Labor's recession recovery myth

Since the global financial crisis, Kevin 07 has been quick to claim that Labor has guided Australia through the threat of recession based on its ability to make positive, quick and hard decisions, with Australia emerging as the only nation among the developed nations, with a strong and growing economy.

The decision-making ability produced a major stimulus spending package and innovation that created the jobs, jobs and jobs that Labor continues to promote to push Australia's infrastructure into the future.

When Kevin 2010 self-destructed with loss of direction and a growing list of broken electoral promises, several “Julias” emerged to take control and moved quickly into election mode to secure another term for Labor. While the faces have changed, the script is unchanged with the same rhetoric, rosy promises and lack of hard detail.

Of serious concern is Labor's total reliance for its promises and plans on a single factor in a shaky global economy - China's continuing economic growth and demand for Australia's resources.

The Liberals were quick to focus on the broken promises and the disastrous schools, computers, and insulation spending packages.

The schools building program

In many instances, the Building the Education Revolution (BER) program has lacked basic commercial responsible planning and ignored input from schools as to their most urgent priorities. Schools have been saddled with new buildings that in turn increased expenditure for security, maintenance, cleaning and daily energy consumption.

Labour has acknowledged that the hastily cobbled program incurred a huge "fast tracking premium" resulting from lack of safety measures, questionable quality and over pricing, but it is, apparently, a small price to pay for new school infrastructure.

Insulation package

This package was more of the same: lacking planning and supervision and displaying recklessness and a total disregard for advice on safety, just to be seen to be spending the money.

No matter what the claimed benefits, the sacrifice of lives of workers involved in the program is a totally unacceptable and horrific premium for this fast tracking strategy and political gain. There are now the thousands of homeowners with their single biggest investment left compromised, at risk of fire, due to a lack of a comprehensive inspection and rectification program to determine how safe they are in their family home.

What did save Australia from recession?

The Labor Government is right about stimulus spending being responsible for Australia's escape from recession. But it has failed to acknowledge, however, that it was not its stimulus package.

China's massive US$586 billion stimulus package was responsible for driving demand for Australian iron ore to produce steel for China's mammoth industrial, property, and infrastructure development. China's steel industry combined with its twisted speculative iron ore import system drove iron ore prices to record levels.

Much of the work created by this demand pushed miners to increase capacity, bring new ore reserves on line and provide the stimulus for explorers to move to mining status.

It was this increase in mining activity that created direct and indirect demand for labour that triggered the moves to focus on the lack of technical and trade skills in Australia.

Considerable stimulus spending occurred after it became clear that Australia was emerging from the threat of recession, and to give them their due, the Liberals urged Labor to cut back on spending. Labor rejected the proposal and ignored the signs of a further stalling in the global economy.

In its campaign rhetoric, Labor conveniently overlooked the spawning of dodgy operators and loss of jobs and genuine businesses in the insulation sector. Where do these appear in Labor's economic and unemployment data today? Has the real cost of providing the massive assessment and rectification program to protect homeowners and workers involved been provided for in Labor's budget?

The Labor Party has touted the success of the Rudd election campaign to bring bold, widespread innovative reform to build a strong Australian economy for the 21st century.

In a perfectly scripted, cut and paste production, the buzzwords of sustainability, economic reforms, employment, etc. have flowed effortlessly and monotonously at every interview. It has been a tsunami of rosy pictures bordering on a cargo cult mentality with broad promises of everything for everyone, funded by an apparently boundless Australian economy and infinite resource export growth. Maybe Labor should look more closely at the definition and extent of sustainability. What is missing is hard data on just how the management of this economic mastery will work.

Shock and awe economic strategies

Labor's response to the global financial crisis was a copy of the US stimulus package delivered with the equivalent of the shock and awe tactics of the Iraq War.

Field Marshall Rudd and his generals implemented this unprecedented economic campaign with massive salvoes of money that decimated the Howard surplus and triggered a major continuous borrowing program as the front line of the stimulus package. The projects involved major works programs to provide jobs, drive the economy and avoid a major recession. It also provided a new and expanded recruitment opportunity for the key unions to increase memberships and their coffers.

China had swiftly followed the US, implementing its own US$586 billion stimulus package in the world's largest infrastructure and industrial development program. The resultant demand for steel, combined with China's highly speculative ore importing trading network, has driven demand for Australian iron ore and pushed iron ore prices to record highs. The Labor Party has seen this as manna from heaven.

Does Labor have a plan "B"

The Rudd economic war strategists, however, failed miserably in battle strategy basics, firing off their economic ammunition, while ignoring the critical need to retain reserves for the unforseen, or for reversals.

The AUS$44 billion-plus National Broadband Network will be the major consumer of funds at a time when the global economy is still floundering and China is sending clear signals of a slowdown in its demand for resources while making rapid strides in developing resource centres closer to home.

During any battle and given the circumstances, boldness may pay dividends, but unless that boldness has support, such action can prove wasteful, painful and fatal.

Labor's strategy to "return the Australia economy to surplus in 2013" appears totally reliant upon a major surge in treasury revenues from the Mineral Resource Rent Tax underpinned by the inferred ability of the National Broadband Network touted to produce a major increase in business productivity and a reduced health bill. Overlaying the timeframe for the roll out of the NBN and lack of detailed costing over the return to surplus raises serious concern about Labor's planning.

Disregarding the questionable NBN fiscal benefits, it is China's continuing demand for resources and related major windfall Mineral Resource Rent Tax revenues that are pivotal in reducing Labor's escalating debt.

If the Mineral Resource Rent Tax fails to meet Labor's estimates, what is Labor's Plan "B" to pay off Australia's debt and return to surplus?

Perhaps the Liberals intention to cancel or modify the NBN is a signal that they have identified the weakness in Labor's strategies and see the cancellation or deferment as one possible way to recover some level of reserves.