Monday, 18 August 2014

Wayne Swan

Wayne Swan should go down as one of the better performing treasurers we have had.

Faced with a looming GFC he eventually listened to both Glenn  Stevens and Ken Henry and brought down two stimulus measures that helped Australia avoid recession ( although nominal GDP did fall ).

He did not try to engage in reckless fiscal consolidation until the last budget he had total responsibility for. In this budget he cut NOMINAL spending and detracted 0.7 percentage points from GDP. This is easily the tightest budget we have ever seen or have figures for. Unfortunately it weakened the economy!

The stimulus measures were entirely appropriate. If they were too large we would have seen rising interest rates and inflation with wages on the increase as well. We saw nothing along these lines.

If monetary policy was the reason for Australia recovered then people must explain how the lag was so short back then and so long now.
Some people such as Tony Makin said we could have relied on net exports for our recovery however net exports were only positive because the negative contribution from exports was lower than that for imports!

For those people who suggest we needed no stimulus measures then they might try to explain why every country that adopted austerity measures had a depression ( a 10% drop in GDP).

We should also realise those critics of 'excessive spending' said the same thing about Ireland and Europe but we only saw those economies go backwards not forward so those critics cannot read GDP figures!

Where people go badly on Swan is conflating his performance as treasurer and his performance as a politician. If people thought interest rates were lower under the Liberals under John Howard than under Labor then it can only because he failed to explain this properly. If people thought Labor had excessive spending then again it goes back to Swan. I agree with Mumble in that Swan never portrayed any confidence at all as Treasurer. I never understood this and perhaps it can only be explained by Swan paying far too much attention to focus group research.

However in the final run a Treasurer is a politician as well as policy induced Treasurer and in this respect he was poor.
Indeed he brought down a very severe contractionary budget in the expectation the lower interest rates which would occur would bring the ALP political plaudits.This didn't happen and again as Treasurer he must take the blame. Here he forgot we all live in the nominal economy not the real economy. Skeptikoi shows this.

Wayne Swan is truly a mixed character.