Australia has an economic and fiscal position that most European governments can only imagine in their wildest dreams. So why the current obsession with achieving a Budget surplus?
I am in Australia as ‘Accenture-Crawford School Distinguished Visiting Professor’ at the Australian National University in Canberra. I’ve been doing a fascinating series of meetings, seminars and lectures with academics and senior public servants from across the Australian federal government, and have had generous access to the ‘corridors of power’ – including a wide range of prime ministers, cabinet officials and leading public servants. Here’s a few, fairly random, thoughts about Australian federal government procedures.
First, on politics, the economy and the Budget. I was fortunate enough to be here when the minority Labour government announced its 2012 Budget. I won’t go into the distractions (there are two highly controversial scandals in train about the Speaker of the House and a former Labour MP and trade union official, which did somewhat overshadow the Budget in the media.) However, the central thing that leaps out about Australia’s economy and its fiscal position is that most European politicians would sell the granny and the children to have Australia’s ‘problems’.
Mainly because of continued demand for raw material exports to China, Australia’s economy came through what they call down here the ‘Global Financial Crisis’ or GFC pretty unscathed. Growth is at about 2% and rising, unemployment is at about 5%, the current government deficit is well below 3% of GDP and the total debt below 10% of GDP. (Australia could definitely join the Euro!).
There are however signs of potential problems: house prices are dropping in some areas (eg Melbourne) due mainly to oversupply; demand from China may be slowing down; and international financial instability is affecting exchange rates. So it’s not all rosy.
All the more strange then that Australian politicians have managed to get themselves locked into an arms-race about who can best produce a ‘real’ surplus in the federal Budget. Even if there were no economic waves on the horizon they wouldn’t need a surplus, given the size of their debt mole-hill.
But there are potential problems coming their way and some flexibility in the Budget could help smooth these out. So why the fixation with a surplus? It appears to be something of an historical accident that the two main political blocks – Labour and the Coalition (of Liberals and Nationals) – seem to have stumbled into this position and I haven’t yet seen any intellectual justification for it. It’s just assumed to be axiomatically a ‘good thing’ to have a surplus.
Secondly, there is the issue of parliament and scrutiny. The Budget process itself makes for a fascinating case. Although, as in Britain, parliament can do very little to change the contents of the Budget presented by the government in office, how the Budget is scrutinised before it’s enacted is very different.
Australia’s bicameral parliament has evolved into very different roles. Although the Senate is supposed to be the junior partner of the two houses it has taken upon itself the main role of scrutinising the Executive, which is based in the House. (The Senate is elected by full PR and rarely has a majority for any one party).
This is most evident around Budget time: next week the Senate scrutiny committees (eight of them) begin hearings on the detailed proposals in the Budget. By all accounts these are gruelling times for departmental officials who get thoroughly and sometimes aggressively grilled about any and every aspect of spending, and also about the results that spending is meant to, and does or does not, achieve.
Although Australia sticks formally to the ‘Westminster’ convention of accountability of public servants through ministers to Parliament, this Budget scrutiny process seems to drive a coach and horses through that particular myth.
I haven’t yet had time to delve into the documentation enough, but it certainly appears from what I’ve been told that this is now effectively embodied in various codes and standard operating procedures, so that in practice there is a lot more direct accountability of public servants to Parliament than there is in Westminster (although even that has changed way beyond the simplistic doctrine).
There may be some lessons here for the UK: especially about the scrutiny role of the Upper House; about Budget processes; and also about accountability of civil servants to Parliament. I’ll be writing more about this in due course – especially as our very own House of Lords Constitution Committee gets into its inquiry about the last of these questions.
Colin Talbot is a professor at the University of Manchester Business School, and an adviser to the Treasury select committee. This blog first appeared on Whitehall Watch