One of the more silly things the Liberal Party did while in opposition was to attack the Secretary of the Treasury Martin Parkinson.
Throughout 2012 and 2013 Joe Hockey and Tony Abbott were highly sceptical of the performance of the Treasury – suggesting its budget figures were politically loaded – and Hockey pointedly refused to express any confidence in Dr Parkinson.
This was silly not just because attacking public servants rather than members of the government makes you look like a bit of a bully – as Senator Conroy found when he attacked Lt. General Campbell. It was silly because given the polls it was pretty well certain that Joe Hockey was going to end up being Treasurer, which meant he would be forced to either back down and admit he had been over zealous, or be forced to sack Dr Parkinson.
Unfortunately Mr Hockey has thus far been unable to back down – his hand it seems has been forced by the Prime Minister’s office, with Tony Abbott ludicrously suggesting that sacking Dr Parkinson was a case of the incoming government placing its “stamp on the economic policy of the country”.
It’s clear that Joe Hockey realises his mistake because while Dr Parkinson was to be moved on soon after the budget, he is now being kept on till the G20 meeting in November.
His mistake can also be seen from the way Dr Parkinson defended the mid-year fiscal and economic outlook (MYEFO) numbers at the recent Senate estimates hearings. The MYEFO numbers were as politically charged as any Wayne Swan budget, and yet Dr Parkinson handled the questions with aplomb and ably defended the Treasury’s change in forecasts.
He explained that the changes did not occur due to political interference but because the Treasury department had updated and – in his view – improved the methodology it used. And far from suggesting the ALP government had used dodgy numbers he told the committee that Treasury was not ready to implement the new methodology prior to last year’s election.
It was the perfect public servant performance – strong defence of his department, and little in the way of looking like a Liberal Party lackey.
On Wednesday night in a speech to the Sydney Institute he also showed he was no ALP lackey.
The speech was as economically-dry as any member of the government would have been able to deliver. In the speech, Dr Parkinson put forward essentially the same arguments that Joe Hockey has been arguing – that a flood of government spending is coming along in 2017-18. He also provided some pretty frank and fearless advice when he outlined the problems the government’s budget faces that are tricker to fix than when we had budget deficits in the 1980s and 1990s.
Firstly we have lower inflation and a flatter income tax scale, we have lower growth because we’re not actually coming out of a recession – which involves a lot of spare capacity being used – and finally “there are fewer assets to privatise, which in the 1990s helped to reduce debt and the cost of servicing that debt”.
He then suggested that one aspect needing to be addressed was the broadening of the base of the GST.
That is advice the government doesn’t want to take up yet, but it is advice that needs to be heeded, regardless of how politically hard it is to stomach. Broadening the GST will be regressive – but surprisingly not overly so. Crucially it will require ensuring low income earners are not the ones who bear the brunt of the changes.
But in an economy where we now spend more of our income on things that are not subject to GST than we did when the tax was introduced, it is a change that will need to be addressed, by some brave political party.
But the courage does not need to stop there – taxation exemptions on superannuation that could bring in around $27bn in extra revenue a year should be addressed.
With an ageing population and dwindling revenue, the budgetary work ahead will require tough choices and should Joe Hockey be the one to make them, he could do worse than to start by telling his Prime Minister that his first choice is keep Dr Parkinson at the head of his Department.
Greg Jericho is an economics and politics blogger and writes for The Guardian and The Drum.