Labor’s GFC legacy (Part 2): What was really achieved

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Kevin Rudd (left) with Wayne Swan (image via abc.net.au).

Alan Austin continues his analysis of Labor's performance during the global financial crisis, putting paid to mainstream media misrepresentations.

The Rudd legacy — 8 years on (Part 2)

BY OCTOBER 2008, the Rudd Government faced horrendous challenges.

In its first 11 months it had chalked up many notable achievements — in social justice, the economy, Indigenous affairs and foreign affairs.

But the forces determined to destroy it were gathering and strengthening.

Early reforms to the lacklustre economy they inherited in November 2007 were impressive. In their first nine months, 225,500 new jobs were created. Gross debt had been stuck around $60 billion for four years. Treasurer Wayne Swan reduced it to $52.4 billion within a year and increased the net money in the bank from a puny $22 billion to $48 billion.

Former treasurer Peter Costello had set the 2007-08 budget parameters for a surplus of $10.6 billion. Swan re-jigged things and delivered an actual surplus of $19.8 billion — the highest in Australia’s history. Exports rose quickly after relations with trading partners were restored, enabling Labor to achieve a trade surplus within its first year. Thus ended a string of 77 monthly trade deficits.

These will be news to most Australians. Few positive stories ran in the mainstream media.

Then, in late 2008, all hell broke loose when the global financial crisis (GFC) – the worst recession in 80 years – hit the world.

Australia’s gross domestic product (GDP) declined, the jobless rate shot up, household wealth dived, the stock market plummeted and business and consumer confidence collapsed.

The Rudd Government responded with the fastest and most extensive fiscal stimulus package anywhere in the world. The first stage, announced in October 2008, comprised:

  • $3.9 billion for pre-Christmas payments to low and middle income families with children, at $1000 per child;
  • $4.8 billion to pensioners, carers and some low-income self-funded retirees;
  • $1.5 billion for first home buyers; and
  • $187 million to create 56,000 new training places.

Rudd also foreshadowed funding for nation-building projects for 2009.

This kept the retail world afloat over Christmas — and thus also rescued wholesalers, importers, the transport sector, service providers and so on. Visitors to Australia from the U.S. and Europe in December 2008 were astonished to see normal pre-Christmas commerce, with shopping trolleys overflowing, cafes, restaurants and cinemas full and the economy bubbling along. In many other countries, shops, eateries, car parks and streets were silent and empty.

Then in February 2009, with the recession deepening globally, the Rudd Government implemented a whacking great $42 billion stimulus programme.

This included:

  • $12.7 billion in payments to most workers, at about $950 each;
  • $14.7 billion for the Building the Education Revolution (BER) programme to repair and built school infrastructure;
  • $6.6 billion for public and community housing;
  • $3.9 billion to insulate 2.7 million homes and subsidise solar hot water systems;
  • $2.7 billion in business tax breaks for equipment purchases; and
  • $890 million to install railway boom gates, fix regional roads and blackspots and other regional infrastructure.

The genius of the BER was that it generated jobs – and flow-on economic activity – literally in every community across the country, however small and isolated. No other government managed a scheme as far-reaching as that.

Further, the Rudd Government guaranteed bank deposits, invested in residential-backed mortgage securities and funded new local and state infrastructure projects. All up, the stimulus came to nearly $89 billion, close to the highest as a percentage of GDP anywhere in the world, delivered – and this is critical – by far the fastest.

It worked where all lesser or slower schemes failed. By 2010, Australia’s was the world’s stand-out economy, with positive GDP growth, low unemployment, a strong positive trade balance, optimum interest rates and very low debt. An extraordinary run of 20 trade surpluses in 21 months started in April 2010.

From 2010 to 2013, the economy improved even further while the rest of the developed world struggled. Wealth and income both increased dramatically, overtaking many countries in global rankings. A streak of productivity increases which ran for 17 quarters began in the first quarter of 2011.

At the time of the 2013 election, Australia’s economy was not only the best in Australia’s history, but the best in the world — by a street. Some say the best in the world, ever.

This was the actual profile:

The mainstream media, of course, falsified this record continually. Virtually every achievement was depicted as a failure and a disgrace.

The excellent news in June 2010 that the BER had succeeded in keeping GDP growth positive – against dire predictions – was headlined in the Murdoch press:

‘Kevin Rudd's BER bungle may have saved Australian economy’.

The “story” opened with:

‘It has been condemned as failure but the Rudd Government's Building the Education Revolution may have saved the Australian economy from posting a negative quarter of growth.’

In fact, according to all the evidence, the BER was a remarkable success on every level. As were most of the other stimulus initiatives. The media, however, continually reported the opposite. In June 2013, Henry Ergas in The Australian pilloried the Government as ‘a ship of fools’ and condemned the prime minister’s ‘willingness to undermine our prosperity that makes Gillard unfit to govern.’

Meanwhile, the rest of the world marvelled and piled on the accolades, including:

  • Triple A credit ratings with Fitch in 2011, completing the full set for the first time ever;
  • Euromoney award for world’s best treasurer in 2011;
  • infrastructure minister of the year award from London-based publication Infrastructure Investor;
  • the vote to chair the G20 group of the world’s 20 major economies;
  • the request to host the Pacific Island Forum;
  • a seat on the United Nations Security Council; and
  • the plaudits of presidents, prime ministers, Nobel laureates and many others. As we shall see.

Coming soon: Labor’s GFC legacy (Part 3): the verdict of history.

Part 3 coming soon. Read Part 1 here.

You can follow Alan Austin on Twitter @alantheamazing.

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