Following calls by policy experts (Jones, 1994) for the Budget to be recognized as essentially a ‘balance sheet’ with policy more properly proposed in strategic documents constructed to accompany and complement the budget, it is useful to de-construct the line of budget statements from 1998 to 2005 with particular emphasis on 1999-2000.
The 2000 statement considers the benchmarks of good effective policy to be measurable outcomes. These outcomes are defined in neo-classical terms that focus on macroeconomic indicators such as growth with particular emphasis on growth in productivity and employment. Other desired outcomes include falling unemployment, healthy corporate profits, low inflation and inflationary expectations. A key suggested outcome is an increase in public saving which is expected to lead to an increase in private saving. In fact, since this budget, running fiscal policy to provide for a surplus over the economic cycle has led to an explosion in private sector debt. (DFAT, 2003)
The key assumptions implicit in these benchmarks include the accuracy of the data, the definitions of the data being valid and the econometric principle of sampling leading to a true picture of the population. Beyond these technical difficulties there is the further issue of the robustness of the assumptions. Tax policy reform is a central policy of this and subsequent budgets. In the neo-classical model, lower taxes sustain competitativeness and are supposed to lead to increased investment and spending in the private sector. In fact there is no connection. (Garelli, 2005) Most importantly they assume these benchmarks to be what the voters actually want from the state and its functionaries.
Policy issues are divided into fiscal and monetary measures. Fiscal policy has been focused on adequate public saving and monetary policy on maintaining low inflation. The goal has been to avoid the ‘boom-bust’ nature of the economy over the previous decades with its rising unemployment.
Theories and values behind these policies follow the neo-classical and neo-liberal economic orthodoxy implicit in family, school and tertiary training of the elite within the Departments of Prime Minister, Treasury, and Finance. (Pusey, 1991 p74) I counted the senior executives of the Reserve Bank of Australia on its website and approximately half were educated at the University of Sydney (RBA 2005). The number of Federal Parliamentarians with law or commerce degrees has increased to over 50% (Parliament of Australia, 2005). In essence fiscal and monetary policy is decided on the basis of a methodology and data set derived from the training and experience of a limited world view.
The dominant theme is compliance with a set of expectations imposed by a group of vested interests. Credibility in world financial markets, the effects of inflation on the savings and investments of the privileged, the concept of ‘competition’ and ‘free markets’ as an effective allocator of resources, forced participation in the labour force no matter what the pay and conditions, reduction in taxation and deregulation of the financial markets. Issues such as sustainability, questions of egalitarianism in access to resources, the recognition of industry policy as the ‘workhorse of industrial dynamism’ (Jones, 1994) are either ignored or assumed to be addressed indirectly. The presumed mechanism to address these issues is a faith in the efficiency of the market to provide a supply to any demand that makes itself heard in the short run. There is no long term vision outlined in this statement. However in a subsequent year the truly amazing claim is made:
“If participation rates for each age and gender cohort were to rise towards the top of the OECD countries' current experience over the next 20 years, then the level of GDP per capita could be over 9 per cent higher by 2041-42 than the projections contained in the IGR. Most of the long-term gain would be in place by the early 2020s”. (Australian Federal Government, 2004).
For economists and econometricians trained in the understanding of exogenous shocks and the impossibility of modeling all variables this claim is bordering on hubris rather than serious analysis.
Competition and its benefits is a given in this statement and those following. The cohort is defined as the OECD and its benchmarks are used. It is also regarded as the referee. So comments from it are used to define how well the Australian economy is doing and to justify macroeconomic policy settings. The implicit concept of competition is there will be a winner and many losers. Being a loser is ‘bad’ and would reflect on the self defined economic managers. Being a good manager brings with it substantial rewards in the material sense. Recent history has demonstrated to the audience of these statements the possibility of improving earnings by many multiples of the average wage for the bureaucrats who have survived the corporatisation of the public service. This vision of competition is also accepted by the Budget’s private sector audience as a given. Those who share the privileges of the technocratic elite have invested considerable resources into giving themselves an edge in this race and have no intention of handicapping themselves with notions of equality. The benefits of competition go to those powerful enough to make the rules and award the prize.
