Published : 2014-05-11 20:06
Updated : 2014-05-11 20:06
America’s Tea Party might be excited to see that its tactics are being replicated as far away as Australia. Australian voters shouldn’t be.
None other than failed U.S. presidential candidate Rick Santorum has congratulated Australian Prime Minister Tony Abbott for his scaremongering about government debt. Santorum calls Abbott a “hard-liner” ― high praise indeed ― who is forcing his conservative vision on a nation that doesn’t know what’s good for it. Yet the more Abbott and his team indulge in Tea Party tactics, the more they’re imperiling the future of one of the developed world’s few bright spots.
For the record, Australia is nowhere near reaching the fiscal emergency that Abbott and Treasurer Joe Hockey have recently been hyping. Gross national debt was just 28.8 percent of gross domestic product in 2013, the smallest outside of Estonia among advanced economies. That compares with 105 percent for the U.S. and 243 percent for Japan. Australia remains the only developed economy that’s avoided a recession for more than 20 years; it’s currently growing at a rate of 2.8 percent. There’s absolutely no reason for Abbott and Hockey to treat Australia’s balance sheet like a national scandal.
The real scandal is the government’s attempt to concoct a fake budget crisis, all in order to attack programs they dislike on partisan grounds, including unemployment benefits, assistance for the poor and single mothers, and Medicare-like programs for the elderly and disabled. This austerity push isn’t just mean and unnecessary ― it’s self-defeating. It will starve Australia of the vital investments in education, training and infrastructure the country needs if it’s to diversify its economy and thrive in the decades ahead.
Granted, Abbott doesn’t entirely fit the Tea Party mold. His drive to impose a temporary levy on high-income earners defies Grover Norquist’s fatwa on all new taxes. But even this seems like a device to give Abbott political cover to “starve the beast,” in Ronald Reagan’s words. The same goes for Abbott’s trial balloons about spending a bit more on infrastructure. Such gestures are intended to head off charges that the government is intent on punishing society’s weakest links.
When Nobel laureate Joseph Stiglitz warned about a “crisis Down Under” in August 2010, he was arguing against precisely this sort of “deficit fetishism.” That was back when Julia Gillard was in power, a leader Abbott blamed for running up the debt. Once Abbott finally deposed Gillard’s Labor Party last September, he eagerly stepped into the very trap Stiglitz had highlighted.
China is much more of a candidate for a debt crisis than Australia is. That’s what should really worry Abbott: Resource-rich Australia remains as big and dangerous a bet on Beijing’s 7.4 percent growth as you’ll find.
Canberra needs to devise ways to make the economy more than just a giant filling station for the Chinese economy. Instead of cutting back on spending, the government needs to be ramping up investments in technology and training to increase innovation and productivity; broadening Internet connectivity; and financing new rail and highway systems. It must combat the forces of climate change, which have increased the frequency and severity of droughts.
When Gillard, who served as prime minister from 2010 to 2013, began down that road, she was derided as anti-business. Abbott’s first priority was to kill her efforts to shake up education, spread the wealth from Australia’s mining boom, set a price on carbon emissions and empower women. His next seems to be scaring Australians into thinking the biggest thing they have to fear is debt itself.
Nothing could be further from the truth. Instead of channeling Santorum and U.S. House Budget Committee Chairman Paul Ryan, Abbott should return Canberra to the days of Bob Hawke and Paul Keating, whose combined premiership from 1983 to 1996 transformed the nation from a backwater into the Group of 20 star it is today. Hawke and Keating didn’t manufacture fake crises. They lowered trade barriers, internationalized the financial system and created a pension system that offers security to an aging population.
Australia became the “Lucky Country” less because of luck than foresight and such long-term reforms. That remains a far better model to emulate than Tea Party-style scare tactics.
By William Pesek
William Pesek is a Bloomberg View columnist. ― Ed.