Politics

Europeans verballed while IMF adopts the Gillard-Swan 'lecture'

It was a European summer day in July 2002: John Howard strode into a meeting with German business leaders in Frankfurt, at the start of a two-week European trip and proceeded to ... lecture them.

After reciting how successful the Australian economy was and the benefits of reforms that Howard had either undertaken himself or supported in opposition, he told them "we don't find very acceptable a situation where the level of subsidy to agriculture from the European Union is 35% of the total value of agricultural production."

Howard even told them to stop focusing on aid for developing countries.

"We've just had a meeting of the G8 in Canada and pleasingly one of the things that came out of that was a new commitment to economic development of assistance in Africa. Very worthwhile, very laudable, and something that Australia strongly supports. But can I gently but nonetheless relevantly make the point that removing trade subsidies is worth by degrees of three or four the total value of current foreign aid by the developed countries to the developing countries."

Back home, there was nary a whisper about Howard haranguing foreigners. No criticisms from News Ltd columnists. No whingeing from the shadow Treasurer. Silence.

Scroll forward almost exactly a decade and Julia Gillard is copping plenty for writing a letter to G20 leaders about Europe and giving a speech in which she suggested business leaders consider what had happened in Australia.

"The Prime Minister and the Treasurer are taunting European leaders with a barrage of public statements," shrilled Dennis Shanahan, accusing Gillard and Swan of having "no new ideas or solutions and only serves to build their own reputations for economic management at home."

Indeed, in a newspaper that is normally quick to attack Europe's sclerotic economic management, the Europeans had found a doughty defender.

"Europe won't be 'lectured' by Julia Gillard, EC chief Jose Manuel Barroso has said" read the headline this morning from another article by Shanahan.

Joe Hockey joined in the attack yesterday, accusing Gillard of "lecturing the world" and issued another media release this morning declaring it "embarrassing". Simon Benson in the Daily Telegraph, unsurprisingly, went further and claimed that Gillard had been "slapped down" by Barroso.

But if you read Shanahan's article carefully, you'll see the headline was plainly wrong. Barroso had not mentioned Gillard or anyone else in his comments about being lectured. In fact, a Canadian media outlet reported Barroso's comments were directed at Canadian Prime Minister Stephen Harper, whose tough talk has allegedly "irritated" the Europeans.

And apart from verballing Barroso, News Ltd and Hockey didn't bother doing some basic research. Gillard and Swan yesterday urged Europe to pursue financial services reforms for "a more integrated banking system" and aim for fiscal sustainability "in the medium term", "while using all available scope to support growth and jobs in the short-term", in particular by bringing forward infrastructure projects.

They also urged Europe to undertake "structural reforms. These reforms include opening up competition in services and key product markets, encouraging flexible labour markets, and tax reforms and entitlement reforms that enhance productivity and improve incentives to work. Ultimately, structural reforms will have the most significant positive impact on lifting global growth and creating more employment opportunities."

Gillard's B20 speech covered the fiscal components of those recommendations. The "Australian way" she referred to was stimulus during the financial crisis and then return to surplus. This "lecture" isn't new and nor is the Prime Minister the only one delivering it.

Last week, Gillard issued a very similar statement with South Korean president Lee Myung-Bak that identified exactly the same strategies. Overnight, the IMF issued a paper on Europe.

What did it recommend? Structural reforms including "product and service market reforms, underlining the importance of tackling vested interests in sectors such as distribution and regulated professions. The North should focus on increasing labor participation and improve services efficiency, while the South urgently needs better functioning labor markets."

All of which Gillard and Swan mention. The IMF also said that while such reforms would work over the medium term, "these reforms need to be complemented to sufficiently boost growth in the short term; hence policymakers must supplement them with policies to promote demand, external in some cases, internal in others... The pro cyclicality of nominal fiscal targets during an economic downturn could be substituted with a focus on improving structural fiscal balances, where there is fiscal space."

Translated, that means don't cut spending when you're already in a recession. Oh, and the IMF recommended financial services reforms for "centralised regulation and supervision". In short, the Gillard-Swan "lecture" to Europe was exactly what the IMF delivered overnight as well.

If Gillard needs to apologise, so does Christine Lagarde and Lee Myung-Bak. If Gillard has "no new ideas" then the presidents of the IMF and South Korea don't either. And maybe not Stephen Harper, too.

As usual, that sort of detail got lost in the News Ltd rush to attack the government. As the example of Howard from 2002 shows, there's a fairly blatant double standard here.

Liberal Prime Ministers are apparently allowed to lecture the rest of the world; Labor ones aren't. And when Howard harangued German business leaders, the RBA cash rate was 5%, not 3.5%, inflation was over 3% not 1.6%, participation was a full two percentage points lower and unemployment 6.3%.

In fact, let's be blunt -- if a Liberal government had these sorts of economic figures, the nationalist tub-thumping from the media would be ceaseless.

Instead it seems any suggestion that anyone could learn from the local economy is the height of presumption -- even when the "lecture" is not merely endorsed but repeated by the IMF.


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