The big question on everybody’s lips right now is whether Prime Minister Gillard will be any different to her predecessor Kevin Rudd. But it’s difficult to see how Julia Gillard can legitimately claim to be different unless she adopts a completely different approach to running the national economy.
So it seems passing strange that she has decided to keep the architect and principal manager of the economy, Wayne Swan, on as treasurer. And stranger still that he has been promoted to deputy prime minister.
Notwithstanding Kevin Rudd’s faults as Prime Minister – and there were many – Wayne Swan’s failings as Treasurer are equally appalling.
Mr Swan has trashed the national balance sheet through reckless spending and a panicked response to the global financial crisis. He pursued excessive, poorly targeted fiscal policy, maintained it despite clear signs of an economic recovery, and forced the Reserve Bank of Australia to increase interest rates. By amassing $94 billion of debt he will put Australia in a much weaker position to withstand future economic shocks.
The Treasurer seemingly didn’t care about the long-term consequences of his “resources super profits tax” (sic) (RSPT) for Australia’s mining industry. Nor the workers, businesses and communities which depend on it. Nor the hard working Australians who have invested in the mining sector directly or through their superannuation.
All he cared about was the short-term politics. He wanted to claim “reformist” credentials, and he wanted a massive new tax to deliver revenues. And what could better suit an old-time trade unionist than a tax designed to spark class warfare?
The only plausible explanation for the rushed announcement of the RSPT without consultation was that the Treasurer wanted to include its revenues in his budget this year. After a record $57 billion deficit in 2009/10, he knew it would be damaging when he forecast a $41 billion deficit in 2010/2011 and projected another 11 figure deficit in 2011/12. Desperate to claim a potential wafer thin surplus in three years’ time, yet unprepared to rein in the Government’s profligate spending, Mr Swan needed the RSPT and its billions in 2013 before budget night.
Of course, history shows that he misjudged the politics because he didn’t understand the economics. He didn’t realise that the theory underlying the tax was flawed in practice, and that it would threaten the industry which had saved us from the global financial crisis.
Ms Gillard’s first act as Prime Minister should have been to sack the worst Treasurer in Australian history.
But she couldn’t do that. After all, she was there every step of the way by his side as part of the infamous Gang of Four that presided over the first two years of this Government. She too endorsed the reckless spending (indeed, in the BER school halls rip-off, she had overseen the most wasteful program of all). She too endorsed the mining tax.
Next, she should have shelved the RSPT, removed the associated revenues from the budget and come clean that the budget was set for a deficit in 2013.
Instead she has retained the tax but announced that the Government will negotiate its details. The political strategy is clear: keep the mining industry quiet in the lead up to the election, and push the bad news out until afterwards.
But genuine negotiations must involve concessions – if the Government is prepared to make concessions on the amount raised by the tax then the budget needs to be adjusted for the Government’s bottom line position.
Perhaps worst of all, neither Ms Gillard nor Mr Swan has acknowledged that the RSPT is flawed policy.
Ms Gillard said “we need to do more than consult, we need to negotiate” with respect to the tax. The language is instructive. Ms Gillard didn’t acknowledge the need for a “debate” to reach a consensus, but a “negotiation”. Ms Gillard is making concessions to the industry’s political power in an election year, not the power of their policy argument.
This is deeply troubling.
It shows Labor doesn’t understand or care about the legitimate economic criticisms being levelled at its proposal. It also highlights the significant risks to the Australian economy if the Labor Party is re-elected, especially if it is re-elected without first committing to parameters for its mining tax. If Labor were returned, the mining industry’s bargaining power would evaporate. The Government could do anything.
The same incompetent man who proposed the mining tax could be Treasurer for another three years. A Swan doesn’t change his feathers any more than a leopard changes its spots. He will keep on spending, and he will continue to attack our economy and prosperity through ill-conceived, politically motivated tax increases. The tragedy is that, next time, it may not be an election year and his targets may not have the financial wherewithal to defend themselves.
Mr Swan has undermined Australia’s international standings and jeopardised our economy. He should have been sent to the backbench, not made Deputy Prime Minister.
Kelly O’Dwyer MP is the Federal Member for Higgins and a former Senior Adviser to Federal Treasurer, The Hon. Peter Costello.
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