31
Oct
2012

Andrew Robb fact check

 

Below is the full Hansard transcript of Mr Robb, the Shadow Finance Spokesperson, who yesterday spoke on the suspension of standing orders.

In bold and italics are a couple of simple fact checks against what Mr Robb said.

Mr ROBB (Goldstein) (15:03): I second the motion. Standing orders should be suspended, because the final fig leaf hiding Labor’s incompetence and economic ineptitude is withering before our eyes. The surplus is dead. Despite Labor’s best efforts at budget fiddles and budget fraudulence, this government is finally being bludgeoned by the fiscal consequence of years of reckless spending (In real terms, government spending fell 0.4% in 2010-11, rose 4.8% in 2011-12 and is forecast to fall a record 4.4% in 2012-13. That is an average annual growth of 0.0% for three years. In 20 Budgets, neither the Howard or Fraser governments cut real government spending. In 2012-13, government spending will be 23.8% of GDP, compared with the Howard government average of 24.2% of GDP) . The government is squirming away from its non-negotiable promise to deliver a surplus. The pretence of having your cake and eating it as well has been exposed—and doesn’t everybody know it.

Standing orders need to be suspended, because we see today that only one in four Australians believe that Labor will be able to deliver its promise to get back into the black before the election. One in four, 25 per cent of Australians only, believe that this government can deliver a surplus—will get back into the black—after years of economic growth, after the biggest boom in our history, after terms of trade that were at 150-year highs (the terms of trade peaked over a year ago, in the September quarter 2011. They have fallen 9.2% since then and according to Treasury, will fall a further 8% in 2012-13), after an increase in commodity prices of only 350 per cent! (According to the RBA index of commodity prices, there has been a 29.2% rise in commodity prices in Australian dollar terms since Labor took office in November 2007, in US dollar terms the rise has been 49.5%. I am not aware of any commodity price index that is up 350% in the last 5 years). Yet they still cannot deliver a surplus, and 75 per cent of Australians can see straight through the rhetoric of this government, see the emptiness of Labor’s economic promises.

That is why standing orders must be suspended. There is a crisis of confidence right across the community; there has been now for 18 months to two years: 13 per cent of all disposable income across 7½ million households is being saved (according to the ABS National Accounts, the household saving ratio in the June quarter was 9.2%. The last time the household saving ratio was 13% or more was in the March quarter 1986), because people have no confidence to spend money. No wonder retail is on its knees (retail sales in volume terms rose 3.9% in the year to the June quarter, the fastest rate of increase in 3 years). That is $120 billion taken out of the economy in one year in savings. Why? The only reason is that people have no confidence that this government will do what it says it will do. Seventy-five per cent today confirmed that they do not believe that this government will deliver a surplus. They do not believe any of the nonsense this government has been peddling in budget after budget—the shonky forecasts, the endless spending, the reckless spending. It goes on and on and on.

The economic fraudulence of this government was so starkly exposed when, as my colleague said, within a day of the release of the Mid-Year Economic and Fiscal Outlook, it was revealed that the first quarter’s payment of the resources super tax was a bit fat zero. The Treasurer became the first Treasurer in history to initiate a tax that does not actually raise any money! In fact, we are told that it could in the years ahead lead to the payment of money back to companies. This is a oncer; this is a first.

The important thing is that walking away from a surplus does have major consequences. It will result in more unfunded spending. It will open the floodgates to spending. The $120 billion black hole is only the start of it—this will open the floodgates for more spending. We have heard it today, with the Asia vision: billions of dollars being promised at this dispatch box, by implication. Where is that coming from? It is on top of the $120 billion black hole. We will see more borrowing, more debt, more issuing of government bonds, more pressure on the Australian dollar.

