Swan doth protest too much about recession

Wayne Swan seems to think he can create a shining legacy as Treasurer if the economy can just hold together until the election. In reality its performance under the next government will be his biggest test.

Treasurer Wayne Swan’s swift response to Goldman Sach’s prediction of a 20 per chance of recession in Australia is revealing.

Swan hit out at the investment bank’s economists for releasing a report suggesting the first six months of 2014 would be a dangerous time for the economy, and at journalists for daring to report the comments.

The problem for Swan, as any PR guru will tell you, is that by railing against the Goldman Sachs analysis, he also gives it maximum oxygen in the press. Economists’ views always vary, but by attacking one point of view with such vigour (Swan slams recession talk, June 13) the Treasurer has given us all pause for thought: “Maybe Australia is headed for recession in 2014?”

Okay, so Swan doesn’t seem to understand the link between what politicians say and what the media report. He’s not alone on that score within the Labor ranks. Despite the Gillard government getting a good number of policy formulations largely right, it’s political communication skills have ensured that punters largely think it’s a disaster (a thought most simulaneously hold while looking at their bank statements and thinking “wow, I’ve never had it so good”).

The best example is Greg Combet’s speech last week listing all the ways in which the Clean Energy Future package is more than hitting its targets and for less cost than Treasury forecast. Ask punters for their opinion (and I often do) and they’ll say the ‘tax’ (it’s not) is ‘hitting the economy’ (it’s not).

Labor apologists often say that it’s not a lack of communication skills holding these kind of success stories back, but a hostile media – led by papers including The Australian and The Daily Telegraph. But then the critics of Labor fret about the reach and influence of a supposedly left-leaning ABC, which with the evening news, 730 program, and Four Corners has influenced policy directly on a number of occasions (the live export ban in the cattle industry last year being the best example).

I will not try to untangle that debate here, but will simply restate that Labor can’t sell the policies it has and, to make matters worse, does a fine job of drawing attention to its greatest embarrassments – such as Prime Minister Gillard’s comments on abortion two days ago, and now Swan’s spotlighting of a single report suggesting a measly one-in-five chance that our 21 years of positive GDP growth might be over.

It’s hard to see why he even mentioned it. Such bearish forecasts have been around for a long time, and often get an airing on Business Spectator (The problem is debt, not the election, June 12 and Abbott will be forced to curb cuts, May 30).

But Swan’s comments reveal something else - something unwholesome. There is an overpowering implication in his reaction that as long as the economy can limp through to the September election with positive growth, Swan’s legacy as Treasurer will be gleaming and spotless.

The reality is that nothing could matter less – it’s the economy’s performance through the early part of a likely Abbott government that’s Swan’s biggest test. Growth now, or a dip into recession – and on the domestic components of the economy we’re already there – won’t matter as much as a jobs rebound, or a jobs collapse next year.

Commenting on his own report, Goldman Sachs economist Tim Toohey told Melbourne’s Herald Sun newspaper: “The biggest risk of sending the country into recession is the consumer continuing to not engage.”

Quite so. But Tony Abbott’s plan for Australia is based on the assumption that simply by taking the reins off the ‘worst government ever’, as he calls it, the consumer will start to engage, businesses will start to invest, and jobs will be created.

That’s a pretty optimistic position. I’d say there’s more than a one-in-five chance that Abbott will be disappointed if a government he leads cuts spending heavily into a downturn. But if that tips Australia into recession, it will be as much Wayne Swan’s fault for bringing the country so close to the edge.