It is a perspective that has brewed among the Liberal rank and file, filtered through junior MPs and is now wholeheartedly endorsed by Scott Morrison.
We are seeing an attempt at revising history unfold right before our eyes. Over the past month, it has reached a crescendo. The PM went into full flight on Thursday when he said Labor had “lost its nerve” when it decided to borrow billions to keep money flowing through the economy as queues of redundant employees snaked out of Wall Street.
Tactically, it allows Morrison to avoid being accused of sitting on his hands amid the worst Australian economic results since September 15, 2008.
See freshman Liberal senator Andrew Bragg in October: “Labor overreacted and wasted billions of taxpayers’ money during the GFC. Worse still, the budget was structurally put into deficit with unfunded promises and disastrous taxes (some which raised no money).”
And Finance Minister Mathias Cormann soon after, curiously citing interest rates going up a year after the worst of the GFC as evidence the economy was going down: “You have obviously forgotten what happened to the cash rate post Labor’s reckless spending spree (Pink Batts, overpriced school halls etc).”
And finally Morrison, himself, last week.
“It would be reckless to discard the disciplined policy framework that has steered us through many difficult periods, and I’ve got to say most recently and significantly the end of the mining investment boom [2013-2019 with the Coalition in power], which posed an even greater threat to our economy than the GFC [see what he did there?]
“The government’s economic policy and direction is one of stability and certainty, not one of chaos and panic that we saw under Labor, which meant that we’re still paying for their recklessness when they lost their nerve years ago.”
Morrison’s framing is politically savvy but historically inaccurate. The Reserve Bank of Australia would argue as much.
“Given the magnitude of the shock to the global economy and to confidence more broadly, there was also a large policy response in Australia to ensure that the economy did not suffer a major downturn [during the GFC],” the RBA notes.
“In particular, the Reserve Bank lowered the cash rate significantly, and the Australian government undertook expansionary fiscal policy and provided guarantees on deposits and bonds issued by Australian banks.”
In all, $52 billion was spent. Some of it well ($8.7 billion in cash bonuses to pensioners and low-income earners) and some of it not so well ($2.8 billion home insulation program), but the cumulative effect was unambiguously positive — Australia avoided recession when others could not.
Yes, we are still paying it back. But here is what the last recession in 1991 looked like: Unemployment rose above 10 per cent, GDP fell by 1.7 per cent. Hundreds of thousands were out of work. Some for five years, some for longer. Many never recovered — 10,000 jumped on the dole queue in a week.
The Organisation for Economic Co-operation and Development this week became the latest in a chorus of global economic bodies to call for the government to do more after it cut Australia’s forecast economic growth rate to 2.3 per cent, its slowest rate since the GFC.
The OECD said a “more expansionary fiscal stance” and further tax cuts were warranted to get the economy moving again. The government argues it has brought forward $3.8 billion worth of infrastructure. Economists note that is worth 0.1 per cent of gross domestic product.
The trouble for the government is in its rush to brand the opposition as reckless, it risks putting itself in a straitjacket — unable to react quickly and with a large cash stimulus should the need arise.
As author and former Canberra economics correspondent George Megalogenis noted on Twitter in October: “We’ve seen this movie before: Keating’s 1990 budget. Economy was hurtling towards recession, but he insisted on another surplus. Long story short, GFC advice to go early, go hard, go households was based on mistakes made back then.”
It may be that the PM is right. That the downturn is cyclical not structural, and Australia will coast through the growing economic headwinds.
But what if he is wrong?
History is written by the victors. It is worth remembering sometimes losers have some good ideas too.
Ross Gittins is on leave.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra