It turns out that Tim Blair’s post, linked below, is based on this piece by Alex Robson (a former colleague of mine and also briefly a blogger), who argues from claimed prediction errors by “leftist economists” (he’s kind enough not to mention me by name) that we shouldn’t trust climate science. His crucial point is that whereas we predicted that the 1996 budget cuts would cause increased unemployment
Howard did indeed reduce overall spending in real terms in the two years following the 1996 election, and he cut the size of the commonwealth public service in each year between 1996 and 2000. But following Howard’s “savage” budget cuts, the unemployment rate did not rise; it fell, from 8 per cent in 1996 to 6 per cent in 2000.
Unfortunately, Alex is being a little economical with the information he reports here. As can be seen below (courtesy of Economagic, unemployment did in fact rise following the 1996 budget cuts. It wasn’t as bad as it might have been (and was in New Zealand where monetary policy was messed up as well), but the facts are clear: contra Robson, unemployment did not fall, it rose.
The unemployment rate didn’t clearly resume its earlier decline until the shift to an expansionary fiscal and monetary policy during the Howard government’s second term.
Another piece of misdirection is the reference to cuts in the Commonwealth public service, largely driven by contracting out. This is a red herring, apparently designed to distract attention from the more relevant variable, public expenditure.