The Failed Estate: Kabuki Economics

Written By: - Date published: 8:56 am, May 13th, 2018 - 19 comments
Categories: australian politics, Economy, International, Media - Tags:

Reprinted with permission from the Failed Estate.

One of the first budgets I covered as a journalist spelt the end of the career of the man who delivered it.

John Dawkins, who had been finance minister in the formidable first Hawke cabinet of 1983, had finally achieved his ambition of taking the treasury portfolio after Paul Keating rolled Bob Hawke for the prime ministership in 1991.

Two years later, Dawkins was gone. He quit politics after the debacle that was the 1993 budget. This is when Keating went back on the L-A-W tax cut promise he had made before his ‘true believers’ election victory against Hewson that year.

In the months after the budget (the last one delivered in August), the program stalled in the Senate. With memories still fresh of the supply crisis of 1974, financial markets became skittish and the Australian dollar sank to around 64 US cents, a then seven-year low. (Recall, Australia was just coming out of recession then).

Having anchored the editing for a US financial newswire inside the lock-up, I recall the real work began in the weeks afterward, filing headline ‘snaps’ to trading screens from our reporters at Canberra doorstops where Keating or Dawkins would be fired questions about budget negotiations. It was pretty shambolic.

These days, it’s hard to imagine financial markets getting anywhere near as excited about an Australian budget. Most of the key measures are flagged well ahead of the event and the bond markets are telegraphed the financing task. In any case, as a ‘AAA’- rated borrower these days Australia finds no shortage of demand among global pension funds for its relatively high yielding bonds. Yes, our public debt has doubled in five years, but it still pales in absolute and proportionate terms to the liabilities of major economies, including the USA.

This means Australia is rarely on the radar of global markets, living off its reputation as a well-run economy with sound public finances, and two major parties broadly committed to the (albeit now shopsoiled) Washington consensus of independent monetary policy, fiscal responsibility, open markets and a commitment to free trade. Put another way, compared to the ‘Breaking Bad’ dramas over Trump, Brexit, the  European monetary union and the fiscal and monetary policy experiments elsewhere post-GFC, Australia (with 27 years of uninterrupted growth) looks like another episode of ‘Law and Order’.

So why is the Australian budget still treated as such a big deal, with hundreds of journalists and analysts flocking to Canberra for a high-security, highly expensive six-hour lock-up? We’ve seen that the markets don’t care much anymore, most of the detail is strategically leaked in the weeks beforehand to sympathetic journalists to maximise coverage and much of the variance in the bottom line from one update to the next is due to exogenous factors beyond the government’s control.

After suggesting the media collectively boycott the whole circus, I had a back-and-forth on Twitter about this with ABC commentator Annabel Crabb, who made the point that it would be hard for her and others to offer an informed opinion about the budget without the lock-up. My response to that is, firstly, why should we be hanging out for their opinion anyway? Sure, share your thoughts by all means but what makes journalists’ insights any more special than anyone else’s, other than the fact they’ve had a six-hour head-start in reading the documents? Keep in mind the entire budget is available online these days within a minute or two of the treasurer getting to his feet. If you know where do look it doesn’t take long to get up to speed.

Understandably, Ms Crabb wants to offer her viewers an informed, considered view, not a “hot take”. But perhaps if the budget was just released without a lock-up (as most countries do BTW),  journalists would go back to the traditional order – first report the facts, THEN offer expert analysis and THEN tell us your opinion once everybody has absorbed the information in real time. The danger with the lock-up is that the coverage expands to fit the investment in the occasion. In other words, it suits the political class to corral the media for a whole day so it can control the message and it suits the media, having made such an investment in the theatre of the budget (like an opening night on Broadway), to preserve the exclusivity of access that the lock-up provides. Disintermediation, digital media and the real-time access that everybody has to the key documents only makes the established insiders more defensive on this score.

I’d also argue that the mutual back-scratching around the budget puts the media at risk of being complicit with the government rhetoric about “running the economy” and “creating jobs”. The depiction of luck as skill suits the insiders. This latest budget, for instance, shows that a $26 billion windfall since the last fiscal update in December is funding another round of the now ritual pre-election tax cuts.  A good chunk of that turnaround was due to a synchronisedglobal upswing in the other developed economies as they finally emerged from the post-GFC slump. The rest was an overdue rebalancing of our domestic economy after the post-mining boom hangover.

