It’s “Game Over” As Treasury Intervention Shreds Rudd’s Credibility

THE FINAL BLOW to Kevin Rudd’s credibility was delivered last night, as the department heads of Treasury and Finance stunningly rebuked Labor’s claim of a “black hole” in Coalition costings; Labor’s charges have been shown to be dishonest, and as a result the election race is now over, bar the counting.

It is now safe to say — barring some stellar and monumental gaffe by the Liberals, the prospect of which defies belief — that the ALP has lost this election; the Liberal Party will be elected on 7 September, probably by a wide margin, and yesterday made it a formality.

After months spruiking baseless claims about Coalition costings — most notably that there was a $70 billion shortfall in them — the ALP yesterday hit the brick wall rigorous press scrutiny should have presented: a rebuff, in unequivocal terms from a source of great integrity, of the veracity of the basis of Labor’s scare campaign over budget cuts that an Abbott government would implement.

The intervention in the election campaign last night by the heads of the departments of Treasury and Finance — a development without precedent — has exploded the last hope Rudd and Labor have clung to: frightening the bejesus out of people that nasty Liberals would cut government spending “to the bone” and induce a recession that would cost jobs.

Here is a very simple outline of what appears to have occurred.

Some months ago, the ALP submitted “hypothetical” Liberal policies to Treasury for costing (as they are entitled to do).

Within the parameters of the material it supplied, the findings provided to the ALP suggested the hypothetical policies would be short funded to the tune of $70 billion.

Later — in due course, and in line with its legal obligations — the Coalition submitted its actual policies to the Parliamentary Budget Office for costing under the Charter of Budget Honesty; these were ticked off and no “black hole” was identified.

Today, Rudd has been running around brandishing the earlier, “hypothetical” costings, screaming “It’s a fraud! It’s an outrage! The Liberal Party will cut to the bone!”

So, admirably — and without being asked — the relevant department heads have taken the unheard-of step of releasing a statement to say that their departments never costed actual Coalition policies, and that Labor had been relying on findings into the hypothetical policies it supplied earlier this year.

Moreover, it seems Labor was warned that the research into the hypothetical material it supplied for “costing” could not be attributed to the Coalition¬†at the time it was supplied — very simply because the Coalition was in no way involved in the process itself.

(Does that sum it up clearly? Here is The Australian‘s take on it too, in case I have missed anything critical, and for more on the statements from various senior public servants).

To be fair to Rudd, his proclamations today that Coalition costings amounted to “a fraud” featured a revision downward in the size of the alleged “black hole” to $10 billion, but that’s all the kudos he can take from what has now been clearly shown as a discredited smear.

This is — not to put too fine a point on it — the end of Labor’s election campaign.

Labor has fought the only election strategy it could: ignore its own record, claim underdog status, neutralise or outflank Coalition positions as appropriate on an issue-by-issue basis, and try to scare hell out of voters about what an Abbott government would do.

That strategy now lies in smoking ruins; at best, Rudd has been caught using incorrect material on which to base his attacks on the Liberals; at worst, the entire Labor campaign has been predicated on a systematic and deliberate lie to the Australian public when it knew what it was saying was a complete fiction.

Either way — as has been observed by others — the ALP has forced the public service mandarins to intervene, lest they be charged with aiding and abetting the ALP politically.

And act they have; whether on principle or fear of reprisal after 7 September, or perhaps (and understandably) a bit of both,¬†Treasury secretary Martin Parkinson and Finance secretary David Tune — together with their counterpart at the Parliamentary Budget Office, Phil Bowen — are to be commended for acting to uphold transparency and honesty in the election process.

Labor, however, appears to still not get it.

After the public service statement, Treasurer Chris Bowen and Finance minister Penny Wong were, unwisely, insistent that Coalition policies contained an overall shortfall of $10 billion, and that a Liberal government would make “savage cuts” to find savings.

It’s one thing to legitimately find a shortfall in an opponent’s election costings, and then prosecute the failing until the cows come home.

But it is another matter altogether to campaign, knowingly, on a fabrication and a lie.

It’s worse still to keep doing so after an impartial third party has blown the whistle.

But we’re talking about the Labor Party, and “decency” is not a word that comes to mind.

Provided there is no game-changing gaffe from the Liberals (and it beggars belief that there will be), yesterday marks the point at which a Coalition triumph next week went from being likely to being a lay-down misere.

