If there was one thing John Howard and Peter Costello could reasonably have expected as part of the historical judgement on their terms as PM and Treasurer, it was a positive assessment of their record as economic managers. But a game isn’t over until the final whistle, and the last few months have produced some unpleasant data. Howard and Costello have left higher inflation and (if you impute the whole of the current tightening phase to their policies) higher interest rates than they inherited from the Keating government. Given that the ratio of household indebtedness to income has grown massively, the effective burden of interest rates is far higher now than in 1996.
A judgement based on inflation and interest rates is unfair in some senses. The big achievement of the last 15 years has been to avoid a recession. While most of the credit for this outcome must go to the Reserve Bank (particularly for getting policy right in the Asian crisis of 1997) and some is down to luck, the government should at least be credited for not doing anything to muck things badly enough to derail the Bank’s economic management (I’m assuming here that the housing bubble, to which the government’s policies contributed greatly, will deflate gradually rather than popping us into a recession. That would be a really nasty legacy for Howard and Costello to leave).
Unemployment has also fallen quite a lot, though until quite recently, the improvement in headline figures masked a deterioration in broader measures of employment and unemployment, particularly for men.
The problem for Howard and Costello is that they chose the criteria on which they wanted to be assessed. They never cared much about unemployment, abandoned the whole idea of an unemployment target early on, and their occasional policy interventions were either focus-group driven exercises like “work for the deal” or ideological costcutting like the Jobs Network.
By contrast, they ran hard on “keeping interest rates at record lows” and now have to live with their failure.
John Quiggin 
Productivity?
Skills?
Keeping govt interference appropriate and effective?
Successful privatisations?
Infrastructure?
Debt?
Fail. Fail. Fail. Fail. Fail.
Lucky lucky men, to have been able to sit on their arses while the tax receipts just tumbled in.
Oversaw an unprecedented explosion in household debt and foreign debt (which more than doubled in the time they were in office).
Keating got it right – Outside his first two budgets, Costello spent the bulk of his time as treasurer laying in a hamock and coveting his boss’ job.
“Work for the dole” i.e. the no deal?
You are a shade too blithe in writing Howard off just like that.
Regardless of how much Howard cared about unemployment, he managed (accidentally or otherwise) to get everybody except for the unemployable into a job. This puts him ahead of every other Prime Minister in Australia (& NZ) for the past generation.
Disingenuous (the kindest interpretation) to say he ran hard on record low interest rates.
He ran on the unmeasurable promise of keeping interest rates lower than an ALP government would have.
Having survived the abomination that was the Keating reign, I am inclined to cut Howard a little slack there. And interest rates when Howard left office were lower than when he was voted in.
Does anyone care about the trade deficit these days? No, didn’t think so…
Oh yeah, Australia’s oil production has been falling for eight years, while demand has been growing strongly and crude prices skyrocketing. Does anyone see any problems with that? No, didn’t think so…
Oh well, lets just crank up interest rates another notch, put a fire under the AUD, and crush a few more exporters.
steve at the pub, yeah he’s a bloody miracle worker – fixing unemployment rates in NZ at the same time.
It is disingenuous to comment that interest rates were lower when Howard left office than when he was voted in. Especially on a blog where most readers understand the influences on interest rates. This includes understanding the shallowness of Howard’s repeated claims of good fiscal management, claims that are now made more hollow given the current economic situation.
I remember being so pleased when the Liberals came to power in 1996 and I am today appalled at how naïve I was to accept at face value their claims to economic management supremacy.
“…he managed (accidentally or otherwise) to get everybody except for the unemployable into a job…”
That happens to be incorrect; a large number got pushed into other categories and not counted as unemployed – but that’s not the same thing as being unemployable. (Plus, a lot of people are still counted as unemployed, but that doesn’t make them all unemployable either.)
That was getting perilously close to blaming the victim.
Regardless of how much Howard cared about unemployment, he managed (accidentally or otherwise) to get everybody except for the unemployable into a job. This puts him ahead of every other Prime Minister in Australia (& NZ) for the past generation.
NZ’s unemployment rate is lower than Australia’s. So your reasoning, Helen Clark is the greatest.
“the improvement in headline figures masked a deterioration in broader measures of employment and unemployment, particularly for men.”
It’s not clear to me what broader measures you are refering to at all here.
