Core promises

My article in today’s Fin is over the fold

If there is one word that will be tied inexorably to the Howard government in historical memory, that word is ‘non-core’. Indeed the word is so closely associated with Howard, that it’s surprising to recall that he never uttered it. Rather, having ditched a large number of inconvenient promises after the 1996 election, Howard proudly announced that he had implemented all his ‘core’ promises. The implication that the broken promises were ‘non-core’ was left to the electors.
The process by which Howard came to this point is instructive. In 1975, the Whitlam government had come to grief by sticking rigidly to its platform commitments even when economic shocks rendered a change of course vital. Subsequent governments, starting with that of Malcolm Fraser, learned the lesson too well, becoming increasingly willing to promise whatever was required to win an election, then renege when the election was over.

Howard himself was an early exemplar of the process, when, newly appointed as Treasurer after the 1977 election, he ditched the “Fistful of Dollars� tax cuts that had been the centrepiece of Fraser’s successful campaign. Bob Hawke followed suit in 1983, after the convenient discovery that the budget position was much worse than expected. The Hawke-Keating government continued on this path through its four terms in office, on issues ranging from privatisation to the L-A-W tax cuts.
By the time Howard was running for office in 1996, voters had woken up to many of the standard tricks. Howard was asked explicitly what he would do if, as with Hawke, the budget position turned out worse than expected. Howard made the commitment that he would stick to his promises anyway. Once the election was out of the way, however, this commitment was adjusted to apply only to “core� promises. A couple of years later it was the turn of the GST, which Howard had promised would ‘never ever’ be introduced.

The great majority of the economic commentariat cheered the repudiation of promises they regarded as obstructing the process of economic reform. Many of them simultaneously deplored the deterioration of the policy process in the later years of the Howard government. However, most failed to make the link between the two.

By the end of the Howard years, it was impossible to take any long-run policy commitment seriously. So the only credible promises Howard could make were those that involved lump-sum handouts (like the baby bonus) or immediate interventions to subvert long-term policy (like the Mersey hospital takeover).
The process is continuing with debates over the tax cuts promised by Labor before the 2007 election, and over proposals to privatise the NSW electricity industry, a violation of long-standing Labor policy.

Most economic commentators would prefer a larger budget surplus to tax cuts, and a privatised electricity industry to a continuation of public ownership. But they failed, before the election, to persuade the parties or the voters to adopt their preferred position. In seeking to retrospectively invalidate the outcome of the election, they are willing to subvert democratic processes to achieve their preferred outcomes.
As with the Whitlam government in the early 1970s, changing circumstances may make it necessary to abandon or modify electoral commitments. But that excuse does not apply here.

It’s true that the economic outlook is worse than when the cuts were promised six months ago. But the risks of higher inflation were evident even then, and were pointed out by critics at the time. And some of the adverse changes, such as the increased risk of a US recession, strengthen the case for tax cuts.
As regards electricity privatisation, the debate has been going on for years, and the advocates of privatisation have conspicuously failed to the carry the public with them. They can scarcely claim that current circumstances, with financial markets in turmoil and proposals for emissions trading in flux, are more favorable to privatisation than they were when the Iemma government was re-elected in 2007.

The Rudd government has rightly sought to reverse the damage to public confidence in political processes inherited from its predecessors, of both political colours. Keeping inconvenient promises, such as the commitment to tax cuts, is an essential part of that task.
The loss of public confidence is even worse at the state level, and particularly in New South Wales. The state Labor government should emulate its federal counterpart and follow the policies on which it was elected.

Who knows? If governments were made to keep their promises, perhaps politicians would be more careful about what they promised.

John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland.

38 thoughts on “Core promises

  1. Read it this morning, John, and thought it was quite good. Not much chance of the message penetrating the thick hides of Iemma and Costa, though, I’m afraid.

    Cheers, and well done.

  2. There’s another similarity between Iemma and Howard. Howard notionally tied the success of the party with his own success, i.e., if they party dumped Howard they were doomed to failure.

    Iemma’s been trying the same line of argument, that there’s no alternative to him, and that if he gets dumped the Labor Party will lose the next election.

    The Liberal Party swallowed Howard’s tosh, and lost anyway. There’s no reason at all for NSW Labor to swallow the same nonsense from Iemma.

  3. PrQ,
    I would have thought that Howard holding an election to rescind the “no GST” promise was enough. Far better than Hawke / Keating and the “no FBT” and “no CGT” promises with which you rank it.
    You are right on the timing, though. While in general I am in favour of privatising assets you have to get the best price consistent with the public interest. Dumping them on the markets now would not seem to be the best way to maximise the public welfare.

