Labor’s Debt and Deficit: “Labor can’t be trusted with the economy” Really?

The election campaign has given us scare campaigns and election ads galore. The strongest line that has come through the campaign is the Liberal party line that Labor can’t manage an economy and that the last Labor Government left Australia in Debt. What’s the truth in these election ads.

“The last time Labor was in Government they left the economy in a 240 billion dollar deficit. Labor can’t manage an economy” the first lines of the Liberal party election ad. How informed is this statement? This is statement lacks critical information in some parts and in others it blatantly leaves out the obvious. 

The last Labor Government was from 2007 to 2013. In the Rudd and Gillard governments the Treasurer was Wayne Swan. While Mr Swan did not deliver a surplus economy and Australia did enter into a state of debt, there are key facts to remember. The most important fact to remember when the line of debt and deficit enters the discussion is to remember the international state of affairs and global economy. In 2008 the world suffered the Global Financial Crisis (GFC), the worst economic recession since the Great Depression. The global markets collapsed and world banks and financial centres liquidated. The US suffered major economic collapses. Unemployment rose to 10.1%, GDP dropped dramatically and the Stock market went into a steep decline. During these years the Australian Labor Government, initially under Rudd then Gillard, saw the economy grow 0.4% in 2009. In comparison all G7 countries saw economic contractions and decline. Australia’s economy continued to grow even through the GFC, Australia remained almost completely unscathed throughout.

At the time Dr Steven Kennedy, General Manager of Treasury, had this to say “I think there are three reasons for this: first, the Australian Government’s and Reserve Bank of Australia’s timely policy responses to the effects of the global financial crisis and global recession; second, that the Australian economy trades substantially with Asia and in particular, China, and the economy is continuing to benefit from Chinese growth in the midst of this highly synchronised global slowdown; third, the Australian banking system has remained in good shape throughout the crisis reflecting sound regulation.” 

Labor’s spending stimulus packages coupled with its willingness to trade with China gave Australia the guidance through the economic tsunami that was the GFC. It also gave Wayne Swan the title of ‘Finance minister of the Year’ in 2011 and the best Treasurer in the OECD. The policy of Labor known as the schools building program are credited with the quarantine of Australia from the hardships of the GFC. 

So while we can see that in the Liberal Party’s advertisement Labor did have a ‘debt’ in government it was due to the economic climate of the time that led to the ‘deficit’ and had it not been for the spending packages Australia’s 25 years of economic growth would have crashed with the rest of the GFC. 

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