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The Australian Federal Budget: 63 Economists Say the Foundation is Unsound

by Frank Stilwell on October 9, 2014
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Government budgets are often controversial. They involve decisions about a nation’s taxation and public spending priorities; and they have substantial implications for people’s well-being. However, it has been a long time since an Australian government’s budget was as controversial as the budget announced in May of this year by Joe Hockey, Treasurer in Abbott’s government. The first budget of the Howard government in 1996 was similarly harsh in some respects but, for generating sustained public protest as well as difficulty in getting parliamentary assent, this one takes the cake.  It has been widely denounced as unfair and based on faulty economic reasoning.

63 professional Australian economists have weighed into the ongoing political debate by issuing a public statement. The organisation and publicity of the statement was coordinated by The Australian Institute. The statement can be seen on its website HERE.

Are 63 economic experts hard to ignore? Well, yes, given that the character of the budget is so obviously political, reflecting the current government’s agenda for changing Australia. The budget attempts to introduce to Australia a ‘politics of austerity’ that has become familiar in debt-laden European nations.  It has all the hallmarks of a neoliberal agenda, blending rhetoric about the need to reverse irresponsible public spending with policies that shift the burden of adjustment onto vulnerable sections of society while seeking to increase opportunities for capital accumulation by the  wealthy.

The oppositional statement by the 63 economists has a mild Keynesian economic character, emphasising that there is no ‘budget emergency’ in Australia. Relative to the post-Global Financial Crisis woes that bedevil many other countries, the Australian economic deficit and debt situations are of modest magnitude. The statement indicates that government expenditure cuts are likely to do more harm than good, both in terms of macroeconomic and social impacts. Prominent Australian post-Keynesian economist Geoff Harcourt has set out this sort of reasoning more fully in an article in The Conversation, available HERE.

The Australian Senate is still considering elements of the budget. Notwithstanding the determination of the Abbott-Hockey government to pass the budget in its entirety, it has been substantially unravelling in practice. Meanwhile, the macroeconomic situation is looking increasingly uncertain; and the government has worsened its own revenue position by pressing on with tax cuts (carbon tax, mining tax and company tax) while increasing expenditure by committing the country to go to war (again) in Iraq. Oh dear…

The names of the economists who have signed the public statement appear below:

George Argyrous University of New South Wales
Tony Aspromourgos University of Sydney
Raul Barreto University of Adelaide
Mike Beggs University of Sydney
Grant Belchamber ACTU
Harry Bloch Curtin University
Dick Bryan University of Sydney
John Buchanan University of Sydney
Gavan Butler University of Sydney
Damien Cahill University of Sydney
Lynne Chester University of Sydney
Richard Dennis The Australia Institute
Alan Duhs University of Queensland
Peter E. Earl University of Queensland
Bradon Ellem University of Sydney
Craig Emerson Former Trade Minister
Geoffrey Fishburn University of New South Wales
Gigi Foster University of New South Wales
Bernie Fraser Former Treasury Secretary and RBA Governor
Roy Green University of Technology Sydney
Corrado Di Guilmi University of Technology Sydney
Tim Harcourt University of New South Wales
Neil Hart University of New South Wales
Gillian Hewitson University of Sydney
Elizabeth Hill University of Sydney
Therese Jefferson Curtin University
Evan Jones University of Sydney
Raja Junankar University of New South Wales
Steve Keen Kingston University
Stephen Koukoulas Market Economics
Peter Kriesler University of New South Wales
Rick Kuhn Australian National University
James R. Levy University of New South Wales
Bill Lucarelli University of Western Sydney
Alex Millmow Federation University
Sinchan Mitra University of Queensland
James Morley University of New South Wales
Alan Morris University of Technology Sydney
Adam Morton University of Sydney
Rod O’Donnell University of Technology Sydney
Joy Paton University of Sydney
Juan Carlos Ponce University of New South Wales
Suraj Prasad University of Sydney
John Quiggin University of Queensland
Patricia Ranald Australian Fair Trade and Investment Network
Goran Roos University of Adelaide
Susan K. Schroeder University of Sydney
Rhonda Sharp University of South Australia
Chris Sheil University of New South Wales
Tom Skladzien AMWU
Julie Smith Australian National University
Ben Spies-Butcher Macquarie University
John Spoehr University of Adelaide
Jim Stanford University of Sydney (visiting)
Frank Stilwell University of Sydney
Tony Stokes Australian Catholic University
Tim Thornton La Trobe University
Phil Toner University of Sydney
Georgia Van Toorn University of New South Wales
Beth Webster University of Melbourne
Graham White University of Sydney
John Wiseman University of Melbourne
Sarah Wright Australian Catholic University
Frank Stilwell

Emeritus Professor of Political Economy at the University of Sydney, co-ordinating editor of the Journal of Australian Political Economy (JAPE), and Fellow of the Academy of Social Sciences in Australia.

1 Comments
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  • Don Sutherland
    October 11, 2014 at 5:29 pm

    Thanks again Frank for this updat and brief rationale. That list of Australian economists is a broad church, methinks.
    I have just read this: http://jackrasmus.com/2014/10/08/latin-americas-made-in-the-usa-2014-recession/
    In it there is a discussion about fiscal stimulus (especially China’s) austerity in response to the 2007 recession ongoing in the context of the international context. Only one brief reference to Australia, which is interesting because of the Rudd government’s prompt although modest positive stimulus.
    Financial crisis is going to happen again – it is in the nature of the system isn’t it? – and that’s why we need left political economists to raise this spectre here in Australia and, in so doing, (a) be somewhat more nuanced about the health of the Australian economy than such a broad alliance enables, and (b) explain why from our point of view, and (c) bring forward ideas about the best way to deal with it.
    We need more combative left political economists than we currently have, out in the public (not necessarily MSM), and more of them.
    It is possible that the crisis will return with some more details at around the next election or in the lead up to it. Potentially, a lot of unemployment, with all of the misery that will bring to those who least deserve it; but who will be the winners electorally, especially given that there is absolutely no sign that the ALP’s economics quartet – Shorten, Bowen, Wong and Leigh – have not broken from their neolaborist embrace of neoliberal financialised capitalism.
    A more vigorius public analysis of the style in Jack Rasmus’ piece is really important for the multi movements that are in action against this government.
    In solidarity,
    Don

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