Does anyone else agree that in an increasingly globalised economy and marketplace, the relationship between cause and effect is very hard to judge and very easy to exagerrate?
It’s not often remarked upon, but there is clearly a vested interest for the political commentariat in playing up the influence that federal politicians have on the economy. Every time there’s a rate rise we are subjected to this tedious and irrelevant finger-pointing exercise.
The honest answer for a federal politician is to say the overwhelming influences on interest rates are global factors. We have higher interest rates than the US and Japan and Europe because we are the beneficiaries of the biggest commodity boom in more than a century. What politicians CAN do is deal with long-run supply issues that may amerliorate the pace of future rate increases (though may still be inflationary in the short-term).
Howard’s failing was not to address these long-term supply issues and govern instead in the most short-term reckless manner.
“Howard’s failing was not to address these long-term supply issues and govern instead in the most short-term reckless manner.”
be serious, he’s a politician, that’s what they do. you would too, if you had to be rehired every 3 years.
(democracy, citizen initiative, referenda, direct elections, etc…)
I’ve been sneaking a look at some of the mainstream media blogs (on the SMH and the Age for example) in the wake of the interest wake rise, and it is truly amazing how many people have popped up with the line that the latest interest rate rise is evidence that the ALP are poor economic managers. People have fallen hook, line and sinker for the idea that interest rates are the only indicator that matters for the health of the economy.
The low level of economic literacy in the general populace is something that really gets on my nerves. People fall for the simplest spin about economic issues (e.g. tax cuts = inflation, Rudd should cancel the tax cuts). If Rudd and Swan want to avoid being blamed for the aftermath of the asleep-at-the-wheel years of Howard and Costello, they will need to start telling people a slightly more sophisticated story about how the economy works, what causes what, how some measures lag behind others etc. Otherwise the Libs will just wheel out the ‘interest rates are always higher under Labor’ line, and some people will fall for it.
As for the legacy of Howard and Costello, I think the best that can be said is that they didn’t derail us during a period of high growth. The high growth and ever-increasing tax receipts made them lazy – see Andrew Norton’s ‘big government conservatives’ arguments.
Sad to say it, but I suspect that we need a slow-down, if not a full-blown recession to get the government back on the trail of meaningful economic reform. When things are good, it’s too easy for governments to coast along, hand out sweeteners as their political needs dictate and not worry about doing the uncomfortable (and at times unpopular) work of economic reform.
Baring a recession, hopefully at least the Tanner razor gang will keep working as long as the Rudd government remains in power to scrap wasteful programs and encourage efforts to boost productivity.
STT, I’d argue it doesn’t really matter.
Neither party’s economic policies are really all that fundamentally different, and had the ALP been in power the last 11 years, the economy would probably look not a lot different to what it did now.
From the point of view of economics, the best democracy is likely to achieve is to quickly boot out a government whose policies were so bad that they were obviously causing significant economic pain. Which is one reason I wouldn’t be at all concerned if somehow the Greens magically swept to power next term – their economic policies might be rather naive, but the worst case scenario is 3 or 4 years of economic subsidence.
Either they’d learn the hard way, or get booted out.
. “NZ’s unemployment rate is lower than Australia’s. So your reasoning, Helen Clark is the greatest.”
Not on your nelly Ken. Even you know what is wrong with your statement. If you are ARE having a blonde/senior day, the clue is in Wilful’s #6 comment.
PM Lawrence at #8 should try hiring staff in the current economy. Soon discover that ANYTHING “proving” there is a pool of useful unemployed is absolute codswallop. No matter what some twerp twists statistics or something into, this cannot be translated into reality (ie, actual workers).
A good courtroom tactic, or political line, but like so much of both those professions, talk is not reality.
SATP, just because you can’t find people who want to work for you doesn’t mean all employers can’t find people.
Steve, point is, Howard did SFA to help the unemployment rate. Work for the dole has had distinctly average outcomes, and one of the problems with your inability to hire is the lack of skills. Long-term unemployables have been shuffled off into disability pensions, but they could have done a lot more for these losers.
Monetary rates.
Under Howard:
7.50 inherited from keating
7.00
6.50
6.00
5.50
5.00
4.75
5.00
5.50
5.75
6.00
6.25
5.75
5.50
5.00
4.75
4.50
4.25
4.50
4.75
5.00
5.25
5.50
5.75
6.00
6.25
6.50
6.75
Average RBA rate under Howard 5.6%
Under Rudd:
6.75
7.00
Average RBA rate under Rudd 6.875% Thus far.
