As the Federal Election draws near and a key focus of the political debate revolves around economic management, a strange posse of Trumpesque, Thatcherite and Tea Party commentators, academics and associated dross has emerged with a raft of “analyses” of economic policy.
“Strange” in this instance is the analysis of what is good economic management, what the goals of governments and economic policymakers are, should be and why, when some of the wonderful success in economic management in recent years is somehow bad. Not the massive and sustained employment gains, staggeringly low unemployment and yet another year without a recession.
The bulk of this discussion is confused, unworldly and wrong.
Much of the discussion is framed along the following lines.
Starting with the facts that have sparked this element of the economic debate: the Australian economy has registered solid and sustained increases in employment, the unemployment rate is tracking at a stunningly low 4 per cent, inflation is in the Reserve Bank’s (RBA) 2 to 3 per cent target band and real wage growth has returned without adding to services based inflation.
In many ways, this is a policymaker’s dream.
For the critics, this is somehow not good enough or perhaps rather, the Government’s role in achieving these results does not fit with their zealotry.
They appear to hold this view because the bulk of the recent run of economic growth and job creation and the resulting low unemployment rate is the result of the government sector, in particular in the care sector, health, education, defence and infrastructure.
The fall in inflation is in addition and in part, the result of the government policy initiatives to give modest subsidies to consumers for electricity, and rent and this should not be counted in the low inflation readings because it is the result of government policy.
Yes, some people really say or, worse still, believe that.
Public sector job creation is characterised as unproductive or bad, that public sector jobs are inferior to the jobs created by the private sector or, indeed, are unworthy.
The criticism extends to a myriad of misunderstandings — that these dynamics from government economic policy have worked against RBA interest rate cuts. This is premised on the bizarre notion that the level of employment in the public sector and government spending more generally should be set to achieve a particular level for interest rates.
What a strange thing to say, particularly when it is probably not accurate and an affront to those people with a government job providing services to the population.
The goal for decent and worthy policymakers and governments is to get everyone who wants a reasonably paying job an opportunity to get a job. The RBA has this as a policy goal.
Does it really matter if the jobs created are in the private sector — say, a dog groomer, personal trainer or toll collector or in the public sector, say, a teacher, nurse or foreign affairs diplomatic looking to boost agricultural exports?
The Thatcherite Tea Party line implies that the private-sector dog groomer is more worthy than a nurse or a teacher.
The whole thrust of “private sector is good, public sector is bad” is not only embarrassing for the proponents of such ideas but is obsolete. It overlooks the clear fact that the bulk of the population – voters, in other words – want publicly-funded school teachers, childcare workers, nurses, law enforcement, garbage people and defence workers.
It is probably the case that the budget surplus could have been larger and interest rates could be lower if there were fewer nurses and teachers, if infrastructure was allowed to rust, roads were not built and if the government funding of surf lifesaving was abolished.
But what a miserable country we would be living in.
The upcoming election campaign should focus on these sorts of issues which will, to some extent be a test of the human-friendly, progressive policy approach, versus the fiscal slash-and-burn approach, with the aim of achieving a budget surplus for no valid economic reason.
I know which approach is better for the country whether enough people vote for it or not.
Stephen Koukoulas is an IA columnist and one of Australia’s leading economic visionaries, past Chief Economist of Citibank and Senior Economic Advisor to the Prime Minister.
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