Saturday, February 8, 2014

Our three top treasurers in 40 years

In the 40 years I've now been an economic journalist for Fairfax Media I've given 12 federal treasurers the benefit of my free advice. I doubt it has made much difference, but I do know this: despite all you read in the paper, our economy is now far better managed than it used to be.

For this I give most of the political credit to just three of them: Paul Keating, by a country mile, Peter Costello and one you won't believe: Wayne Swan.

That the economy is now far better managed is easily proved. We went from boom to recession in my first year, 1974, back into a severe recession in 1982 under treasurer John Howard, and then again in 1990 with Keating's "recession we had to have".

Each was worse than the one before and each was correctly labelled "the worst recession since the Great Depression". I formed the view that recessions happened about every eight years.

But as Paul Bloxham, of the HSBC bank, has reminded us, Australia is now in its 23rd year of continuous economic growth. Must be doing something right.

To have achieved such an unprecedented gap since the last severe recession we had to escape the Asian financial crisis of 1997-98, the US "tech-wreck" recession of the early 2000s and the Great Recession that followed the global financial crisis in 2008 - and still isn't really over.

Reckon that was all down to good luck?

We owe it at least as much to good management. I know because I remember the roller-coaster ride the economy was on before the econocrats got it back under control.

Wages rising 25 per cent in a year and inflation hitting more than 17 per cent under the Whitlam government; inflation back up to 12 per cent under treasurer Howard and unemployment peaking above 10 per cent after his recession; mortgage interest rates hitting 17 per cent and unemployment peaking at 11 per cent in Keating's recession.

Turns out the present growth period accounts for just over half my 40 years. And of my 12 treasurers, Keating, Costello and Swan were in office for well over half.

Keating is our best treasurer by far because he instigated the sweeping reforms that transformed the economy and laid the groundwork for better day-to-day management of it. He made the economy less inflation-prone and more flexible, thus able to reduce unemployment faster.

Costello's greatest achievement was to free the Reserve Bank to change interest rates as it saw necessary, meaning the economy is now managed more by econocrats than politicians. He also ensured our banks were tightly supervised while the Americans were letting theirs create so much havoc.

Swan deserves a spot on the treasurers' honour board purely for his surprisingly deft handling of stimulus spending and human confidence after the GFC, ensuring we suffered only the mildest of recessions.

Aided by some in the media, his political opponents have had great success in rewriting that recent history. But later historians won't be deceived.