Penny Wong, the finance minister, said in her first speech that ‘this government has made it clear that the return to surplus is not negotiable’. Well, this government is crab-walking away from that promise, made over 150 times in the last two years. The backflip over this non-negotiable commitment to deliver a surplus is leaving Australia more vulnerable, more exposed—we need a change of government if we are to remove the crisis of confidence that is so endemic in our community. (Time expired)

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20
Oct
2012

McCrann backs Henderson in making up facts

 

Terry McCrann, the writer well qualified to cover economics for the Herald Sun and Daily Telegraph, has found time to leave the Sandown dog track to come to the defence of Gerard Henderson who made a series of humiliating factual errors in an article he wrote for the Sydney Morning Herald a few months ago.

I pointed out those errors to Mr Henderson here :http://tinyurl.com/9lb6ueq  and had a further exchange here http://tinyurl.com/9s4skp3 .

McCrann’s comment, which was published on Henderson’s webpage, is reproduced below in blue.

It is cute to see McCrann’s comment come in the same week that HSC students sat their economics exam. If McCrann’s effort was an essay in that exam, I suspect he would have trouble getting a pass mark from even a generous examiner.

Like Henderson, McCrann delivers a few howlers, he fails to understand the context of my initial comment on Henderson misleading his readers with factual errors and he possibly pressed some wrong buttons on his calculator when trying to make a point.

So, here we go.

McCrann claims that I sprung “to the defence of the 1974 Whitlam budget”.

Sorry Tezza. As I pointed out to Henderson, at no stage did I ever provide a critique of the economic record or Budget settings of the Whitlam government. I was simply pointing out to Henderson the factual errors in his article that happened to cover the fiscal settings of the Whitlam era.

Not a good start.

Next up, McCrann says: “Koukoulas thundered that your [Henderson’s] ‘howler of howlers’ was to claim the budget deficit increased substantially in 1974-75. When instead, the government recorded a budget surplus.”

McCrann goes on: “Actually … the 1974-75 budget had a deficit of $2.57 billion. In today’s terms, that does not sound much, but it was equivalent to 4.3 per cent of that year’s GDP. Today such a deficit would be around $65 billion.”

Whoopsie Tezza. It the 1974-75 budget delivered a surplus. The current Budget documents, at Budget Paper No 1, Statement 10, Table 1, page 10-6 shows that the 1973-74 Budget recorded a surplus of $1.150 billion or 1.9% of GDP which was followed by a SURPLUS of $181 million in 1974-75 or 0.3% of GDP.

Surplus, not a deficit.

Treasury have noted for many years that “data have been revised … to improve accuracy and comparability through time.”  And before Mr McCrann does a Jack Welsh and accuse Treasury of fudgng the numbers to suit some agenda, a quick glance at the 2000-01 Budget papers, delivered by Peter Costello some 12 years ago, recorded the fact that the 1974-75 Budget was in surplus.

To his credit and as his should, McCrann has often cited and used revised data in his columns. To my knowledge he has done this without question. It is clearly best to use the most up to date facts when assessing economic events. On the issue of the Budget numbers and the Whitlam Government, McCrann strangely rejects the accurate and up to data information. I suspect he has an agenda which is based on bias and not factual evidence. More of that below.

This is where McCrann’s next humiliation comes. He notes that “Back in 1974-75 though, the Whitlam budget lifted government spending by an almost incomprehensible 45.8 per cent in a single year. Koukoulas claimed it was “only” 39.6 per cent.”

Terry, get out your calculator and type in the following:

Government spending in 1974-75 was $15,463 billion. Divide that by government spending in 1973-74 which was $$11,078 billion. After you do that, subtract 1 then multiply by 100 to get the percentage change.

What do you see Terry?

I make it 39.6%. If you pressed the correct buttons, you would too!

I am not sure where McCrann’s 45.8% comes from (other than it was used by Henderson) but that sort of error is almost incomprehensible!

Next McCrann kicks a series of own goals.  He notes: ‘Showing just how clueless he is, Koukoulas ridiculed the difference between your [Henderson’s] reference to the increase being almost 50 per cent and his “correct” figure for the increase, as – “worth around $36 billion in a single year”.