Nothing Labor says now can or indeed should be regarded as in any way accurate, reliable, credible, or uttered in good faith.

And in a clear sign the ALP does not learn from its mistakes, the parallels with Anna Bligh’s disastrous campaign in Queensland in 2012 — in which she continued to insist Campbell Newman had committed misconduct requiring CMC investigation, even as she admitted there was no evidence to support the claim — are astonishing.

In eight days time, Tony Abbott will be elected Prime Minister of Australia; it was always likely to be thus, but the scope of the belting Labor now seems destined to suffer has been largely and directly fuelled by its own conduct.

This is an ethically and morally bankrupt government, whose contribution to Australia is minimal, and whose Green-stained “legacy” will largely be erased in the next term of Parliament.

There is nothing left for Labor to campaign on. There is nothing it can say that is of any consequence. Its imbecile of a leader has permitted himself to be caught up in a fast and loose rendition of the truth, and very soon, his party will be annihilated.

For Labor, the party will shortly be over. Australia will be the better for it.

Is The Australian Economy About To Hit The Skids?

FORTUNE may be smiling on Tony Abbott in more ways than one; a softening world economy could suggest the coming election as a good one to lose. But with a reviled and politically discredited government set to be ejected from office in a landslide, Labor would make an easy scapegoat for any recession.

Most readers will by now have heard me say several times that I believe the Australian economy — the resources sector excluded — is already in recession, and probably quite heavily so.

Nobody, and least of all the self-important know-it-all Treasurer Wayne Swan, has made any pretence to contradict the contention that the minerals and energy sector has been holding Australia’s economic performance aloft for many years now.

I read an article by Terry McCrann in Brisbane’s Courier Mail during the week (and quite probably carried by other News Ltd titles as well) which makes the case, and compellingly so, that the proverbial backside is about to fall out of that sector of the economy too.

The orthodox wisdom would be that a recession (an officially announced one, that is, of two quarters of negative economic growth) inside the first year of an Abbott government would see the Liberals blamed for it.

The political times, however, are anything but orthodox.

I tend to think a recession — after Labor has left office — is probably the final, devastating blow post mortem that could be inflicted on the ALP and its reputation (such as it is) for economic management.

Ironically, one of the strongest factors to substantiate this lies in the so-called Global Financial Crisis, which struck during the first year in office of the Rudd government, and Labor’s handling of it — or at least its trumpeting of same ever since.

By consensus, it is recognised that the GFC was an externally driven event; that is, it would have occurred irrespective of who occupied the Treasury benches in Canberra at that time.

By shovelling some $47 billion at the economy (and voters directly) under the auspices of “stimulus,” Rudd and Swan were able to point to an Australian economy unique among developed nations in averting a recession as a result of the GFC.

Nonetheless, it was a damned-close run thing: one-quarter of negative growth, followed by another in which the economy recorded growth of just 0.1%.

Whether the Rudd government’s actions had anything to do with avoiding recession, or whether it was simply the case the mining industry would have taken care of that on its own at that time, remains a moot point.

But the $47 billion in (often rorted and abused) stimulus spending set in train a behaviour pattern that has since seen the Rudd-Gillard government rack up another $200 billion or so in additional debt since the GFC in 2008.

Swan, in particular, has dishonestly and consistently tried ever since to convince anyone who would listen that the Australian economy has faced a revenue problem, and that government receipts collapsed in 2008 and have never really recovered.

His own budget documents, however, show that revenue has increased by an average 7% each year since the ALP took office — despite the GFC — and that they increased by that amount in the past year despite Swan tabling a budget that included an $18 billion deficit.

So the problem isn’t revenue at all; it’s spending. This is a critical point we’ll come back to.

Bristling with class envy and resentment, the ALP under both Rudd and Gillard set about finding a way reap billions of additional tax dollars from the mining sector to help offset the profligate and uncontrollable spending spree to which it had become addicted.

It is a matter of record that the mining tax, in its first full year of operation, has raised next to no money.

Yet the damage was done, as fears of sovereign risk and considerations of increasing costs and regulation punctured confidence within the industry.

Investment in mining projects began to fall, and some projects worth tens of billions of dollars in foreign investment and orders were simply abandoned.

Today, we face a major trading partner in the US, whose economy is finally showing signs of sustained growth after six years of torpor.

