For the past two years and, it seems, for several more years, several European countries are playing out a real-time experiment in economic policy: whether large levels of government debt can be brought under control with aggressive fiscal austerity.
The answer, thus far, is no — whether it is the dysfunctional economy of Greece, or one of the world’s largest, the UK’s, debt reduction targets have been missed because of the impacts on economic growth of austerity. That’s along with the apparently incidental human cost in terms of high unemployment.
Despite the ongoing failure of the experiment in Europe, Australians are increasingly being urged to austerity by conservative commentators. Foremost among them is David Murray, former head of the Future Fund, who is repeatedly given more or less unchallenged space at the national newspapers and on the ABC to endlessly rehearse his warnings about succumbing to the same disease as Europe, and the need to dramatically slash government spending.
It’s fitting that much of Murray’s advice is delivered via The Australian Financial Review and The Australian. Both papers are owned by companies busy cutting costs in an austerity drive that will can only staunch their bleeding, not return them to growth.
Fortunately, Australia is not in the desperate positions in which Fairfax Media and News Ltd now find themselves.
When pressed to explain in detail the nature of the threat to Australia, with its low levels of government debt, Murray produces an external shock scenario that has been repeatedly addressed by the Reserve Bank and external agencies such as the International Monetary Fund, as being an unlikely one that Australia, its federal government and its financial system should be able to handle if indeed it eventuates.
And Murray and people like him can’t point to one economy where austerity has driven growth, cut unemployment and made the people of that economy wealthier and more at ease with themselves.
But the hairshirt scenario being pressed on us is less about real-world challenges and more about ideology. The ideology is to be found in the railing of Murray and others at “welfare”. Australia indeed has a middle-class welfare problem (no one is accusing the government of unmerited generosity to Newstart recipients; quite the opposite). But Murray and conservative commentators have been strangely silent when the current government has mustered some courage to cut it back.
As the Reserve Bank explained on Tuesday, there is a genuine question over what will drive Australian growth as the current phase of the mining investment boom comes to an end next year, especially given the sluggish state of global growth. With low inflation and a government committed to a dramatic fiscal tightening, it has been left to monetary policy to refire domestic demand in anticipation. Donning the fiscal hairshirt, however, would place far too much pressure on monetary policy, with its known limitations. The cost would be lower growth, greater difficulty in returning to and maintaining surplus, and a human toll in unemployment.
There’s an adage in business, which says: you can’t cost your way to growth.
David Murray – “dyed in the wool conservative and (thus, with it being a “socialist conspiracy”?) overt climate change denier” – appearing regularly over the last couple of days on the ABC as another of their “experts” (like Reith?) – spreading his “considered opinion” on another of his “special interest hobbies” – “the economy”?
An “economist” of sorts – expert in “predicting the past”?
Well done Crikey. David Murray’s recent elevation to being the ABC’s go to economic sage/messiah, is rapidly becoming a right PITA.
Lateline one moment, 7.30 the next. Can regular gigs on Q&A and The Drum be far away?
Climate denier, failed (or at least less than stellar) Future fund manager, he really doesn’t bring a lot to the table.
I thought Peter Reith was the most annoying man on the ABC. But if the last week is any thing to go by, and Murray continues to appear, he’ll be a shoo-in to seize the title.
Why do we have to suffer this man and his outrageous views on the ABC every other day? I have taken to the mute button as a means to escape such tripe! Ditto Peter Reith and that annoying IPA whatsisname on the Drum far too frequently.
“…the mining investment boom comes to an end next year”.
No, boys, the mining boom will not end next year. Projects currently under construction will start earning trade dollars to add to the current flows, China’s economy is set to increase at a rate of (only?) 6+% pa, India’s 5+%, and so on.
This isn’t the end of anything. There’s cause for optimism, despite the gloom emitted from the failed Futures Fund Chair’s mouth.
“Have prejudices. Will Travel.”?