Well Terry, I am right. While you have your calculator there, follow these instructions:

50 minus 39.6 equals 10.4. That is the percentage difference between Henderson’s claim that spending rose by almost 50% and the fact that it rose 39.6%.

Terry, then take the 2012-3 outlays from the budget papers which are $364.208 billion and add 10.4% (Henderson’s error).

That is 364208 times 1.104 which equals 402086.

Then take 364208 from 402086 and you get 37878.

This means the difference between the made up 50% growth number and the 39.6% fact is, in 2012-13 dollar terms, $37.878 billion. Allowing for the “almost” in the almost 50% used by Henderson and McCrann, the error is somewhere around $36 billion or $37 billion in today’s dollar terms.

It looks like I am right again.

McCrann then makes up some of his own points for arguments sake, it seems, by saying “Being completely unaware that his [Koukoulas’] 39.6 per cent would be like lifting budget spending now by a mind-numbing $140 billion or so in a single year.”

Here McCrann brings into the argument some bizarre figuring that has nothing at all to do with my pointing out of Henderson’s howling errors in the original article about the Whitlam government. (I do note that government spending will fall by a record amount in 2012-13 when we see the MTEFO numbers soon, but you won’t see McCrann covering that inconvenient fact I am sure.)

Then poor old Terry, who since his days covering greyhound racing for the Truth (I think, but I am happy to be corrected) has only ever written a few hundred words every second or third day for the economic journals of choice for economists who follow greyhound racing, says: “Koukoulas’ … [has] just taken his numbers out of the current budget papers. These are a reconstruction of the real numbers, to try to put them on the same basis as the way the modern numbers are done. To my mind, the real numbers are, well, the real numbers.” (My emphasis.)

Oh Terry! Here is McCrann emerging from his kennel to slag and bag me for using the latest, most up to date numbers available. Huh? Like Henderson, McCrann prefers some other numbers, one’s he calls the real numbers because they are, “well, the real numbers”.

This has to be one of the more remarkable comments in McCrann’s illustrious but obviously rapidly fading career. He doesn’t believe the current data. It doesn’t fit his bias. Maybe McCrann needs to go down the same path as Alan Jones and have someone check his facts before he goes to print.

Maybe McCrann is living in the era of a Bex and a good lie down. Maybe he doesn’t believe the new fangled medicine because it’s not real medicine.

McCrann obviously has a problem with facts or at least the facts that don’t fit with his biases. I wonder how many other facts he has made up over the years as he works to lead his readers down the garden path.

__________

CORRESPONDENCE: TERRY MCCRANN CORRECTS STEPHEN KOUKOULAS’ HOWLERS ON THE WHITLAM LABOR GOVERNMENT

Terry McCrann to Gerard Henderson – 19 October 2012

Gerard, it takes an impressive level of clueless stupidity for even a Labor apologist to spring to the defence of the 1974 Whitlam budget – the budget that defined that government as the worst and most destructive in Australia’s history. Until that is, first Kevin Rudd came along to top even Gough Whitlam in sheer bumbling awfulness. For him of course, subsequently to have to cede the title of Australia’s worst ever prime minister, to Julia Gillard.

But up stepped former Gillard advisor Stephen Koukoulas to pompously ridicule your criticisms of the 1974 budget and the numbers you used [See MWD Issue 158]. And get it absolutely and totally wrong. Apart from one minor mistake, which you have acknowledged, your numbers were correct.

Koukoulas thundered that your ‘howler of howlers’ was to claim the budget deficit increased substantially in 1974-75. When instead, the government recorded a budget surplus. Actually, and I quote from the 1975 budget papers, the 1974-75 budget had a deficit of $2.57 billion. In today’s terms, that does not sound much, but it was equivalent to 4.3 per cent of that year’s GDP.