This would ordinarily be a good thing, except for the fact — as highlighted by McCrann — that the US is also flooding world commodity markets with the same resources, and in huge quantities, that Australia’s minerals boom has been predicated upon.

Between the mining tax and the carbon tax, Australia has become far less competitive as a supplier of minerals and ores on world markets. The falling value of our dollar — if sustained — will ameliorate the effect of these to a point, but until they are abolished these measures will remain a killer of primary sector activity.

This is exacerbated by the fact that China — long the reason a mining boom took off in the first place — has been deliberately slowing its economy, with the direct consequence that the appetite of is industrial sector for raw Australian materials has eased.

And whilst the re-emergence of the US will do little to assist the sector, it’s a problem compounded by the fact Japan — traditionally another key destination for Australian materials — remains moribund economically, with continuing weak demand for the kind of things Australia has to sell.

Further afield, Europe is almost a basket case, despite signs that the UK economy is coming back to life; the EU remains a key destination for Australian exports, but the Eurozone as a whole is depressed, and hardly a growth market for Australian product.

It needs to be remembered, too, that just as we sell resources and mineral ores, so do South Africa, a number of countries in South America, and the US — which means there are just as many players (if not more, counting the US coal and shale gas industries) competing for larger slices of a rapidly shrinking pie.

This is where the discussion of government debt comes into play, and why Labor will be damned for the coming recession in Australia long after it has been removed from government.

As the Australian dollar falls, it is true our exports will become more competitive in price; the flipside is that with most government debt priced in US dollars, falls in the value of our currency increase the amount that must be paid to service or retire that debt.

Interest rates in Australia are already low — historically low — and despite the bleating of Swan, they are low because the economy, mining sector excluded, is virtually moribund.

We are already seeing sharp falls in company profits from the first firms reporting this financial season, and unemployment is beginning to rise despite this government fiddling the method by which unemployment numbers are calculated to push them downward.

If the economy plunges into official recession, at some point the Reserve Bank will need to lift interest rates to support the currency to contain the amount of money required to make interest payments on government debts. Even now, with the dollar still near parity with its US counterpart, the annual interest bill is $7 billion, and rising.

And this is the point.

Australia might have low debt “by international standards” — a cavalier justification for mismanagement indeed — but those debts are already high enough to cost $7 billion per year to service with a currency near parity, and stand to become more expensive in proportion to whatever degree the dollar falls against the greenback.

Add into this mix steep rises in unemployment and the consequent explosion in the nation’s welfare bill, along with falling corporate profits that lead to a real decline in Commonwealth revenue rather than an imagined one, and the economic picture that begins to emerge is bleak indeed.

In such a situation, the capacity of a government — any government — to respond with stimulatory measures would be hamstrung; with a budget already in heavy structural deficit and an interest bill on existing borrowings making additional loans punitively expensive, the effects of such a recession would be brutal, savage, and enduring.

You’d think this might be a good election, viewed this way, to lose; but the irony is that by having created the environment in which such a scenario may well emerge, Labor will attract only the blame for any recession rather than obtaining a political weapon with which to try to beat its way back into office.

Indeed, such a recession could entrench the Liberal Party in government for decades, as the memory of Labor mismanagement is endlessly recycled for public consumption in a campaign strategy the ALP would have no answer for.

It’s a salutary warning to Labor types every time they run around, publicly thumping their chests, and holding up their economic management “credentials” during the GFC as proof of their fitness to govern.

It’s perverse, but those stimulus measures have likely exacerbated the severity of any recession Australia might suffer.

And whilst it’s an old story, the ALP’s eternal penchant for taxing and spending like drunken sailors, racking up enormous public debt for someone else to clean up, won’t help.

This time, the recession will be impossible to avoid, and it will make anything Rudd, Gillard and Swan think they have to boast about pale in comparison.

If the Liberal Party is able to show a causal link between a collapse in the mining sector and the recession that results from it and Labor’s taxation and borrowing practices, the next Labor government will be a long time coming.

And in a final, exquisite irony, had that $200 billion in extra debt gone to finance roads, rail, and other desperately needed infrastructure — rather than paying for more public servants, pay rises for public servants, spending programs delivering little benefit, and to finance economy-dampening measures to suit the unions’ wishes — then employment in Australia would be booming, irrespective of what might transpire in the mining sector.