So as much as the media wants to personalise the budget process (Scott at the controls like Kirk in the Starship Enterprise), the reality is the government is not ‘in charge’ of the economy. And that’s why this trend of making 10-year projections beyond the four-year forward estimates is just nonsense. This latest three-phase tax cut, culminating in a virtual flat tax regime by 2024, is particularly silly. Imagine Peter Costello, in the midst of the commodity boom of the early 2000s and money coming out of his ears, projecting tax cuts for 2008. What could go wrong?

The truth is the Australian economy is a tiny cork on a big, heaving ocean. We’re a minor-to-middling political power, which largely outsources its foreign policy to Washington. Our political culture is increasingly a pale imitation of the partisan 24/7 shouting that dominates Washington (minus the guns). Our thinktanks import their spotty libertarian thought-bubbles from across the Pacific and our pop culture is almost entirely derivative. For all the noise and gnashing and wailing of teeth, the budget deficit swings around 1-2% of GDP most years. Our debt of 20% of GDP compares with levels of 80,90, 100% and more in other developed economies. The political argy-bargy and column inches filled is way out of proportion to the global significance of it all.

If there’s a story in this budget it’s connected to a bigger one about the exhaustion of the three-decade neoliberal experiment globally. Once governments have privatised everything and outsourced it all and transferred every single risk to the shoulders of individuals (so they are ‘free’), what’s left? Politicians are reduced to tedious, train-spotting arguments about revenue-to-GDP ratios and “the path back to surplus” (the economic equivalent of waiting for Godot). Outside economics, they are left to fight manufactured culture wars to fuel the permanent outrage machine at News Corp – hence the entirely ideological budget cuts for the ABC and the quarter of a billion dollar ‘chaplains’ program. Even the tax cuts serve an ideological purpose, sold in the American style as “it’s the people’s money and it’s government’s job to get out of their lives”, language that is totally alien to Australia’s social democratic tradition.

With the politics ritualised, so is the media coverage. Panels of talking heads tediously debate the political strategy and whether the tax cuts will shift Newspoll. The images are always the same – the treasurer in shirt sleeves strolling through the lock-up and chumming up with our favourite commentators, the piece to camera above the huddled journos, perched over the books like anxious students in an HSC exam (“pens down, time’s up!) the references to the “centrepiece pitch to middle Australia”, the PowerPoint presentations, the well-rehearsed talking points from the rival political players – it’s beyond boilerplate.

Of course, there are real stories in the effect the budget measures have on people  beyond Canberra. But you don’t hear them beyond the hastily constructed and clumsy family-at-home-in-front-of-the-telly voxpops. As Bernard Keane observed in Crikey, the budget is now a parlour game for the political class, a highly ritualised and abstract exercise totally divorced from the real-world impacts of the taxing and spending decisions. The game is now so airless and artificial that politicians set as their benchmarks for success arbitrary revenue targets that bear no resemblance to anything anyone cares about or connects with, which I guess is the whole point.

In the meantime, it is no wonder people are switching off and searching for a political movement that returns to the public a sense of their own agency, that protects and strengths our social infrastructure and that purges our exhausted political conversation of the dead Hayekian worldview that created this mess.

It’s time to close the curtain on kabuki economics.

19 comments on “The Failed Estate: Kabuki Economics ”

  • Comments are now closed

  1. lprent 1
    13 May 2018 at 9:57 am

    Great post. I love it.

    • mickysavage 1.1
      13 May 2018 at 10:07 am

      He is a phenomenally good writer who blogs occasionally. He has a really good grasp of media and also financial issues.

      • dukeofurl 1.1.1
        13 May 2018 at 11:57 am

        Doesnt mention that Australias Treasury talks about budgets on a ‘cash basis’ while their Finance department ( which handles the spending side) talks about the numbers on an accrual basis ( the same as we do)

        The previous budget had a deficit of $35-40 bill ( cash) but only a deficit of $8 bill ( accrual)
        Other complications are the GST revenue is distributed to the States for their own spending. For strange reasons people like OECD dont count this as ‘expenditure’

        On top of that the Federal Government runs a sort of ‘off the books infrastructure spending’ ( but not a PPP).
        Maybe we adopt that as well?