Today such a deficit would be around $65 billion. Fancy, that, much like the deficits that Gillard and her treasurer Wayne Swan, who Koukoulas used to, ahem, advise, have presided over. And they’ve done it every year. Back in 1974-75 though, the Whitlam budget lifted government spending by an almost incomprehensible 45.8 per cent in a single year. Koukoulas claimed it was “only” 39.6 per cent.

Showing just how clueless he is, Koukoulas ridiculed the difference between your reference to the increase being almost 50 per cent and his “correct” figure for the increase, as – “worth around $36 billion in a single year”.

Being completely unaware that his 39.6 per cent would be like lifting budget spending now by a mind-numbing $140 billion or so in a single year. Something I think that even the team of Koukoulas, Swan and Gillard would draw some breath at.

Koukoulas’ mistake was the simple one of someone that understands little of budgets and even less of history. He’s just taken his numbers out of the current budget papers. These are a reconstruction of the real numbers, to try to put them on the same basis as the way the modern numbers are done. To my mind, the real numbers are, well, the real numbers, and are as I and you have stated.

Koukoulas exposes himself by making a snide reference to the author of the source you quoted. W.E. (Bill) Norton was a distinguished head of the Reserve Bank’s research department – an economist who actually knew what he was talking and writing about. Unlike your unfortunate correspondent.

Terry McCrann

News Ltd

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13
Oct
2012

Gerard Henderson admits he was wrong

 

Some two months after I pointed out to Gerard Henderson that his SMH article contained a series of factual errors, he responded to my request for a correction with an email to me which is reproduced in full below in blue.

My original post is here: http://tinyurl.com/9lb6ueq

As with his misunderstanding of Budget data, Mr Henderson fires a series of accusations and comments at me on things I didn’t say.

Mr Henderson says I offered a “courageous defence of Gough Whitlam’s economic record”. Sorry Gerard, but no where did I outline a view of the economic record of the Whitlam Government – I merely pointed out that you made a bunch of factual errors which could have misled your readers.

Next, Mr Henderson, rather humiliatingly for someone of his importance, asked me to recall a meeting I had with him, “when in 2007 you were writing with The Age”. Well, I have never met Mr Henderson and have never worked at The Age.  I do know that Jason Koutsoukis did write for The Age around that time and may have met Mr Henderson. In 2007, I was living in London, heading global economic research for TD Securities. I can’t be sure, but suspect Mr Henderson is confusing a couple of woggy Greek names – Koukoulas, Koutsoukis – what’s a few letters here and there. Yasou!

Mr Henderson then, for some reason tells me that I worked for Prime Minister Gillard and now Market Economics. I am not sure why any of that is relevant to his reply, other than to acknowledge that my understanding of Budget and economic facts is up to date and vastly superior to his.

Only after that does Mr Henderson start to address the concerns about his factual errors.

In doing that, Mr Henderson said he relied on a 1982 occasional paper from the RBA for his data. Hhhmmm. That’s a bit like relying on a sharp pencil and a pocket calculator for some econometric regressions. Mr Henderson says “statistics are revised from time to time. I will make corrections where such are necessary.”

Well, the numbers used by Mr Henderson are wrong.

For Budget numbers, I rely on the Treasury Budget papers here –  http://tinyurl.com/9r4sw6b . I have no knowledge of the dusty old source book Mr Henderson relied upon.

But in any event, Mr Henderson’s defence of his errors crashes badly. Even that factually flawed source book doesn’t support his “facts”.

In looking at the increase in government spending in 1974-75, Mr Henderson’s source book said the rise was 45.9% which in his view “is close to 50%”. Close enough is good enough for our Gerard. Just to repeat, the correct figure is 39.6% which relative to 50% growth is, in today’s dollar terms, worth around $36 billion in a single year.

On the next error, Mr Henderson admits he is wrong. His source has the figure as 4.2% of GDP. Mr Henderson said:

  • “In my SMH column I made an error by giving the figure as “more” than 5 per cent – the reference should have been to “less” than five per cent. I concede this error. You should concede that this is a minor error.”