Rates under Labour from 1990 to 1996:
17.50
17.00
15.50
14.00
13.00
12.00
11.50
10.50
9.50
8.50
7.50
6.50
5.75
5.25
4.75
5.50
6.50
7.50
Average RBA rate under Labour from 1990 to 1996 9.9%
Please tell Ruddy a lower score is better in this game.
As has been pointed out before… the way that inflation was measured changed in 1998 when the RBA took out the components of CPI that caused feed-back i.e. the cost of housing loans (the interest payments) and the cost of personal credit (interest payments on credit)… so you cannot really compare the interest rates under Keating/Hawk and Howard.
In fact you could argue that it was the “feed-back” effect that caused interest rates to go so high (as the result of the previous property boom) under Labor. If the same CPI measure had been in effect under Howard, the 2000-2003 property boom whould have had a drastic effect on inflation (i.e. bigger loans, bigger interest repayments, bigger feed-back).
I presume Tony has listed nominal interest rates not real interest rates.
You can compare Keating/Hawk and Howard using the 1993 and 1998 business cycle As there was no housing boom then and the rates are still higher under labour.
http://www.rba.gov.au/Statistics/cashrate_target.html
we have been running a current account deficit for years imports/exports and the coalition govt ignored it did nothing but fueled it with increased handouts I think their “economic” credentials are a myth rather like the devil convincing the world he does not exist, can anyone remember the last time we exported more than we imported
conrad Says:
Participation rates.
Yeah, I agree that in macroeconomics the Howard government has a fairly good record. In particular, the horror 1996 budget (which I and everyone here bitterly opposed at the time) proved prescient and made life much easier for the RBA in the Asian economic crisis. Given the difficulties of managing a small, open, narrowly based economy “not stuffing up” is actually an achievement.
As others have pointed out they were not very good on microeconomics. Their latter-day enthusiasm for spending our money on pork barrelling to buy elections, at the cost of pro-growth investment, was very damaging.
John Howard tweaked noses, kicked shins and poked eyes and left the place far more forward thinking and robust than when he came in.
Of course there is still much more to be done as young kev is finding out.
SJ: There is almost no difference in male participation rates between now and a decade and a half ago, nor any real difference between now and the last few years. A report out from the ABS today shows the the 2004 numbers are almost the same as the 2007 ones (evidentally the latest boom has done nothing to this number). SImilarly, the 1990 number for 15-64 year olds is only 2% higher than today. I imagine this would be easily explicable due to the expansion of higher education (hopefully a good thing), people being able to retire earlier due to the great wealth that has been generated (that one is speculative, but is a good thing too), and, since female workforce participation is higher, some males being able to work less (i.e., those with partners with decent jobs).
#4 SATP wrote: “Regardless of how much Howard cared about unemployment, he managed (accidentally or otherwise) to get everybody except for the unemployable into a job.”
This comes dangerously close to circularity:
“Dad, why doesn’t that bloke have a job?”
“Because he’s unemployable, son.”
“Why is he unemployable, Dad?”
“Because he doesn’t have a job, son.”
It seems to me the Howard government’s economic record is impeccable if one chooses the appropriate Key Performance Indicators (KPIs). Specifically:
Economic growth, as measured by GDP
Government budget (if one ignores asset sales)
Inflation (if one ignores the change in the measure and the outsourcing of monetary policy)
Unemployment (if one ignores the change in the measure and the emergence of working poor).
Nevertheless, it was Howard who recognised toward the end of his government that governance by KPIs is not necessarily a good thing when he acknowledged that there are many people hurting. I believe this recognition is an important part of his economic record.
The above list of KPIs happens to be a list of macroeconomic variables, excluding foreign debt and income distribution. These macroeconomic variables may have served a useful purpose during the post-WWII years, before ‘microeconomic reform’. They are, IMHO, inadequate in a deregulated globalised financial market economy. For example, the idea of increasing ‘savings’ – private or public, voluntarily or involuntarily – may have been a good one during the pre-microeconomic reform period. However, there is northing I can see which prevents mountains of financial securities being issued to transform ‘savings’ into ‘asset bubbles’. I am happy to be proven wrong.
