Sydney Morning Herald Economics Editor Ross Gittins
presented a lively paper to Australian Business Economists Annual Forecasting
Conference yesterday. Here are a few
choice snippets, but wonks will want to look at the whole speech here.

“It’s good news time for economists: the economy is back on top of the
political heap. After a relatively brief period of preoccupation with
security and border protection issues, the recent federal election
leaves no doubt that the public is back to sharing the economists’
obsession with matters economic,” he told the pointy-heads.

Gittins even had some amusing political revisionism to entertain the
economists with – and if you can get practitioners of the dismal
science to crack a smile, that’s quite some achievement.

“It’s possible that, even in the 2001 election, economic factors played
a greater role than popularly supposed,” he told the throng. “A
paper by Professor Tim Fry and colleagues at RMIT used data from the
ANU’s 2001 Australian Election Study to show that John Howard’s win was
underwritten by a strong tendency for people who believed themselves or
the country to better off than 12 months ago, or that they will be
better off in 12 months’ time, to vote Liberal.

“In the latest election, macro-economic issues helped Howard in both
positive and negative ways. The booming economy left few voters
with sufficient reason to want to change the government, while Mark
Latham’s inexperience and the negative highlights of Labor’s last
period in office left him vulnerable to Howard’s scare campaign on
interest rates. Labor’s Basil Fawlty policy – its strange refusal
to engage the Libs in debate over the economy – was a major
error. It could have mounted a lot of telling counter-arguments
about the worsening in affordability for first-home buyers, the
continuing rapid growth in the foreign debt and its link to the blowout
in household debt, and how this has taken us to the point where
interest payments are claiming their highest ever share of household
income. Little wonder voters were so sensitive to a scare
campaign on interest rates. But Labor’s inexplicable silence left
us in the remarkable position where the very man who’d got voters up to
their ears in debt was able to persuade them he was the only person who
could be trusted to ensure they didn’t go right under.

“But, as Lindsay Tanner has pointed out, Labor’s lack of credibility on
the economy runs far deeper than just the crazy tactics it adopted in
this campaign. Economists look back on Labor’s time in government
with not a little respect, but the Howard Government has worked
assiduously for the past eight years to trash Labor’s reputation as an
economic manager, with Labor doing little to try to counter that
assault. Why? Because, as Tanner says, since Paul Keating’s
defeat in 1996 his successors have been ambivalent towards Labor’s
record on economic reform. Labor’s wanted to be seen as opposed
to economic reform, not as the primary instigator of it. Little
wonder it’s lost whatever economic credibility it once had.”

And talking about economic credibility, what does Gittins think John
Howard has planned, not that he will soon be able to implement the
reform agenda he has spent the last two decades and a bit itching for –
snigger – been cruelly thwarted?

“I’m sorry to be a wet blanket”, Gittins says, “but I ha’e me doots
about Howard’s enthusiasm for a new round of reform. His personal
to-do list on micro reform was set in his mind by the mid-80s and has
changed little since then. As those reforms are achieved and crossed
off his list, no new items take their place. Take, for instance, the
challenge of ageing. It’s not on Howard’s list so, though Peter
Costello and Ken Henry preach about it unceasingly, very little
actually gets done…”

Finally, Gittins also has some advice for the pundits – political and economic:

“I want to make one point that was apparent to everyone on election
night, but we’re already in danger of forgetting: Howard’s increased
majority came as a surprise to everyone. Although few people
expected Labor to win, no one expected it to lose seats – not Labor and
not Howard. He admitted that the most he’d hoped for was not to
lose any seats of his own. The triumph was not foreshadowed by
the poll formerly favoured by the pros – Newspoll – and those other
polls pointing to a strong Howard win were openly pooh-poohed by their
sponsors. The moral is: no matter who you are or how close your
ear is to the ground, it’s simply not possible to know how an election
will transpire. Like forecasting the economy, it’s just supposed
experts pretending to know more than they do.”

Happy Christmas to you, too, Ross!