The Abbott Government- a threat to the economy

The new Australian Government has big ideas about economic growth, deregulation, the cutting of red tape and letting business get on with business. Unfortunately for them, and indeed the whole country, their absurdly idealistic and unrealistic views are not supported by reality. The reality of their ideas is merely that they do not wish to take any responsibility – they are a government opposed to governing.

When Mr Abbott have his speech in Sweden to world leaders and economists, his ignorance of economics must have been obvious to everyone in the room.

Imagine it: An economic nobody fortunate enough to inherit a strong economy and host privileges for a global summit of world leaders swaggers onto the stage in the European Union to tell the people in the room who have just endured a global recession and having heavily praised his predecessor for the best economic management in the world, that they’re all idiots, that the previous government were terrible economic managers and that it’s ok now, because he’s here to fix it all.

Besides the obnoxiousness of bringing national politics to the international stage, there’s also the simple fact that his policies are the tried and failed policies of most of the nations he’s preaching to. The governments to which he is waxing lyrical of the benefits of deregulation and free trade are the countries who know much more about free trade, austerity and deregulation than Mr Abbott has ever read through their experiences alone.

He talks of the failure of climate policy and the huge costs incurred by renewable energy to countries with economies run on 40% or more renewable energy production- successfully.

And this is the crux of the issue- Abbott talk with nothing to back up his claims- worse- he talks to people with evidence against his claims, with no interest in the reality of the situation.

On the national stage, he looks to industries that were growing during the lead up to the global financial crisis- to rapid growth and the export of resources as the future of Australia completely ignoring the change in direction of the countries he wants to export to, in the process tearing up years of work by industries to adapt to the new market with sustainable resources such as sustainable timber and funding major growth in coal exports to countries moving rapidly to renewables. If Abbott were a CEO, his company would collapse due to bad decisions and totally misreading the market, but he’s not, he’s just the prime minister of Australia.

He speaks of the previous governments as illegitimate (they weren’t, that’s factually wrong and for a politician to believe that, which I suspect he doesn’t, would imply a total lack of understanding of Australia’s political system.), as financially irresponsible (wrong, they produced a leading world economy and win international praise and awards for economic management) and claims that they were saved by the responsible economic management of the Howard Government’s surpluses.

So let’s examine that.

Let’s say there was a man with a family. He’s in a little debt, but nothing he can’t afford to pay off with his high paying job. The thing is, this man thinks debt is irresponsible, that spending money is pretty bad and irresponsible, so he starts to save money. Well, how do you do that? He has a brilliant idea. He saves money by buying the cheapest, lowest nutritional value food, he saves money by never taking his kids to hospital or a doctor or sending them to school, so he doesn’t have to pay any school fees. His wife gets a job, it doesn’t pay much, but it’s a job, so he now claims that bills are now her responsibility, despite knowing full well that she doesn’t make enough to cover them. That’s her fault though, even if they are his bills.

So what’s the result? A household full of poorly educated, malnourished, sickly people who are barely making ends meet. But his bank balance is looking incredibly healthy and he’s debt free.

Does this sound like good economic management to you? That’s what the Howard Government did, leaving us with failing infrastructure and a stunted economy, but lots of money. Not as much as we’d have if they’d kept everything running properly and boosted growth through proper structural support, but a lit of money.

When Howard lost to Rudd in 2007, the new government had to repair all the things that Howard had left unfunded while offering no alternative methods of funding to them, none that were sufficient to make up the difference anyway. On top of that, the global financial crisis hit and the Rudd government made a pretty obvious observation. The best way to keep an economy running is to have money flowing through it, rather than letting it shrink. So what did they do? They provided stimulus and encouraged business to grow. That money circles through the economy, getting taxed as it travels, returning it to treasury while boosting consumer confidence and economic security.

It was a massive success, saving Australia from the economic recession sweeping the world. The treasurer, Mr Swan, won an international treasurer of the year award and economists world over praised the good sense of the Australian government. I would like to note here that there are two Australian treasurers who have won this award, Mr Swan and Mr Keating, who was Howard’s predecessor.

You’ll note that Abbott’s idea of responsible economic management does not win any sort of international recognition for good management. There’s a good reason for that. The economy is not the bottom line, it’s everything that happens above that line.

I’d also like to note at this point that during Mr Abbott’s time as health minister the Australian hospital system suffered prolonged shortages of beds and a lack of doctors.

If this method of governmental hands off is so good, why doesn’t it produce good results?

Then there’s the environmental side of things. Abbott’s view is very much a Victorian attitude to the environment. The natural world is nothing but a set of resources there for the exploitation of man (“man” used deliberately to reflect his archaic view of the world).

Not only is this view outdated, it isn’t even economically reasonable. It has been over a century since people started to realise in the developed world that rampant industrialization and land clearing has serious environmental consequences that damage your economic growth and availability of resources.

People like Abbott think that the environmental movement is merely one of sentimental hippies that want to protect trees because trees are pretty green things you can hug.

Ask any environmental scientist why it matters and they’ll tell you that it’s because damage to the environment is more economically costly than the benefits you get from the exploitation, and we do not have the capacity to easily replace the systems we destroy. This is what environmental protections are really for, not for sentimental reasons, but the protection of resources, public health and assets. Abbott sees this as unnecessary inhibitors of development, when in reality they make such things viable.

Then we have the deregulation, which is especially topical today. Abbott wants to repeal unnecessary red tape. Much of it brought in in response to problems in industry collapsing and damaging the economy, taking down individuals, businesses, industries and banks because someone got greedy and made a bad decision with other peoples money. Usually to resign and take the rest as a payout to themselves for the trouble of being bad businessmen. Again it’s about “personal responsibility” and deflecting responsibility off government- a refusal to govern.

This is why the Abbott government is bad for the economy, their short sighted views are not just outdated, but demonstrably counterproductive to their supposed aims.

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4 thoughts on “The Abbott Government- a threat to the economy

  1. Very good! I liked the family analogy, it’s very apt and accurate. When the government is in surplus, the private sector which largely fuels strong economic growth is in debt which is what happened under Howard. Had the Howard government been in power when the GFC hit, Australia would more than likely still been in recession. It was the application of Keynesian economics by Swan that saved Australia from the worst effects of the financial crisis. What is needed now in the wake of GMH, Ford and Toyota ceasing car manufacture in Australia is a massive stimulus package so that the economy doesn’t slump into a recession and then Depression. Abbott however, is ideologically opposed to Keynesian theory and is hell bent on implementing ‘free market’ economics, the results of which will be soaring unemployment and massive social dislocation. The man is a complete idiot.

      • How very true. Stable governments require a strong public service and infrastructure in order to provide the impetus for the private sector to remain strong. Here again, Abbott is diametrically opposed and is trying to dismantle as much of the public service as is possible.
        Overall, Abbott’s policies may also be likened to a person who goes to a restaurant, orders a meal and then asks the waiter to slowly strangle them while they’re chewing in order to aid digestion. Madness!

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