Labor had a plan for dealing with the collapse of the international economy, and had considerable success in insulating Australia from its worst effects. As a result, hundreds of thousands of Australians are still working in jobs that would have dissappeared had the government simply sat on its hands or adopted a pro-cyclical "austerity" approach. These hundreds of thousands of workers continued to pay tax, continued to spend their discretionary income, and did not require unemployment benefits. As a result our budget stayed healthy, unlike Greece's, which adopted Hockey's pro-cyclical "austerity" approach.
In September 2013, treasury and the PBO released their projections (PEFO) of the future performance of the economy, based on the fiscal settings then in place . They showed that debt at the time was slightly below $200 billion and would peak at just over $300 billion. According to treasury's analysis, GDP growth would average at around 3.5%, providing healthy revenue streams to the government that would easily fund its commitments and ensure a return to surplus many years before most of our competitors and peers.
Earlier this year, treasury and the PBO issued updated projections (MYEFO) of economic and budget performance, this time based on the pro-cyclical fiscal settings imposed by Mr Hockey on the economy. Although exactly the same "model engine" was used, the figures that popped out were quite different to those in the PEFO, and showed a marked deterioration in the outlook, with peak debt almost doubling to over $600 billion, growth slowing to 2.5% (30% reduction) and the return to surplus delayed by many years.
This is not surprising. If you put beef into a mincer, you get minced beef. If you put pork into a mincer, you get minced pork. The mincer hasn't changed, just what you put into it. When treasury put Labor's counter-cyclical fiscal settings into the mincer, a positive economic outlook was produced. When they put Hockey's pro-cyclical settings into the mincer, a bleak economic outlook was produced.
Hockey can defuse the "timebomb" that he has created with his pro-cyclical settings, simply by reverting to Labor's counter-cyclical settings. But then he would have to admit error and, even more embarrassing, admit that his opponents had it right all along. While this would be a no-brainer for a normal adult, it is an insurmountable hurdle for an intellectually and morally bankrupt Tory narcissist like Hockey. Australia will pay dearly for Hockey's immaturity.
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