Chris Gardiner thinks he’s making a case for former PM John Howard and his lawyer Treasurer Peter Costello when he declares that they’re responsible for modern Australian governments’ obsession with surpluses at all costs:
If we are hearing a lot about the need to return Government to surplus, and hearing the PM use the word ‘conservative’ as much as he can, it is because Howard and Costello set the governance benchmark and changed our political culture in their term in office…
The Government is touting its projected return to surplus in three years. The reason it must is that the Howard and Costello achievement includes an electorate that assumes that a good government is one that has no debt, one that funds tax and social reform from private sector wealth creation and government surplus.
Ignoring for a moment that H&C’s main method of “achieving” surpluses was selling off public assets, being in office during a mining boom, and cutting services for the poor (something you’d think would bother Chris, given his earlier role as Director of the Anglican Archbishop of Sydney’s Overseas Aid Fund), he’s missing a more fundamental point here: scaring governments away from deficit spending is one of the worst things that they could have done for the future prosperity of the country.
Think about it for a moment. The majority of people who’ve built wealth in this country, and around the world, borrowed to build assets. They borrowed to buy their first house. They borrowed to buy investment properties. They borrowed to start a business. They borrowed to expand a business. And because they were borrowing to build something valuable, it was the financially prudent thing to do and they prospered – even if, at many stages of that growth, it looked like they were massively “in the red”. This is analogous to deficit spending – you borrow to build infrastructure, and whilst you’re in debt in the short term, you’re in debt to build an asset of value. In the long run, you’ll be well ahead.
What’s analogous to the current public-private partnership model, the insistence on relying on private companies to build public infrastructure? Where government takes on most of the risk and the private companies profit at public expense? The closest I can think of is the rent to buy model – you know, when you buy a TV from Radio Rentals and end up paying twice as much for the same thing. And although you’re never actually in the red, in the long term you’re very much worse off.
But that’s what (we’re told by the media is) the public insistence on surpluses has wrought.
If Howard and Costello are responsible for Labor’s complete refusal to borrow to build infrastructure, then it’s just one more reason they should hang their heads in shame.
PS Like Peter Costello, I’m a lawyer, not an economist.