Well Mr Henderson, I concede nothing. Importantly, the actual figure is 3.3% of GDP which is at least 1.7 percentage points lower than the more than 5% quoted, which in turn is equivalent to at least $26 billion today’s dollar terms in a single year. Another huge error.

Next Mr Henderson argues that his old book shows a Budget deficit of 4.2% of GDP in 1974-75. The Budget documents show a surplus of 0.3% of GDP. A simple error from Mr Henderson. A trifecta of mistakes – a surplus, not a deficit.

These elementary, school-kid like errors are surprising for someone of Mr Henderson’s standing and experience.

He covers up for these errors saying that I missed the theme of his article that the Whitlam Government was a disastrous economic manager and lost control over the economy.

I made no judgment of the economic credentials of Whitlam – one way or the other. I merely was pointing out to Mr Henderson that the facts he was using to support his case were wrong and this risked misleading his readers.

I am pleased Mr Henderson has acknowledged his errors and I trust he will pay more attention to detail in his future work.

____________________________

Mr Henderson’s email to me.

Dear Stephen

What a thrill to hear from you on 8 August 2012.  And lotsa apologies for the delaying responding to your courageous defence of Gough Whitlam’s economic record.  Alas, I have been busy of late.  So I valued your reminder of my tardiness sent on 23 August 2012.

As I recall, we last met in Sydney when in 2007 you were writing for The Age and were one of “The-Guardian-on-the-Yarra”’s principal barrackers for Rudd Labor and principal opponents of Peter Costello’s economic record.  It all seems a long time ago now.  Since then you have worked for Julia Gillard and the most prestigious Market Economics – which even devotes space to me on its (prestigious) blog. A (continuing) brilliant career, to be sure.

As you will recall, you wrote on your Market Economics website on 8 August 2012 that I had made some factual “howlers” in my Herald column of that day concerning the Whitlam government’s economic performance.

You ignored the thesis of my column – which was that Gough Whitlam lost control of the economy in 1974.  Perhaps you have not read about such economic disasters as Jim (“call me Doctor”) Cairns, Tom Uren, Clyde Cameron, Rex Connor and – of course – Mr Whitlam himself.  In any event, you focused on statistics.  My focus, on the other hand, was on economic performance.

Here is the apparent disagreement between us:

▪ I wrote that in 1974-75 Commonwealth outlays increased by close to 50 per cent.  You say that it was 39.6 per cent.  Phew. What a relief. Good to know that Gough Whitlam and the team increased spending by only 39.6 per cent in a single financial year.

▪ I wrote that in 1974-75 spending increased by more than 5 per cent of gross domestic product in just one year.  You say it was 3.3 per cent.  Well, that’s alright then. Whoa, indeed.

▪ I wrote that taxes in 1974-75 increased by close to 30 per cent. You say the correct figure was 30.5 per cent and suggest that I was only “largely right”. This seems like a quibble to me.  But it’s good to know that taxation increased by only a third in a single year.

▪ I wrote that in 1974-75 the budget deficit increased substantially. You say that there was a budget surplus in 1974-75.

Unlike the ABC, I am always willing to make corrections and issue clarifications.

As indicated in my Sydney Morning Herald column, the principal source for my comments on the Whitlam government was John Kunkel’s article “`It Was Like a Lunatic Asylum’: Remembering Labor’s 1974 Budget” which was published in the December 2004 issue of The Sydney Institute Quarterly. Over the years I have also relied on the statistics contained in W.E. Norton The Deterioration in Economic Performance: A study of the 1970s with particular reference to Australia (Reserve Bank of Australia, Occasional Paper No 9, September 1982). 

I make the following points:

▪ According to Table 4 A 2 of W.E. Norton’s book, Commonwealth outlays increased by 45.9 per cent in 1974-75 (See Page 95). In my SMH column. I rounded this up to “close to 50 per cent”.  In my view, 45.9 per cent is close to 50 per cent.

