AA,

Firstly your claims were without qualification. Given that mining revenue only dipped before recovering to levels exceeding anything Howard ever saw, the excuse of the GFC is relatively feeble.

That in the first year of the GFC that stimulus was required was not in question, however, the management of this was appalling. The general economic consensus is that the amount spent was excessive, and extended far too long, for example in the construction industry which was "at risk" of shedding jobs the demand pushed up wages by 10%-20%, and non government projects were shelved due to a shortage of labor, and the majority of the "stimulus" continued to be spent long after the country returned to trend growth.

On top of this the Schools halls project was so badly handled that the cost of these buildings at public schools (that were managed by the government) averaged double the cost of those professionally managed by independent schools. To top it all most of what was offered to the public schools did not match what they actually really needed, and most public school halls did not begin until the need for stimulus had passed.

So while stimulus was needed, a competently targeted stimulus could have achieved the job savings at a fraction of what Labor spent.

So for my $300 000 overdraft I got $30 000 worth of value.

The comparison of the first 5 years. One received an economy in crisis, and reduced the debt, the unemployment and taxes. Swan inherited an economy that at full employment, producing record surpluses, and growing at 4%, and delivered the 4 greatest deficits in history (even when the economy was growing) pushed up unemployment, and has consistently missed every budget target he set himself.

As far as your indicators are concerned:

1 Tax collected is not an indication of tax rates.
2 Non mining industrial production is collapsing, so stop quoting figures that include mining.
3 Quoting quality of life index figures from 2005 shows what about Labor?

I'm sorry, but your cherry picked indices are generally irrelevant or were better under Howard.

Good morning,

Re: “Firstly your claims were without qualification.”

Correct. And remain so. The last discussion was about GDP growth. No?

Scroll back to my original list of 25 variables where the present Government is doing as well as or better than the previous Government. GDP growth is not there. It’s on your later list.

We are all correct here. You rightly list it as an area of better performance by the previous Government in raw terms. I am right to leave it out. Economists are also right to claim this as a major indicator that your current economic management is best the world has ever seen – because economists always consider context.

Re: “Given that mining revenue only dipped before recovering to levels exceeding anything Howard ever saw, the excuse of the GFC is relatively feeble.”

Yes and no. Mining is important. But it’s only a proportion of your total economy.

Re: “That in the first year of the GFC that stimulus was required was not in question.”

Excellent. Making progress. This has certainly been questioned by many, here and elsewhere, including Grim23.

Re: “The general economic consensus is that the amount spent was excessive, and extended far too long …”

Not true, Shadow Minister. Economic consensus gives it a big tick. General community consensus, which is heavily influenced by Australia’s mendacious media, doesn’t.

Re your criticisms of the school buildings project, some buildings cost more than they otherwise might have in less harried circumstances. But that wasn’t the point of the project, was it?

We can equally argue that John Howard in 1996 could have bought far more than 650,000 semi-automatic guns at a fraction of the $320 million spent in Australia – if only he had gone to the US secondhand market. But that wasn’t the point either, was it?

Auditors put the waste at around 2% overall – about average.

Re: “I'm sorry, but your cherry picked indices are generally irrelevant or were better under Howard.”

Not at all, SM. I listed 25. That's not cherry-picking. They are all relevant and all provable.

Cheers,

Again and again and again I tell you and you ignore it that interest rates are a very poor indicator of the stance of monetary policy!

You say youve read the links but can't see sufficient evidence that monetary policy alone did not get Australia through the crisis.
How about the one that compared Australia to New Zealand? Or the one that showed how our exchange rate perfectly tracked the fall in commodity prices? And that since our exchange rate has been tracking commodity prices we have always had stable NGDP growth? And that since our exchange rate has remained high while commodity prices have fallen our growth has slowed? Or the one that explains that we had significantly higher nominal gdp growth leading up to the crisis, so there was further for us to fall? It was an implicit NGDP level target and a forward rather than backward looking monetary policy that set us apart.

The differences are subtle and require you to look deep into the data. Again, your sinple statistic is too simplistic.

As for the Great Depression, it has been accepted for a long time that it was caused by a sharp contraction in the money supply, not the stock market crash. Ghe stock market crash was, like the one in 2008, caused by expectations of tight monetary policy going into the future.