  4. Andrew, there’s no point arguing that one of Howard’s lies wasn’t quite as bad as one of someone else’s lies. People have had a gutful of this kind of thing.

  5. SJ,
    Sorry, but I see that example dragged up time and again. It is tedious. If you believe there are plenty of examples, fine use them. To me at least if a polly makes a promise, says “OK, I got it wrong” and then holds an election with a clear commitment to a particular policy position then that is fair enough.
    The promise was made at one election and another was held before it was “broken”. To me, that is the correct way to go about a change.
    If you don’t like it, fine, but there was an election and the people returned them on the strength of the policy position. If you happen to think that a democratic mandate is not enough, well, sorry, but I think you are just plain wrong.

  6. Fairly good overall John but you lose it a bit at the end especially with-

    “The Rudd government has rightly sought to reverse the damage to public confidence in political processes inherited from its predecessors, of both political colours. Keeping inconvenient promises, such as the commitment to tax cuts, is an essential part of that task.”

    With the benefit of political hindsight like ‘L.A.W’ and ‘core’ labelling of predecessors, the tax cuts are an absolute no brainer for Rudd now. What’s less clear is the overall reversal of damage to public confidence with less obvious or below the radar policy (non-core?), as even the kings horses and kings men are already beginning to notice here-

  7. That’s not the issue in this particular instance. Howard didn’t make a mistake and do the “OK, I got it wrong” thing with the GST, he consciously lied about it:

    In May 1995, eight months before the general election in March 1996 that made him prime minister, what Howard lied about was his commitment to a goods and services tax (GST). That was his infamous “never ever” pledge. How it happened, and how Howard ignored his pledge once he’d become prime minister, is open and shut. At a Sydney bankers’ lunch, where he spoke about the Keating government’s coming budget later that month, Howard referred briefly to John Hewson’s losing GST policy in the 1993 election and how “nothing remotely resembling it” would be Coalition policy in the 1996 campaign.

    But when a businessman asked why, if a GST was so economically sound, Howard wouldn’t again support it, he gave a long answer which included, in part: “… We would occasionally like to win, you know. The fact is the last election was a referendum on the GST. There is no way we can have it as part of our policy for the next election. As to what happens some years in the future, I don’t know. But the GST cause was lost in the last election …”

    Every news outlet ignored it except The Australian. It ran a single-column story on its front page next morning, saying Howard had “left open the possibility of the Coalition reconsidering a GST some years in the future”. Howard panicked. He’d told the truth in answering the businessman’s question. Now he felt he had to lie if he wasn’t to sabotage, after 22 years in politics, his last opportunity to be prime minister.

    He issued a four-sentence statement saying, “Suggestions I have left open the possibility of a GST are completely wrong. A GST or anything resembling it is no longer Coalition policy. Nor will it be policy at any time in the future. It is completely off the political agenda in Australia.” Later that day, confronted by a clamouring press pack, he compounded the lie. Asked if he’d “left the door open for a GST”, Howard said: “No. There’s no way a GST will ever be part of our policy.”

    Q: “Never ever?” Howard: “Never ever. It’s dead. It was killed by voters at the last election.”

    Nothing equivocal about that. But 27 months later, in August 1997, less than 18 months after becoming Prime Minister, Howard told the truth by telling more lies. He announced a “great adventure” in tax reform he wanted to “share with the Australian people”.

    Six months later, we learned the heart and soul of this “adventure” was to be the introduction of a GST. And how did Howard rationalise his “never ever” pledge? He didn’t. He simply lied again. Howard told Parliament in April 1998: “I went to the 1996 election saying there would not be a GST in our first term. I go to the coming election saying we are going to reform the tax system … The Australian public are entitled to be told before an election what a government will do after the election. They do not deserve to be misled. They do not deserve to be deceived.”

  8. It seems to me that politicians should operate ‘closed loop’ rather than ‘open loop’. Their policies should reflect feedback from current events and should not be preannounced and immutable. Indeed feedback rules make sense in any setting – for any sort of policy determination – where there is enough uncertainty.

    You elect people to govern not to represent the day-to-day aspirations of a largely uninformed electorate. If you don’t like what they do you chuck them out.

    Howard led one of the most successful Federal governments in Australian history. Even when his party lost office Howard’s personal popularity remained high. The issues you are focusing on so vehemently John were keenly felt by 0.1% of the voting population.

