Never Let the Facts Get in the Way of Talking the Joint Down
Over the years in this job, I’ve read countless new stories. Many are insightful, some are completely misleading or incorrect, others still are deeply irresponsible.
Two different stories in this morning’s papers fall into that last unfortunate category.
The first cited a private economist from Goldman Sachs who predicted there was a 20 per cent chance Australia would head into recession. As an economist, he’s entitled to his views – as are the hundreds of other private sector economists, some of whom are paid to push the boundaries to get their company’s name in the paper. This time, journalists who should know better blindly took the bait, splashing the word ‘recession’ all over their headlines and lead paragraphs as though this was some common credible view.
This is incredibly reckless. As I said last week, the consequences of these kind of half-cocked misrepresentations about our economy live on for much longer than the news cycle.
As Treasury Secretary Martin Parkinson said on Thursday: “I don’t think anybody, and I’m being serious about this, I don’t think anybody should throw around accusations of that we’re in a recession or we’re on the verge of a recession lightly. Because the most important thing when you think about economies is confidence and trashing confidence, whether it’s for whatever reason and however it’s done is not something that I think is in the national interest.”
Tellingly, this morning’s report was the third time in the last five years economists from Goldman Sachs had predicted the same chance of a recession. Did these predictions eventuate? Of course not. Was this mentioned in any of today’s stories? Of course not.
Goldman Sachs’ model appears to completely ignore the very stimulatory effects on economic activity of record low interest rates and the RBA’s scope to ease further if it judges that necessary – a critical fact.
I’m always up for a robust discussion about the performance of our economy, and it’s great to have a range of views in our public debate – but opinions and assertions must be based in fact.
Too often we see a Liberal Party determined to talk down our economy at every turn, be slippery with the truth and tell straight out lies about our economy (think of the Opposition Leader saying he’ll return growth to the economy).
But just because Mr Abbott and co are at war with the facts, it doesn’t give licence to others to ignore their responsibilities to base their assertions on reality.
I’ve talked a lot in recent times about the big transitions our economy is going through, as the mining boom shifts from a record investment phase to a ramp up in production and exports, and the broader economy transitions to non-mining drivers of growth. We’ve never expected these transitions to be seamless – the big adjustments rarely are – but as a country we’ve got runs on the board when it comes to managing some of the most powerful forces in living memory.
If you'd told any economist ten years ago we'd go through a once-in-a-century terms of trade and business investment boom and come out with contained inflation and record low interest rates, they'd have laughed. If you told them we'd also get hit with the worst global recession in three generations followed by five years of prolonged uncertainty and come out the other side with an economy 14% bigger and 960,000 more jobs, they would have shown you the door.
Since late 2007, our economy has grown more than any major advanced economy to become the 12th largest in the world, climbing three places from 15th – with only the 51st largest population. We’ve got an unemployment rate that starts with a '5', at the same time that both underlying inflation and our official interest rates start with a '2'.
The position of strength that our economy faces the challenges is so often absent from commentary and reporting, much of which seems determined to talk down our prospects and achievements at every turn.
The other story that that completely missed the mark was an article in The Australian newspaper today under the headline ‘Coalition better Robin Hood than Labor’. The basis for the claim that inequality has somehow increased under Labor was that in 2001 government taxes and benefits reduced overall income inequality by 48% whereas in 2010 the reduction was less than 45%.
This is yet another example of the Australian cherry picking years to suit their political purposes. If The Australian had taken the final year of the Howard Government as its starting point, then little change would have been apparent on this same measure.
In 2007 government taxes and benefits reduced overall income inequality by 44.4% whereas in 2010 the reduction was 44.5%.
But much more importantly, the article only touches on the difficulties of any simplistic interpretation of these numbers. Acting decisively to save jobs during the GFC was undoubtedly the right thing to do by low income workers and their families. And yet saving jobs means there’s less redistributive work that needs to be done by taxes and transfers - more workers means fewer people on Newstart.
Indeed, the author Roger Wilkins is cited in the article referring to falling welfare reliance as well as tax cuts as driving the results in his paper.
A more interesting and informative article would have discussed what was driving these trends and the extent to which they merit concern. I have never suggested that the success or otherwise of Government policies rides on single indicators of inequality precisely because interpreting them is complex. Governments have a responsibility to help the needy and preserve the fair go but also encourage and reward hard work. We can’t ignore globalisation and pretend it won’t affect us, but nor should we be blind to it.
Perhaps the most interesting indicator, intergenerational mobility, is something that can only be measured decades after the period in question. Yet if any measure of income inequality rises, the Australian paints it as a failure of the Government. If it falls, the Australian says our focus on those doing it tough is unnecessary.
Judith Sloan’s attempts at gotcha journalism failed miserably with this contribution:
Wayne Swan would get a lot out of reading the latest results of the HILDA survey. The Treasurer will be able to find out that the distribution of wealth actually became more equal between 2002 and 2010, with the largest gains in the bottom half of the distribution.
This finding may be news to Judith Sloan, but this was published in detail in a Reserve Bank paper more than a year ago and reported on by her colleagues at The Australian then.
In my economic note just prior to and foreshadowing my John Button lecture in July last year, I drew on this study saying:
Australia’s success was confirmed by a Reserve Bank study in March that showed wealth inequality in Australia has lessened in recent years. Not only did we avoid recession during the GFC but we came out of it a more equal society than we went in.
In my discussions on inequality, I have always championed Australia’s great successes, preserving the fair go, and being a more socially mobile society than most. I’ve also always said we need to watch out for those who attempt to shut down or delegitimise discussion of inequality and its causes.
This is a complex issue and the readers of the Australian deserve better, as do those who were forced to eat their breakfast this morning reading stories about impending recession.
It’s just not right and it’s deeply irresponsible to assert otherwise.