The above list of KPIs obviously misses all environmental issues.
It seems to me the management of anything by KPIs is the problem.
It is preposterous to give the Howard government credit for the country surviving the 1997 Asian economic crisis – a year after they’d come to power. All because of $5bn in spending cuts (out of about $170bn or whatever)?
That budget’s effect on interest rates would surely have been negligible, it didn’t suddenly make us more ‘robust’ in the short term.
The 1996 budget might have been ‘good for us’, but it wasn’t the reason we survived the Asian meltdown. Nothing the 5 minute old Howard government did was responsible.
conrad, I assume you’re talking about 6202.0 Dec 2007
It shows that the male participation rate has risen slightly (trend numbers) from 71.6 in Dec 2004 to 72.4 in Dec 2007.
I can’t lay my hands on the number for a “decade and a half ago” (1992, suspiciously during a recession and at an unemployment peak), but the tren is reasonably obvious:
So I guess you do have a point that male participation has basically flatlined since about 2001, and an argument might be made that Howard arrested the decline.
The female participation rate has further increased to 58.2% in Dec 2007.
Well, there might be some women who suddenly say “Guess what, honey, I just got made a partner at Malleson’s, so you can give up your day job!”, but I’d want to see some stats before I’ be willing to agree that the declining trend in male participation was a voluntary thing.
I’ll let John take it from here. Your original question looked to me like you were entirely unaware of what “broader measures” might exist.
This point is basically the same as Smiley’s @20 above. Pre-1998, CPI was not a good deflator because it captured some asset price inflation. Post 1998, it’s still not a good deflator because it fails to capture asset price inflation.
Scratch the above. I hit “submit” too soon.
Ernestine Says:
This point is basically the same as Smiley’s @20 above. Pre-1998, CPI was not a good deflator because it captured some asset price inflation. Post 1998, it’s still not a good deflator because it fails to capture asset price inflation.
No, that’s silly. Management by KPIs just means judgement of results by things that are quantifiable and measureable.
It’s the use of available but inappropriate measures as KPIs, or the absence of better measures that causes problems.
At least the cunning old fox left us with those LAW tax cuts, at exactly the same time past central bank profligacy chickens were coming home to roost with inflation. It’s all about interest rates and mortgages now as the Rudd govt’s frenetic attempts to heed fiscal conservatism amply demonstrates. Come hell or high water, they’re not going into the next election with high interest rates and inflation now. Razor gangs and tax cuts. What more could a bloke ask for from a Labor govt eh?
And you’ll recall I told you all so when Johnny and Pete announced those tax cuts, facing those awful poll figures. That has gotta be their greatest legacy and I’ll look forward to it in Johnny’s memoirs.
If that’s their greatest legacy, they were worse than even I thought.
Steve at the pub, thanks for a shining example of post hoc ergo propter hoc reasoning.
Smally: mi onli spik inglish, so ur furrin lingo post is grate for bignotin’ urself, but as far as comprehension (outside of latin scholars) goes, you may as well have typed “woof, woof, woof”.
i can’t think why everyone doesn’t do latin, are we raising a nation of barbarians?
i also wonder why the government doesn’t inject a day or so of political science in the history curriculum, so that ‘educated’ even scholarly people wouldn’t marvel that politicians run the nation for their electoral advantage, and would be aware that there are ways to run a nation that don’t depend on philosopher kings floating to the top of bandit gangs.
well, no wonder there. the wonder is that educated people put up with their nation being buggered about by a few hundred grifters that couldn’t get into the real estate agents guild for moral failings.
alas, educated people are generally “very comfortable, thank you”, and confine their dissatisfaction to whinging, in latin.
I see no difference in the economic policies that Howard championed as PM as he did as Treasurer under Fraser. Howard astutely recognised that the only industry Australia actually had that did anything for exports was extractive. His economic grasp was distinctly mercantalist and he firmly believed in the idea of demand led recoveries, he simply gave those forces their head. Equality, equity and the need to invest in human capital really never entered his head. The Howard led governments greatest failures will be revealed over time to be the misplaced investment in fossil fuel driven energy sources, failure to address the changing climate, failure to support and foster higher education and good science and finally the failure to recognise the mirage of never ending economic growth and to have our minds redirected to a sustainable environment without which there will be no economy. In time they will be reviled not lauded.