The attention paid to improving productivity in this and subsequent statements acknowledges the difficulty of measuring it whilst extolling the virtues of education and the application of technology. Little is made of the fact increasing productivity could simply be an increase in the amount of hours worked by those in full time employment. Nor is attention paid to an education policy that would improve skills formation for the majority until the 2005 Budget which allocates funds to encourage competitors for the States based TAFE system. Famously lethargic, the minister responsible for the development of information technology development, Senator Richard Alston, oversaw the relative decline of communication infrastructure for the eight years he managed the portfolio. (ATUG, 2005)
A more general observation regards the use of language in the statements. The rhetoric relies on metaphors that reinforce the economic orthodoxy as Besant has noted in another context. (Besant, 2002, p14). Changes to the settings in the economy are universally described as ‘reforms’. The metaphor suggests improvements or at least a move away from a ‘cacophony of impurities, an [economic] world steeped in original sin’. (Jones,2000)
Deconstructing this and subsequent budget statements has been an interesting exercise. Not only in terms of exposing the gap between the hyperbole and the real but also in suggesting new avenues for policy analysis and development.
References
Australian Federal Governments Budget Statement No 3, 1999-2000 Economic Policy Reform and Australia’s Recent Economic Performance http://www.budget.gov.au/1999-00/bp3/bp3index.html
Australian Federal Governments Budget Statement No 3 1997-1998 Structural change: Recent Developments, Benefits and the Role of policy http://www.budget.gov.au/1997-98/bp1st3st.asp
Australian Federal Governments Budget Statement No 3 1998-1999 The Current Account Deficit: Structural Improvements http://www.budget.gov.au/1998-99/bp1/HTML/BST3.htm
Australian Federal Governments Budget Statement No 3 2000-2001 Maintaining Low Inflation and Strong Growth http://www.budget.gov.au/2000-01/papers/bp1/html/bs3.htm
Australian Federal Governments Budget Statement No 4 2001-2002 A More productive Australia – Policy and technology
http://www.budget.gov.au/2001-02/papers/bp1/html/bs4.htm
Australian Federal Governments Budget Statement No 4 2002-2003 Australia’s Terms of Trade- strong and less volatile http://www.budget.gov.au/2002-03/bp1/html/Bst4.html#TopOfPage
Australian Federal Governments Budget Statement No 4 2003-2004 Sustaining Growth in Australia’s Living Standard
http://www.budget.gov.au/2003-04/bp1/html/bst4.htm
Australian Federal Governments Budget Statement No 4 2004-2005 Maintaining Low Unemployment in Australia
http://www.budget.gov.au/2004-05/bp1/html/bst4.htm
Australian Federal Governments Budget Statement No 4 2005-2006 Prosperity and Sustainability
http://www.budget.gov.au/2005-06/bp1/html/bst4.htm
ATUG (2005)Australian Telecommunications Users Group Limited Speech:
Rosemary Sinclair - National Telecommunications Summit (ATUG)
http://www.atug.com.au/docs/ATUGTelecomsSummitPres30May05
RosemarySinclair.ppt#270,17,CableTelevision
(website accessed 1/8/05)
Bessant, Judith (2002) Just Policy, 28, December 2002, pp.12-22
(DFAT, 2003) Australian Government Department of Foreign Affairs and Trade,
Advancing the National Interest.
Jones, E (1994) ‘The Budget: just a sideshow’ Australian Financial Review
February 14, 1994
Jones, E (2000) ‘Economic Utopia and its Handmaidens’ Australian Review
of Public Affairs 8 September 2000 School of Economics and Political Science
in the Faculty of Economics and Business, at The University of Sydney.
http://www.australianreview.net/ Website accessed 29/7/2005
Parkinson, M (2004) ‘Australia’s medium term challenges’ Economic Roundup
Australian Treasury Summer 2004-2005 Stored
http://www.treasury.gov.au/contentitem.asp?NavId=&ContentID=958
Parliament of Australia (2005) Biographies of Parliamentarians http://www.aph.gov.au/house/members/mi-alpha.asp (website accessed 2/8/05)
RBA (2005) Structure of the RBA http://www.rba.gov.au/AboutTheRBA/Structure/index.html (website accessed 1/8/05)
Garelli, S (2005) IMD World Competitativeness Centre
http://www02.imd.ch/documents/wcc/content/pr.pdf (website accessed 1/8/05)
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