1930s Depression, Australia, business, China, Coalition, debt, deficit, economics, economy, Euromoney, expenditure, exports, GDP, GFC, global financial crisis, government, Joseph Stiglitz, Labor Party, Liberal Party, Lilley, Malcolm Fraser, mining boom, National Party, New York, OECD, Paul Keating, politics, recession, revenue, stimulus packages, treasurer, unemployment, Wayne Swan, world economy
Wayne Swan, the member for Lilley in the Australian House of Representatives since 1998 (and from 1993 to 1996), has announced that he will not stand at the next election due in 2019. It was Swan who was treasurer during the global financial crisis (GFC) period, the world’s worst economic downturn since the 1930s Depression. Australia was affected quite severely by the GFC as was nearly every country.
Some on the right still mistakenly believe that the GFC was largely confined to advanced economies in the northern hemisphere and that it only lasted a short time. Australia’s GDP growth fell from about 4% to 1% and revenue fell from 25-26% of GDP pre-GFC to a low of 21.4% in 2010-11 and it still hasn’t recovered. This is why we have had deficits for the last nine years and an increase in government debt.
Swan and the Labor Party government came up with two stimulus packages worth $52 billion, most of it in 2009, to keep us out of recession. They had to be put in place in a hurry due to the collapsing world economy and weren’t perfect but they did the trick and kept us out of recession. Many on the right think that the mining boom and exports to China saved us from recession. But gross value added from mining grew by about $3 billion and exports to China by about $9 billion in 2009. Each 1% of GDP at the time was about $14 billion. So with growth falling to about 1%, the stimulus packages were quite clearly the only thing that kept us out of recession.
Nobel prize winning professor of economics Joseph Stiglitz of New York said: “You were lucky to have, probably, the best designed stimulus package of any of the countries, advanced industrial countries, both in size and in design, timing and how it was spent – and I think it served Australia well.” He also said that such programs are “preferable to the waste of human and capital resources that would have resulted if there was no stimulus”. Most countries had stimulus packages of some sort. Swan won Euromoney magazine’s finance minister of the year.
Stimulus package spending was across the economy and prevented many businesses from going broke. Unemployment was kept under 6% compared with more than 10% during the world and therefore Australian economic downturns of the early 1980s and early 1990s with Malcolm Fraser and Paul Keating as prime ministers.
The Coalition (Liberal and National parties) and some of its supporters still talk nonsense about debt and deficit disaster under Labor. But Australia came out of the GFC period with the third lowest government debt to GDP ratio of the 34 OECD countries in 2013, since pushed out to ninth lowest after more than four years of Coalition government. Expenditure under the Coalition is actually higher as about 25.4% of GDP than it was under Labor which averaged about 24.8% and Labor had the GFC.
We can be thankful that the Coalition wasn’t in government at this time. Given their slowness and conservative nature, I think their response to the GFC would have been too little too late to keep us out of recession. Thank you Wayne Swan and Labor for being there.