SJ: I’m aware of some broader measures, but I’m aware of none that show males are convincingly terribly worse off than a decade ago. The main group people argue about being worse off is older unskilled males (hardly a broad group). However, the arguments are generally based on declining participation, but it isn’t at all obvious what that is from and whether it is good or bad — I don’t have an opinion, and haven’t seen convincing data determining why this is. It is generally assumed that this may have been due to greater levels of involuntary unemployment, but its not like males in that group in 1995 were exactly in high demand either. Given that people in that job are generally doing hard and dull jobs, it wouldn’t be surprising if more would retire earlier if they could. Similarly, older males are also the richest group in society, which again might allow more to retire early, so it would be good to see the age-by-wealth-by-participation graph to rule that out.
Will be raining again today,and some of the paddocks have shown signs of potato virus,which ends up as a sort of milky rot.Steve at the pub,has been awol leave with his contemptuous statements.I will repeat,that some of my ideas have been valued in $ millions,this isnt a mental folly on my part.I would take to court,anyone who makes any statement like that by him,in any form of the media.Unless idiots like him,give up their present right to go on in generalities,then, they will be subjected to stolen tasers off Police,who are now getting on my goat.
The early 1990’s property bubble didn’t disappear over night. House prices didn’t deflate instantaneously. So I would suggest that 1993 and 1998 have a significant difference. At least 5 years of mild deflation/stagnation.
SJ,
1. No, my point is not essentially the same as Smiley’s (20).
2. “Management by KPIs just means judgement of results by things that are quantifiable and measureable”
Exactly. But this is the problem because the relationship between those who have influence on the results and the results is not made explicit (hence wrongly ascribing achievements or failures to managers is possible) and the focus is on easily quantifable and measureable variables (hence it is possible to measure the values of variables that are not necessarily important)
Describing or characterising ‘an economy’ by a few macroeconomic variables, which happen to be viewed as important by the finance sector, is not meaningful to the rest of the people who belong to the economy.
I am saying the previous PM, John Howard, indicated toward the end of his goverment that he understands this.
steve at the pub, if you (accurately) tell us that you cannot hire useful people, that does mean that they aren’t there, it means that there are blockages stopping things come together. I know, from seeing people at the other end, that there are unemployed yet useful people who can’t get work. Does that prove that you don’t exist? No, it proves that you can’t get together – that’s what “structural unemployment” is. And I have some reason to believe that if everybody did get together, there would be some useable unemployed left over.
“Doesn’t mean”, I should have written
PM Lawrence, you have read every word I typed, and not one of those words referred to me.
I said all but the unemployable are in jobs. (this comment would be assumed by all but complete pedantic nutters to be a generalisation, & not to mean that it is proved wrong if the nice young thing 2 doors down with a lovely manner & excellent typing skills is currently out of a job)
Applied to a population of 20million people my is a generalisation x 20million times.
That said, the bulk of people who are “work-ready” should be able to find a job in the current climate.
However, FYI PM Lawrence, it is a lot easier for me to get staff now than it was 2 years ago and for the first time in years I am only having staffing trouble with hiring in two areas, (both of which require a high degree of skill, or a high degree of experience & personal aptitude)
Though it is nothing like it was in the early to mid-90’s, when prospective staff came seeking me out, & I could pick & choose!
Did someone say “tax reform”? No, really, I am sure they did tax reform. Pretty close to “Option C” in the end too. Paul Keating of 1984 would be rolling in his grave.
Yes, steve at the pub, I know you “said all but the unemployable are in jobs”, and I know you were not making an absolute universal statement of the sort that would even be disproved “if the nice young thing 2 doors down with a lovely manner & excellent typing skills is currently out of a job” but rather something of the sort that meant, say, that ‘the bulk of people who are “work-readyâ€? should be able to find a job in the current climate’.
I know you meant all that, and I also know that… it… is… not… true. I know this from accounts from people working in service providers trying to place people, and so on. Your own direct observations, like mine, don’t tell the whole story – but they do tell part of it, the fact that there really was an improvement. But thinking that things reached the point where “said all but the unemployable are in jobs”, no, that’s a misreading – unless you are going to turn it into a self-fulfilling prophecy with employers refusing to consider the unemployed and so making them unemployable, like Groucho Marx not joining any club willing to have him.