    The difficult thing about evaluating Kevin Rudd’s truthfulness is of course that he doesn’t commit to much at all. It is difficult to come up with an ex post honest appraisal of shallowness that is cloaked in cliche.

    I am unconvinced that Rudd is being wise and operating ‘closed loop’. He is being vague because he wants power and has very few keenly felt values about much at all.

    Iemma seems to me one of the more courageous Labor politicians. He leads the government and is right to impose his view of the desired future path of the NSW electricity industry. In an integrated eastern electricity market it makes sense to privatise these assets leaving out the distribution network. Paul Keating is right we are not living in the USSR in the 1950s when the socialist state needs to control power distribution.

    It certainly makes no sense to have the future of the electricity industry contingent on the views of a few thousand electricity workers worried about microeconomic reform. I’d much prefer an elected government to make this decision and to face the wrath of the people should they get things really wrong.

  9. SJ,
    As seems to be par for the course, you are missing one, teensy, weeny little detail out of that. He called an election. You know, that thing governments should do when they are going to go back on their word in a major way. That small thing – a democratic mandate.
    Is a democratic mandate only OK if you agree with the result, or do you have a problem with the very idea of the people having a voice?
    Keating and Hawke rabbited on about how they would never introduce an FBT or a CGT. Then, after the election, volte face. That, with all due respect, is much worse than the holding of an election. Howard did the right thing in this instance. Hawke and Keating did not.

  10. Andrew, since you’re willing to abandon the claim that Howard didn’t lie about the GST, I’m willing to abandon the claim (which I never made BTW) that there wasn’t an intervening election.

    So we’re back to where we started. You say that one of Howard’s lies wasn’t quite as bad as one of someone else’s lies.

  11. Ah come off it SJ, the Libs changing their mind on the GST was the same as Labor on Rollback or Offshoring. They all maent what they said at the time, but the times and circumstances change. Personally I’m glad Labor lied all those years about fixed exchange rates and tarrifs, which Hawke and Keating, etc put right in the end. In hindsight i wouldn’t have wanted them to stick to past truths.

    On another note I never thought I’d say it John, but this (compliments of Greg Mankiw)
    is the best defence of Rudd’s silly Fuelwatch and a few more public servants running around our supermarkets with clipboards, I’ve ever heard. The man’s got a point.

  12. AR, I agree that calling an election made a difference in the case of the GST. In fact, I wanted to develop this point in relation to the ALP practice of seeking the approval of party conferences for a change in policy. I also had some more examples of Howard mendacity I wanted to use.

    But space constraints being what they are, I went with an easily remembered lie that could be covered in one sentence, rather than worse broken promises that would take a couple of paras. Among the worst of these I’d nominate the ministerial code of conduct.

    Observa, your Rollback example doesn’t work. Labor ran on the issue and lost. It was under no obligation to take the same policy to the next election. And I don’t think it has made any commitments that would be violated by introducing new exemptions or by modificatons to existing ones.

    AFAIK, the only fixed commitment Labor has made in this area is not to raise the GST rate. Some commentators didn’t like this, and a breach would certainly be comparable to Howard’s, but I don’t think an increase was ever really on the cards.

  13. If one is to be guided by treasury and the RBA tax cuts are one “core promise” that the ALP should drop, now that they are in government they should be providing the very best governance according to the conditions now not some time in the past.

    This inflexible approach is risk adverse and whilst it might make good politics is not cost effective and not good business and further strengthens the argument for privatisation.

  14. People don’t really expect politicians to deliver on their promises. In that way, it’s not really a “lie”. Rudd is being to finicky about it.

  15. “Observa, your Rollback example doesn’t work”
    Well I think it does if an absolute truth that both Keating and then Howard both came to fully understand at the time, was simply ‘lied’ about(or at best not comprehended) by many of those now in Govt, some might say for populist political motives. The fact that wall to wall Labor now has the mandate to rollback a GST,(they only promised not to raise it remember) ostensibly to help those ‘working families’ of theirs and reduce inflation at the same time, now demonstrates the absolute truth that Howard saw all along. Yet he is somehow the brazen liar, according to many now. More a comprehender of absolute truth I would have thought now, by Labor’s tacit acceptance of his courageous reform, without so much as a word of thanks or ‘sorry’ for getting it wrong.

    That’s essentially rog’s point too now, that there is an absolute truth(or perhaps simply conventional wisdom) about those tax cuts, that Rudd should be cognisant of and act accordingly, just like Howard did with the GST. Iemma with electricity privatisation now too. He must seize the opportunity on NSW consumers’ behalf, to give them the best policy (ie absolute truth) for their own damn good and let history be his judge.