        A quirk of their constitution ( like the recent many Mps and Senators who we disqualified for dual citizenship) meant that Federal Government funding for state schools ‘chaplains’ was deemed illegal
        https://en.wikipedia.org/wiki/National_School_Chaplaincy_Programme
        https://en.wikipedia.org/wiki/Williams_v_Commonwealth

        They kept providing the funding ( $250 mill plus) by work arounds rather than curtailing it ( including 100s of other programs) and that first work around was later ruled invalid. Finally the chaplains were funded by the states directly who were then funded by the Commonwealth.

  2. Ad 2
    13 May 2018 at 10:23 am

    I would rather have a boring political media together due to a very stable state, flourishing society, strong democracy, and strong economy, than what most other countries in the world have. That in the end is what this writer is complaining about. He may not enjoy the political economy of Kabuki, but I suspect he wouldn’t like the political economy of Sepultra either.

    • mickysavage 2.1
      13 May 2018 at 10:31 am

      Does a flourishing society require the continuation of traditional budget customs?

      • Ad 2.1.1
        13 May 2018 at 10:49 am

        It doesn’t really require politics as described above, at all.

        It’s definitely up to politicians and political parties to refresh the political order.

        But predictable and well-forecast budgets are far more preferable than massive surprises.

    • greywarshark 2.2
      13 May 2018 at 10:42 am

      Ad
      So it’s one or the other is it. TINA – again? What about a handcrafted, fit for purpose economic and political system? Any skilled craftspeople to make this delicious delectable pavlova all of our own, that is craved and enjoyed by the rest of the world?

      • Ad 2.2.1
        13 May 2018 at 10:55 am

        You’re confusing your preferred political system, from the focus of the piece which is political media.

        The writer of the piece is full of the spent and cynical ennui that perpetuates what he is complaining about.

        For the multiple platforms now available to engage the public about politics, his writing shows only that he has no imagination nor any will to imagine any alternatives. He sounds like Bob Dylan in the Time Out Of Mind phase:

        People on the platforms
        Waiting for the trains
        I can hear their hearts a-beatin’
        Like pendulums swinging on chains
        I tried to give you everything
        That your heart was longing for
        I’m just going down the road feeling bad
        Trying to get to heaven before they close the door

        • fender 2.2.1.1
          13 May 2018 at 12:30 pm

          The verse you quoted from the song Trying Yo Get To Heaven from the album Time Out Of Mind actually goes like this:

          “People on the platforms, waitin’ for the trains.
          I can hear their hearts a-beatin’, like pendulum swingin’ on chains.
          When you think that you’ve lost everything,
          You find out you can always lose a little more.
          I’m just going down the road feelin’ bad,
          Tryin’ to get to heaven before they close the door.”

          Here’s the full song:

          “The air is gettin’ hotter, there’s a rumblin’ in the skies.
          I’ve been wadin’ through the high muddy waters,
          But the heat riseth in my eyes.
          Everyday your memory goes dimmer,
          It doesn’t haunt me like it did before.
          I’ve been walkin’ through the middle of nowhere,
          Tryin’ to get to heaven before they close the door.

          When I was in Missouri, they would not let me be.
          I had to leave there in a hurry, I only saw what they let me see.
          You broke a heart that loved you,
          Now you can seal up the book and not write anymore.
          I’ve been walkin’ that lonesome valley,
          Tryin’ to get to heaven before they close the door.

          People on the platforms, waitin’ for the trains.
          I can hear their hearts a-beatin’, like pendulum swingin’ on chains.
          When you think that you’ve lost everything,
          You find out you can always lose a little more.
          I’m just going down the road feelin’ bad,
          Tryin’ to get to heaven before they close the door.

          …

          I’m goin’ down the river, down to New Orleans.
          They tell me everything is gonna be all right,
          But I don’t know what all right even means.
          I was ridin’ in a buggy with Miss Mary Jane,
          Miss Mary Jane got a house in Baltimore.
          I’ve been all around the world boys,
          I’m tryin’ to get to heaven before they close the door.

