Labor's Debt Problem

If there's one thing you'd think even the federal Labor government's most fervent opponents could grudgingly concede, it's that Labor did quite a good job steering us through the GFC. We've low unemployment, low interest rates, low inflation, the economy has grown 9% since 2010. Instead of giving credit to the economic management of Gillard and Swan, however, the conservative line runs that they have achieved all this solely by running up massive debt - $200 billion is the figure often thrown around. It's an appalling number. But is it true? Where does it come from?

The closest I could find to a credible source for this figure was an article in The Australian which claims government borrowings in the form of commonwealth securities will reach $249.7bn within 4 years. $250 billion within 4 years! It's worse than we thought. Wait. Not debt. "Commonwealth securities". What are those exactly? Well, they're also known as treasury bonds. $250 billion of government treasury bonds doesn't have quite the same alarmist ring to it as crippling government debt. Also, it is often claimed that Australia had no government debt when Howard and Costello left office. The truth is Australia had $58 billion of government securities issued at 30 June 2007. Howard left Australia with a $58bn dollar debt! The thing is, why? Bonds are usually issued at times of war or crisis, to make up for a shortfall in revenue, such as the massive fall in tax revenue during the GFC. The Howard government faced no such event. In fact they were such hoarding, miserly economic managers they left their much vaunted $20 billion surplus, as if governments were corporations with a responsibility to turn a profit, instead of that money being stolen from every taxpayer in Australia to make themselves look good to people who don't understand how economies work. What the hell did Howard and Costello spend that $58bn on? Where were the hand-wringing editorials about how our children would ever pay it back?

Of course, it could be argued that Labor was reckless to spend all that money on economic stimulus; they should have reduced spending to reflect revenue, as a Coalition government would presumably have done, and waited to ride the GFC out. Would be better off? We'll never know. But I doubt it. As the worst of the GFC failed to hit Australia, people don't realise the massive calamity we have been spared, seen in nations where the path of austerity was taken. So I suppose you can forgive some conservatives for thinking, "well, Labor did okay...but the Coalition would have been even better."

Then there's the lunatic fringe, who think Australia isn't doing so well. Australia is doing bloody awful, in fact, and the only reason we have a AAA credit rating from Fitch, Moody's, and Standard and Poor's; the only reason we are rated as one of he world's strongest economies - and Wayne Swan as world's best treasurer - is that global economists believe the false economic data fed to them by the government. Just think, Australia is in the toilet financially, but Gillard is such an international super-liar she has managed to convince the world's best economic analysts that we're doing great. No investigation necessary, they've taken the lies from the Reserve Bank in toto. And drawing on this thesis, not only does Alan Jones know more about global weather patterns than climate scientists, he also knows more about the economy than the world's best economic analysts, who have trillions of dollars invested in determining risk. He truly is a polymath and great thinker and we are lucky to have him. Presumably Botswana will now claim they have a $600bn economy, since global financial markets believe what ever the country in question tells them.

Really, the only was to claim the government has racked up massive debt and left the country in a terrible position is to at best blur figures and at worst, lie. It's simply untrue to say Labor has left a $200bn debt without  mentioning the $58bn from Howard and Costello. It's also a lie to count out  surpluses to pay the figure off - they are paid from tax revenues, which we wouldn't have under a Coalition government. We'd be in a deeper hole, in fact, and no amount of overstating the less than 20% of GDP accrued from the mining sector can change that. I've my problems with Labor, but it seems damn ungrateful to toss out the government who did all this in favour of one that will run the economy into the ground and blame them for it.