  16. Hey, I’m angry about a whole lot of Howard’s lies, but the GST isn’t one of them. I think he was right to bury the GST as an issue once Hewson lost an election on it. I think he was right to subsequently resurrect it and give the voters the right to either give him a mandate or throw him out. Why? Because it was and is a good policy. If he had introduced it without giving the electorate warning, then I’d have an issue.

  17. I think it’s called leadership Morris me old mate, albeit the fly in the ointment is that absolute truth or conventional wisdom bit, which brings me to sidetrack this thread a bit and discuss rog’s point-
    “If one is to be guided by treasury and the RBA tax cuts are one “core promiseâ€? that the ALP should drop..”
    How valid(true?)is the conventional economic wisdom on this? After all Rudd is being pestered to break a L.A.W/core promise on the basis of it and show some real leadership apparently.

    Conventional economic wisdom (CEW) has it that giving out those tax cuts will be inflationary and counterproductive to the Reserve’s learned machinations. How so? As I understand it the Govt is free of any debt ie it’s not wanting to borrow scarce resources/output from foreigners or Australians and presumably that surplus is the real savings ie consumption forgone by Australians. The fact that Australians might have borrowed a bit more foregone consumption from foreigners than is deemed good for them is neither here nor there. Giving them back their foregone domestic consumption to pay back those foreigners more quickly and ease their debt burden should make it easier on these ‘working families’ and cannot be inflationary whatsoever. What’s all this conventional wisdom banging on about giving back people their foregone consumption being inflationary? Sounds like a load of old cobblers to me too Kevin. Well either that or some tar and feathers mate.

  18. “If he had introduced it without giving the electorate warning, then I’d have an issue.”
    I agree Kymbos, but with all due respect, what about floating the dollar and dropping the tarrif wall by the Hawke/Keating Govt?

  19. SJ, much as I disliked Howard, I have to side with Howard on the GST. He may have been hiding his true intentions for some time before running on the GST, but at least he did bring it out in the open and run on it. This counts for a lot.

  20. Think of it simply as ‘priorities’ SATP, the order of which is constantly being adjusted by we sometimes greedy,ignorant mobs. Eventually someone comes along that has the nous, balls and stamina to set us on the right track in the end. Ah democracy, aint it grand?

  21. With regards to the never ever GST, I never was a big fan of it but then it’s not the end of the world either, in the big scheme of things.

    Deliberately lying, and lying so blatantly, is what Howard did. I can understand why Howard felt the desire to kill off the endless media speculation about whether he would close the door on it or not, but Howard had a choice on how to deal with that media dog-and-bone. He made his choice to lie. An alternative, which he didn’t take up, would have been to state that if a GST was ever reconsidered in future, it would be put fair and scare before the people as part of an election campaign.

    The fact that he placed GST as centrepiece in the next election campaign does not let him off the hook, for this simple reason. Given he lied about it being never ever, how could a voter that supported a GST take Howard’s word that he would now implement it if elected? Plainly, such voters couldn’t, they simply had to hope that Howard would treat the GST “as a core promise” – this time.

    Time to leave the keyboard idle for a bit…

  22. Rudd is already slipping – having gone from “Gay marriage is a matter for the states and territories” to “we’ll veto any ACT legislation on Gay marriage” – I guess that was a non-core statement.

  23. I really hate to defend Howard on the GST but it must be said that an exact precedent was set by Bob Hawke on capital gains tax.

    Those with long memories will recall the sequence of events was:

    1. Prior to the 1980 election Labor said it would introduce a capital gains tax. This was after the Barwick High Court legitimated the use of converting income into (then) tax free capital gains.

    2. In the 1980 election campaign, the Fraser government ran the mother of all scare campaigns, to the effect that Labor will tax the capital gains on your house. This scare campaign was arguably the reason Labor lost the election.

    3. Having learnt that lesson, in the next election campaign, in 1983, Labor specifically avowed not to introduce a capital gains tax. At the campaign launch at the Sydney Opera House, Bob Hawke said “we will not introduce a capital gains tax” (and he was cheered by the audience.

    4. Consistent with this promise, Labor did not introduce a capital gains tax in its first term of office.

    5. The issue then went away, or so it was thought. In its next term of office, following the 1984 election, and following the 1985 tax summit, the Hawke government did introduce a capital gains tax (with the family home conspicuously excluded).