▪ According to Table 4 A 2, spending increased by 4.2 per cent of the GDP in 1974-75 (see page 95).  In my SMH column I made an error by giving the figure as “more” than 5 per cent – the reference should have been to “less” than five per cent. I concede this error. You should concede that this is a minor error in view of the fact that I was pointing to what any reasonable commentator would concede was a huge increase in spending in just one year.

▪ According to Table 4 A 2, the deficit amounted to 4.2 per cent of GDP in 1974-75 compared with 0.6 per cent in 1973-74. In my SMH column I wrote that the deficit increased substantially in 1974-75.  You maintain that the 1974-75 budget was in surplus.

As you know, statistics are revised from time to time. I will make corrections where such are necessary. My problem is that your focus on minor points overlooks the big picture.  Namely, that Whitlam Labor lost control of the economy in the middle of his three year term.

As you should be aware, such Labor identities as Bob Hawke, Paul Keating and Peter Walsh hold the view that Mr Whitlam was a disastrous economic manager.  This was a principal motivator for Messrs Hawke, Keating and Walsh – among others – when Labor occupied the government benches from March 1983.  They wanted to prove that – unlike during Mr Whitlam’s time –  Labor could run a competent and reformist government. And they did.  Your email of 8 August 2012 overlooked this central point.

Best wishes

Gerard Henderson

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3
Oct
2012

Marco Business 180 degrees wrong

 

The good people at MarcoBusiness have made a mistake. I suspect they inadvertently took some of my comments regarding RBA policy out of context.

They cut and paste a lot of my column from Business Spectator this morning (here

http://www.businessspectator.com.au/bs.nsf/Article/RBA-Reserve-Banks-interest-rates-China-inflation-A-pd20121003-YPST4?OpenDocument&src=sph)

and included it in their column here:

http://www.macrobusiness.com.au/2012/10/the-kouk-sees-the-glass-overflowing/

They say that:

  • “The “Kouk” is largely known as a Labor guy so some of this has to be taken as rhetorical. But still, such optimism is highly questionable. The RBA is not cutting interest rates to these levels because we are entering economic nirvana. On the contrary, we are entering the end of the mining boom much earlier and at much lower levels than earlier assumed.”

A couple of points. I am not sure any political predisposition means that my work, which in terms of RBA policy is widely regarded as some of the best going around, is “rhetorical” simply because it presents a glowing endorsement of the economic policy settings of a government that happens to be Labor. It begs a question of what is an ideal scorecard for the economy? I judge that to be conditions prevailing about now. Others including Macro Business may have a different view, but I and most good economists reckon it is easy to argue that 3%+ GDP; 2% CPI and 5 – 5.5% unemployment rate is in fact “near perfect”.  They are “near perfect” because these macro indicators are on any level good, and even more importantly, sustainable.

To the other point in the Macro Business article – nowhere ever have I said that “the RBA is cutting interest rates … because we are entering economic nirvana”. This verbalising of me from Marco Business is unhelpful.

A simple reading of my words this morning and over years of covering the RBA is that its pragmatism and flexibility are praiseworthy.

This morning I wrote:

  • “and now [with] the RBA moving to a more accommodative monetary policy stance, the scenario for the Australian economy through to the end of 2013 is annual growth in real GDP bouncing around 3%, plus or minus a few tenths of a per cent, underlying inflation (excluding the temporary effect of the carbon price) running in a 2.0 to 2.5% band and the unemployment rate ticking up towards 5.5% but probably not going much higher than this.”

I added:

  • “It is a near perfect economic scenario that will be enhanced if even easier monetary policy down the track can lift growth sufficiently to see the unemployment track back to 5% or even a touch less.”

In other words, the RBA rate cuts are helping to sustain the near perfect macro picture for the economy, and not as Marco Business claim, that the near perfect economy is allowing the RBA to cut.

180 degrees wrong Marco Business.

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