The question you really need to answer is do you seriously think that the RBA would not have been able to stabilise NGDP without fiscal stimulus?

Hello again Grim23,

Thanks for this.

Re: “Again I tell you that interest rates are a very poor indicator of the stance of monetary policy!”

Okay. If interest rates are a poor indicator, then what measurable variables do you have?

Re: “You say you’ve read the links but can't see sufficient evidence that monetary policy alone did not get Australia through the crisis.”

No. Monetary policy was a factor. But doesn’t explain Australia’s surge, does it?

Re: “since our exchange rate has been tracking commodity prices we have always had stable NGDP growth?”

Two problems with this, Grim23. First, NGDP growth is an outcome, not a setting. What were the strategies Australia applied to achieve this?

The second problem is that Brazil had a near identical exchange rate history to Australia’s during the GFC. Compare the charts of the Aussie dollar and the Brazilian real between January 2008 and June 2010. Near identical. No?

Both countries export minerals. Same global commodity prices. Eerily similar exchange rate declines and rises through the GFC. Brazil started at about 16th and ended up 16th in economic ranking. Australia started at 11th and ended up 1st – by a street.

Can you see how this suggests “exchange rate tracking commodity prices” was not significant?

So what were the decisions which propelled Australia’s economy from 11th ranked to best in the world – and best the world has ever seen – by an impressive margin?

Ken Henry urged Wayne Swan to “Go early, go hard and go households.” Swan did that. He implemented the world’s greatest Keynesian stimulus. Correct?

The world then watched in awe as Australia leapt ahead of every other nation in a single bound – with one negative quarter, rapid recovery of the dollar, low taxes, low inflation, increased services, increased benefits, low deficits, low borrowings and performance on the 25 indicators Shadow Minister and I are discussing as good as or better than achieved through the Howard Government's boom years.

If you claim the stimulus had no effect, then it is fair to ask what did.

Back to you, Grim23.

Cheers,

AA,

If Howard's GDP growth beat Juliar's hands down, then your unqualified claim was wrong.

Most economists realise that stimulus was required, but also realise that the stimulus was too much, too long and poorly managed.

Your comparison to other countries is also disingenuous as no other country had the same proportion of minerals exports, nor a zero net debt. Howard left Australia in a far stronger position than other country in the world to deal with the GFC, which meant that it suffered less than any other country.

Labor could claim some credit if it managed the stimulus in a targeted and efficient manner, but they simply went out and spent like drunken sailors, leaving a legacy of debt that future generations will need to pay.

Hello again Shadow Minister,

Not sure we are on the same page. You may need to clarify.

Re: “If Howard's GDP growth beat Juliar's hands down, then your unqualified claim was wrong.”

What unqualified claim? Can’t find one.

Re: “Most economists realise that stimulus was required, but that the stimulus was too much, too long and poorly managed.”

Really? Who? Based on what analysis?

Just behind Australia in spending quantum were Mexico and the USA. Both had five quarters of negative growth to Australia’s one. Unemployment almost doubled in Mexico, more than doubled in the USA. Both have gone into much deeper debt than Australia.

Most other OECD nations which spent less performed even worse.

Is there any evidence anywhere to suggest that Australia would have done as well had it allocated even marginally less, or more slowly, or targetted differently?

Re: “Your comparison to other countries is disingenuous as no other country had the same proportion of minerals exports, nor a zero net debt.”

Not really, SM. No country had precisely the same proportion – true. But several other nations also export vast quantities of minerals. We have looked at Brazil – which, if you are right about minerals exports, should have done well through the GFC. Same with the other big minerals exporters. No?

Australia ranked ninth among countries exporting to China in 2008. What happened to the other eight? Any protection through the GFC? None whatsoever.

Plenty of other countries had low or zero net debt, SM, including Spain, Finland, Iceland and Chile. They all had 2008 budget surpluses as well - yet all suffered terribly badly.

In contrast, Israel, Switzerland and Singapore went into the GFC with huge debts but are now travelling extremely well.

Evidence is overwhelming that deficit and debt made no difference at all. Unless you have contrary data, SM.

You have heard Professor Joseph Stiglitz and others assert Australia’s quantum and direction were spot on.

So I’m curious to hear which economists claim lower stimuli would have worked, what quantum would have been better, and on what empirical basis.

Thanks, SM.

Cheers,