Former Treasury secretary, now Chairman of a large bank, Dr Ken Henry, warns Australia of potential catastrophe. Paul Kelly reports: ' National Australia Bank chairman and former Treasury chief Ken Henry warns that Australia faces an unacceptable risk with its budget deficit and fears the nation will wait for a painful economic crunch before confronting true financial repair.
'In an exclusive interview, Dr Henry issued his most powerful warning about the failure of politicians and the national parliament, saying responsible fiscal policy had become a “pretence”, the economic reform narrative “no longer exists” and politicians are fixated by “appeals to populism”.
'Dr Henry said Australia was now running the risk that its AAA sovereign credit rating might be downgraded, coinciding with another global financial disturbance, and in this situation the consequences for Australia “would be truly catastrophic”.'
As I recall, this was the 'great man' who saved us from recession by urging Kevin Rudd to spend like a drunken sailor when the late Global Financial Crisis was upon us. 'Go early, go consumers, go hard' was the advice Dr Henry used to boast about. There is no evidence of Treasury warning then that it was starting our nation down the rocky road to excessive growth of debt and potential loss of our Triple A credit rating. So entrenched is that spending culture that the current Treasurer still occasionally urges us to spend.
What about belt-tightening, saving rather than spending and working for a living rather than relying on welfare?
Dr Henry is also reported to be harking back to the infamous 'Banana Republic' crisis. I know from being there that Bernie Fraser's Treasury played no part in the advice to change tack offered then by the RBA, in fact its Head of Research. Indeed, the entire senior Treasury team sat there like cigar store Indians, failing even to make eye contact, while Paul Keating ranted at your humble scribe. I was the purveyor of the advice to fix the budget which is now being rediscovered by a former Treasury Secretary, about 30 years too late.
To give him his due, despite the ranting and later vilification of the humble scribe, Labor Treasurer Keating took the RBA advice, and the Labor cabinet endorsed it and fixed the budget. Their bold actions were supported by the then coalition opposition, as that opposition supported Labor's reforms. Current Labor is very far from supporting the current coalition government's so far relatively feeble attempts to fix an equally dangerous fiscal imbalance. The Labor opposition will also oppose any economic reforms proposed by the coalition, and the economic illiterates in the Senate will almost certainly vote 'Nyet'.
This is why good judges say only a major economic crisis will jolt Australia's politicians and voters into serious economic reform, including budget repair.
Dr Henry's very belated warning is a case of 'better late than never'. To add to his case, recall that to get the Australian economy back on an even keel, in 1990 as RBA governor, former Treasury Secretary Bernie Fraser had to resort to massively punitive interest rates and to impose 'the recession we had to have'. Global interest rates will inevitably need to rise to normality at sometime in the future. Should we lose that precious AAA credit rating Australia's interest rates will be at a premium over global rates. The crisis being warned of by Dr Henry will be upon us and the solution will again require punishing interest rates and a serious recession.
The image of the week - Julia in Wonderland (with Kevin and Wayne) - summarises the net result of Labor's fiscal policy.
The sporting life.
What a weekend it has been in Australia's sporting life. The Sydney Swans belted Geelong and for the best part of 24 hours it seemed likely that there would be an all Sydney grand final. However, the brave young Footscray dogs outlasted the Giants of Western Sydney to give Melbourne a chance. As in their win against reigning premiers Hawthorn last weekend, Footscray was again magnificent. After three hard final struggles in a row, however, it would be a sporting miracle if they prevail next weekend. With the Swans renowned for their fantastic opening efforts, the first quarter of the Grand final should be a corker. If the Doggies can withstand that opening, the game should be another for the ages.
In Rugby (League, not Union) the Storm squeaked home and the Sharks downed the Cowboys. So there is to be another classic matchup in Melbourne next weekend. Go Storm.
Collingwood seemed to have snaffled a lot of the best Netballers. Along with the new AFL for wimmin, and Jobe's Feminist cap, the influence of ladies in our sporting life is about to take a big step up. Go ladies. Equal pay will take a while, but it will surely arrive.
Image of the week