An open letter to Terry McCrann
As the Herald Sun economics writer (is that akin to the cordon bleu chef at McDonalds, or peeling potatoes at Heston Blumenthal’s The Fat Duck I wonder?) you wrote to Gerard Henderson last week about the facts concerning the 1974-75 Budget. For those who didn’t see that contribution, I reproduce it below in full.
Before looking at your lack of self consciousness as you again fail to contemplate facts, I offer an opportunity to you to put your credentials next to mine.
My brief CV is below. Terry, can you please present your CV and let’s have readers decide who might be better placed to discuss budget matters and, in fact, any issue relating to the economy? Is it you or me?
The reason I do this is in part because you assert:
- I recite “my assertions are the facts”;
- that I “have little knowledge of history and even less analytical rigour”;
- that I don’t “understand that in those days budgets were in August”;
- that some of the budget figuring “is beyond your correspondent”;
- “he clearly does not understand that the Treasury ones [data] he quotes are quite literally made up”;
- and finally, “Koukoulas seems unable to understand the arithmetic.”
Well Terry, he is my background:
- Bachelor of Economics from ANU, Honours year 1985.
- 8 years in Treasury working on Budget policy, economic forecasting, State financial relations, debt management and monetary policy.
- 5 years in Citibank economics department, with 3 years as Chief Economist, a position attained at age 33.
- 2 years as Economics Analyst at The Australian Financial Review.
- 5 years Chief Economics Strategist TD Securities, Asia Pacific.
- 3 years Global Head of Economic and Market Research at TD Securities in London.
- 6 months Senior Economic Advisor, Treasury.
- 10 months Economic Advisor to the Prime Minister, Julia Gillard.
- 1 year Managing Director of my own business, Market Economics Pty Ltd.
In those 25 years or so, I was involved in some way in more than a dozen Budgets, mini-Budgets or fiscal updates. I advised the Treasury Secretary on monetary policy matters and prepared forecasts that underpinned government policy deliberations and budget revenue and expenditure estimates. I had frequent complex interactions with the Australian Bureau of Statistics and the RBA to discuss conceptual data issues, national accounting concepts, public sector finances and the veracity of the forecasting process. In these undertakings, it was important to use facts without fear or favour and to use the latest techniques and data.
In the private sector, I had around 2,000 client meetings with the biggest bond and foreign exchange fund managers in the world, including the reserves managers of 40 central banks. I also advised hedge funds and real money investors in at least 45 countries, ranging from Japan to the US, China to Algeria, France to Poland, Hong Kong to Botswana, Saudi Arabia to Finland. In aggregate, these fund managers oversaw a cumulative total of many trillions of dollars. I must say that it was interesting to engage with a fund manager who was about to embark on a program of buying or selling a few billions dollars of bonds and then revisiting those calls as market trends evolved. I had a legal obligation to use facts and not make things up. I learnt so much with these wonderful contacts that I am now able to apply to issues when I look at the budget, financial markets, policy and economics.
In advising the Prime Minister and her government on economic policy matters, it was important to make sure that going into a G20 meeting, for example, everyone was aware of issues that were involved in the US/China “currency war”; and what was involved in directing the AOFM to be active in the RMBS market, to name a few. Again, a high level of responsibility and a need for attention to detail. A 400 word spray based on numbers that I made up could have been damaging.
So Terry, can you present your CV so that readers can benchmark your bona fides?
I still find it very odd that you refuse to go with the times and accept that the latest, most accurate and conceptually sound data.
I very much look forward to hearing from you.
Terry McCrann to Gerard Henderson – 2 November 2012
Your occasional correspondent, former Julia Gillard advisor Stephen Koukoulas, is apparently of the genus of Labor Party shills that believes if you put your fingers figuratively in your ears, close your eyes, and just keep reciting, “my assertions are the facts, my assertions are the facts,” that you can make them so.
Unhappily for him, though, the facts of the Whitlam government’s dreadful 1974 budget are obtainable. For someone like Koukoulas who has little knowledge of history, and even less, it would appear, of analytical rigour, he would no doubt find puzzling the source I have used.
As you know Gerard, it is what is known as an original or primary source: the actual budget documents of the time. And more specifically, the 1975 budget, which had the full numbers in all their awfulness of the outcome of the 1974 budget for the 1974-75 fiscal year.
The relevant page from that budget is reproduced below. Two broad points need to be made upfront. Presumably Koukoulas does not understand that in those days the budgets were in August, so they contained essentially finalised figures for the preceding year ended 30 June. Unlike today’s May budget, which has “estimates,” usually wrong, for the financial year still to finish.
Secondly, the 1975 budget was not a creature of the incoming Fraser government dressed up to make the Whitlam Government’s total economic irresponsibility look worse. Apart from the fact that would simply not have been possible to achieve, the 1975 budget was brought down by Labor treasurer Bill Hayden, who back then, before the scales would subsequently fall from his eyes, was still a rusted-on “true believer”.
Indeed, I can vividly remember personally praising Hayden for aiming to exactly halve the growth in fiscal spending from 1974-75’s 45.8 per cent to “just” 22.9 per cent.
As you and your readers can see, the facts of the 1974 budget are as I stated in my previous correspondence – and you, with one trivial mistake excepted, did as well.
Outlays leapt as noted 45.8 per cent – as you wrote “close to 50 per cent.” The budget deficit exploded to $2.57 billion. In those days it was broken down into a domestic and overseas deficit. Perhaps one day, I’ll explain why to Koukoulas.
The domestic deficit in 1974-75 was stated as being equal to 3.3 per cent of GDP. It is a calculation perhaps beyond your correspondent, but for his benefit and that of your readers, the total deficit was equal to a little over 4.3 per cent of GDP.
In an impressive combination of yawning ignorance and rather clunky abuse, Koukoulas has plucked purported figures for the 1974 budget from a table in the back of the current 2012 budget. He seems completely unable to understand that they are merely a theoretical reconstruction of the actual numbers, in an attempt to put them on the same cash basis as the modern budget numbers.
Koukoulas accuses me of making up numbers; he clearly does not understand that the Treasury ones he quotes are quite literally made up. They exist only in the Treasury computer. They are not, as he implies, “revised” or to “improve accuracy” – as for example, GDP numbers are revised, often years after the event.
The lie to that is the fact that the source you quoted for the 1974 budget numbers was published in 1982, some seven years after the 1974-75 fiscal year. Written by the distinguished Reserve Bank economist Bill Norton, whom Koukoulas seems never to have heard of.
The Koukoulas-(modern) Treasury numbers are not a “revision” but an inevitably crude attempt to adjust the earlier numbers to provide some hoped-for comparability with the modern numbers. If Koukoulas had more understanding of both statistical method and the structure of budgets, he would understand how approximate and indeed unreliable such an adjustment is.
Koukoulas seems particularly offended at being accused of “springing to the defence” of the 1974 budget. This demonstrates he has as little understanding of language and rhetorical method as he does of budgets and history. That he literally does not understand what he is writing.
How else could anyone characterise his abusive attack on your comments on the 1974 budget? If he’s not “defending the budget” what is he doing? Especially, as he seems to think it was triumph – his now, the budget’s then – that its spending jumped by only 39.6 per cent in 1974-75, not your “close to 50 per cent?”
As I noted, the correct increase was 45.8 per cent. As I further noted, even using his made-up, for want of a better word, lower figure, it would be the equivalent of lifting budget spending today by $140 billion, in a single year.
From his response, Koukoulas seems unable to understand the arithmetic. Given his former role advising Ms Gillard, perhaps that explains an awful lot about recent budgets. And the word “awful” is used advisedly.