypocrite is it only really works when their hypocrisy sees them doing something you disagree with.

If an opposition party decries the lack of spending on health and education and then cuts such spending when in office, then their hypocrisy is not only easy to call out but deserving of venomous attack. And such attacks hurt.

But what about when the hypocrisy is caused by the government doing something right?

Had the government actually lived up to its dumb rhetoric that debt was evil, and decided to drastically slash government spending and pursue austerity measures, we would likely be in a recession.

Even Joe Hockey’s horror 2014 budget was actually quite light on the total cuts to the deficit and debt – he knew a fast return to surplus was a fast track to recession.

The problem for Labor attacking the government over debt is that it implicitly suggests they believe it should be lower and, secondly, the rising levels of debt actually reveals just how little it matters.

When we reached $500bn worth of gross debt no one sitting at home felt a chill go down their spine. No one came home with the sad news that they had lost their job because the government now had half a trillion dollars’ worth of debt on its books; no one got a letter from their bank telling them that, due to the government’s debt, interest rates were going up.

We currently have record levels of debt and yet also record low interest rates. Unemployment has fallen and even full-time employment – that most elusive thing of the past few years – also appears to be growing more solidly.

Debt is apparently not the economic evil the conservatives would have had us believe it was.

Labor’s main thrust regarding the level of debt is that it means the government should not be delivering a tax cut to high-income earners by ending the deficit levy for those earning over $180,000, or the company tax cut for big businesses.

But while Labor might feel such lines are winning, they only really make sense if you agree with the view that debt actually is an economic evil and deficits are the gauge of economic management.

Clearly the Labor party does not take that position.

It is frustrating that the hypocrisy of the government is writ large in all they now say. In 2009, Scott Morrison told parliament that “the borrowing of $100m a day was something that outraged” his constituents. This week, when such borrowings are nearly 40% higher, he argued that “we are raising the gross debt to build airports, to build railways, to build infrastructure, to build submarines”.

Believe what conservatives do, not what they say.

Under Shorten, Labor has been excellent at driving the political debate. It led on housing affordability, on equality, on school funding and on health such that it had the government under both Abbott and Turnbull struggling to react. Now it has reacted, Labor needs to adjust.

Tax cuts for those earning over $180,000 or a company tax cut for big businesses are not bad because they will raise the deficit but because they are poor economic policy that increase inequality and do little to drive economic growth.

Labor party MPs are surely thrilled they no longer have to argue within an idiotic paradigm that debt and deficit is evil. But they need to be careful that, in revelling in the hypocrisy of the government, they do not find themselves adopting a policy on debt that returns us to that idiotic position. Then the hypocrisy would be back on them.

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