January 24, 2014
Chief political correspondent
Prime Minister Tony Abbott has used his contribution to the World Economic Forum in Davos, Switzerland, to criticise Labor’s stimulus spending during the global financial crisis while also calling on the US to tread carefully as it tapers its own stimulus measures.
On Thursday night, he painted a generally bullish picture of the global economy but noted the recovery remained ”fragile”.
Prime Minister Tony Abbott has attacked Labor’s stimulus spending during the GFC in his speech to the World Economic Forum in Davos, Switzerland. Photo: Jason Alden/Bloomberg
In comments set to inflame the argument over Labor’s financial record, Mr Abbott broke with the convention of avoiding domestic point-scoring while on the international stage by claiming Labor had erred during the financial crisis because it had ignored the immutable economic rules.
According to the Prime Minister, the Howard government had helped the economy but Labor had undone all the good work.
”In the decade prior to the crisis, consistent surpluses and a preference for business helped my country, Australia, to become one of the world’s best-performing economies,” he told the high level group containing many of the world’s top business and political leaders.
Pressing the flesh: Japanese Prime Minister Shinzo Abe meets Tony Abbott in Davos at the four-day World Economic Forum. Photo: AAP
”Then a subsequent government decided that the crisis had changed the rules and that we should spend our way to prosperity.”
The comments seem to suggest Australia did not need to stimulate the economy through 2008-09 under Labor, despite the near-unanimous advice of economists and Treasury to do just that.
The stimulus program has been accused of waste, such as the pink batts scheme, elements of the school halls program, and cheques sent to the deceased or to people living permanently overseas.
However, the Australian government also received widespread praise and recognition from around the world for its aggressive response to the global challenge with swift policies credited with avoiding the recession from which virtually all comparable economies are yet to fully recover.
Former treasurer Wayne Swan, who was in charge during the global financial crisis and implemented the stimulus program, said on Friday that Mr Abbott’s comments were ”sad” and misguided.
‘It’s not a great start for [Mr Abbott] to take the chair of the G20 and deny the very basis of the global financial crisis,” Mr Swan told Fairfax Media.
Mr Abbott’s theory that Labor’s stimulus spending was a bad idea, ignores the analysis of economists, Treasury, the International Monetary Fund, the World Bank and the G20, Mr Swan said.
It was poor regulation of the financial sector, not government spending, that caused the crisis, Mr Swan added.
”For Tony Abbott to try to rewrite the history of the global financial crisis . . . shows that he has no understanding at all of the forces at work in the global economy,” he said.
”It’s sad that he would seek to use an international forum and chairmanship of the G20 to engage in a bit of grubby domestic politics, which the whole audience will know is wrong.”
Shadow treasurer Chris Bowen said Mr Abbott’s speech suggested he was ”addicted to being leader of the opposition and [hadn’t] adjusted to being Prime Minister”.
”What we saw from the Prime Minister in this speech was a pretty tired old recitation of . . . slogans, and frankly, continuing attacks on the Labor Party for domestic political purposes,” Mr Bowen told ABC radio on Friday.
”It’s not how a Prime Minister would traditionally conduct himself while overseas.”
Mr Bowen said Australians would expect their Prime Minister to show ”a bit of vision” in a speech at a high-profile international event such as the World Economic Forum.
If Mr Abbott was critical of Australian excess, he went the other way on US stimulus, warning that the ”taper” of quantitative easing, where the Federal Reserve has effectively been printing money, should be done carefully.
”In the United States, economic growth is set to rise from under 2 per cent to almost 3 per cent with 1 million jobs created in the last year,” he said.
”China’s growth is moderating but likely to remain over 7 per cent. Even the eurozone is finally growing again. Of course, the recovery remains fragile. The US taper will need deft management.”
With Australia chairing the world’s premier economic leadership grouping, the G20, later this year in Brisbane, Mr Abbott was keen to lay down some markers, emphasising that it was not governments that created wealth but business and markets.
He said the financial crisis had been a failure of governance rather than of capitalism itself.
Mr Abbott said the lesson of the recent past including the success of lifting hundreds of millions out of poverty was that it was achievable only through promoting greater freedom and the markets that they would engender.
”It’s worth noting if only to remind ourselves of the good work that can be done, that in the past few decades, more has been achieved to reduce poverty than in any other period in history,” he said.
”Essentially, officialdom has begun to grasp that human freedom is less a threat than an opportunity – as soon as people have freedom, they create markets.”
The Sydney Morning Herald