          Gotta sleep down in the parlor, and relive my dreams.
          I close my eyes and I wonder, if everything is as hollow as it seems.
          Some trains don’t pull no gamblers,
          No midnight ramblers like they did before.
          I’ve been to Sugartown, I shook the sugar down,
          Now I’m tryin’ to get to heaven before they close the door.”

          Can you please explain how this masterpiece of a song “sounds like” the writer of this article?

          • Ad 2.2.1.1.1
            13 May 2018 at 12:51 pm

            My quote was taken from the official Bob Dylan website.
            It was that set of lyrics that I chose, rather than the better-known popular version that you quote.

            https://www.bobdylan.com/songs/trying-get-heaven/

            The specific quoted verse I chose speaks of melancholy, longing, resistance, world-weariness, of observing that same tiredness in ordinary people.

            Tell you what, put the song on and re-read the piece at the same time.

            • fender 2.2.1.1.1.1
              13 May 2018 at 1:31 pm

              Your interpretation of the song isn’t inaccurate. Just don’t see how it relates to an article about the media drama surrounding budget day that resembles a bizarre Kabuki play or the americanised Kabuki dance

              • Ad …
                13 May 2018 at 1:35 pm

                That means you suffer from the same failed imagination that the post complains about. Which is apposite.

                • fender …
                  13 May 2018 at 2:00 pm

                  The post doesn’t complain about a failed imagination, it complains about a superfluous media frenzy surrounding budget day.

      • greywarshark 2.2.2
        13 May 2018 at 5:30 pm

        Yeah I am confused all right. The words that pour out from our mouths or from under our fingers, some of them obviously correct and doable but never acted on, must be a Pavlovian response to the concept of freedom of expression.

        The Russians and Chinese have really nothing to worry about if letting the peeps appear to have the right to air ideas, as the pipeline is blocked along a way where the clamp is out of sight. Is there any meaning in all this – will we ever get results, small significant changes that help us where we are right now?

  3. greywarshark 3
    13 May 2018 at 10:38 am

    wow that is a great thinkpiece. And the meaning of kabuki, stylised Japanese theatre mostly performed by males, that is a great analogy.

    We may have to pass everything that happens to us and that we do before a reality checking program to see how well it serves us as humans, and the program will have a call sign of Where is the love? That sounds risible, but only because it cuts through the stolid practicality process to questions of what is our life about, not just as a system that produces statistics that tell us how we are doing while we are being.

    Where is the Love – three different approaches showing our human
    creativity on this important thing
    The Black-Eyed Peas

    or Roberta Flack

    or this is really street stuff ( but is it niceness?)

  4. dukeofurl 4
    13 May 2018 at 4:06 pm

    What has fascinated me is all the talk of the ‘$1 Bill funding boost’ for Foreign affairs including aid budget.

    These things are too complicated for the media who dont tell how many years this is over ( 4 years) or even what we are spending now

    National wasnt so shy about its election promises about aid for the pacific
    $644 mill of aid in 2017/18 , most of that for pacific
    and ‘The present three-year $1.7b New Zealand
    Aid Programme ‘

    Its tucked away in their election policy factsheets
    https://www.national.org.nz/foreign_affairs

    Its a classic budget strategy, repackage your opponents programs with a bit of ‘ jiggery pokery’ which shifts money from one area to another and call it an increase but mostly all thats happened is extend for a year.

    Much is made of the Stockhom embassy, but McCulley opened embassys in Dublin (?) , Baghdad and Bogota(?)

  5. Nic the NZer 5
    14 May 2018 at 8:17 am

    http://bilbo.economicoutlook.net/blog/?p=33365

    Explains why the whole AAA thing is an irrelevant cherade.

  6. Tracey 6
    14 May 2018 at 7:18 pm

    Imagine if the media reported facts first… if only John Lennon had paused

  7. Philg 7
    14 May 2018 at 7:53 pm

    Yes, the media has become Theatre, Entertainment.RNZ’s Jim Mora describes ‘The Panel ‘ as ‘The News of the day in a different way’ Just give it straight Jim. We don’t need bias, trivia and opinion. Just give us the news, the whole news and not a selective version of it.