    Howard was more honest than Hawke. He at least fought the 1998 election saying he would introduce the GST in his next term. Hawke made no such commitment prior to the 1984 election.

  24. John,

    Myanmar’s qunadry is ir adoption of socialism.

    How many disasters of this magntitude are needed before you might, in the words of Oliver Cromwell suspect you are wrong?

  25. Louis,
    Dictatorship is dictatorship – whether run under the banner of “The Burmese Road to Socialism”, “All power to the Soviets” or “Arbeit Macht Frei”. While I frequently disagree with our host on several areas, I would not confuse his opinions with any of those three.

  26. Howard more honest that Hawke – you’ve got to be kidding! I don’t recall Hawke saying “never ever” about a CGT. Howard’s “never ever” was a blatant lie – for political expediency only.

    Query – what percentage of the population were affected by the introduction of an FBT or CGT? I know what percentage was affected by the GST. I don’t think you can put them in the same class.

    I also don’t recall Howard advertising his work “choices” legislation before an election – he had no mandate on that one. How valuable is the Senate – our house of review? Perhaps the Howard Govt. only lasted as long as it did, because the Senate did such a good job of moderating the bills that came before it.

  27. Yes a good history article John about terms that have recently faded from the lexicon. It’s now all about ‘meeting commitments’, rather than unseemly core/non-core and L.A.W promises, etc. Even undertakings is a bit too strong it seems. Of course if you are not ‘meeting your commitments’, then that could be termed ‘attempting to meet your commitments’ or for those with more revolutionary zeal and fervour, it would be a case of the ‘struggle to meet your commitments’. Either way it would no doubt involve the need for lots more meetings.

  28. I’m sure you have some sort of snark intended here, observa, but it’s not working. It’s really difficult to get past the brute fact of Howard’s mendacity, no matter how fast you spin.

  29. Actually John I think it’s more a case of an increasingly hostile attack dog media that’s making life progressively more difficult for our leaders and as such they’re becoming more PC with their vocabulary over time. Can’t blame them. Cause and effect. Also I suspect the incumbents are fast running into the-‘Gotta problem? Blame Labor!’ paradigm. Be interesting to see how the meeja react to the Rudd Govt’s first Budget.

  30. Heather Ridout scored the budget 8/10, and said she was a hard marker – also said that business had been waiting for some of these things for years. NAB economist said the budget delivered all of Labor’s promises. One economist said that nearly all promises were met, except for a change to have high income ($150k) means testing for some ‘welfare’ elements.
    Sky news seemed to take the budget okay. Malcom Turnbull had a bit of a sook about inflation even though he did’t believe in inflation a fortnight ago…

    But, will the telegraph still have “Beer, cigs, up” as its headline tomorrow?

  31. PeterRickwood wrote: “SJ, much as I disliked Howard, I have to side with Howard on the GST. He may have been hiding his true intentions for some time before running on the GST, but at least he did bring it out in the open and run on it.”

    Donald Oats wrote: “The fact that (Howard) placed GST as centrepiece in the next election campaign does not let him off the hook …”

    spiros wrote: “(Howard) at least fought the 1998 election saying he would introduce the GST in his next term.”

    In fact, as I demonstrated on 15 Sep 05, it is a myth that Howard openly and honestly put his GST proposal before the electors even during the 1998 elections:

    (John Howard) concealed his intentions to introduce the GST almost to the last minute. A farcical inquiry into our taxation system was held. When Liberal commmittee Paul Zammit came to realise that the Government was not interested in seriously considering submissions other than submissions in favour of the GST, he resigned.

    John Howard timed the elections to make it impossible for Parliament to examine the GST legisaltion prior to the elections.

    In the weeks leading up to the elections, millions of taxpayers dollars had been spent to promote the concept that ‘reform’ to our tax system was necessary.

    In spite of that the Coalition still lost the popular vote in the lower House (roughly 51.5% against the Government on a two party preferred vote) and a decisive majority of Senators who stood opposed to the GST were elected.

    After the election a Senate Inquiry found that many of the claims made during the election campaign were false.

    The Government still had the hide to push through its GST legislation. The most galling aspect of this whole sad episode was that Australian electors were never given the choice at the next election to reject the GST because, as Peter Costelllo so impudently reminded us over and over and over again, “The Labor Party is so opposed to the GST that they are fully committed to implementing it should they win the next election.”

    SJ, I wholeheartedly agree with you. Thank you for finding that article by Alan Ramsay Let’s have the honest truth, once and for all of 18 Aug . In case, it may be of interest, I have also posted material on NSW electricity privatisation at

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