Abbott’s not-so-golden years
As figure one shows, that’s true – but it’s not the whole story. Yes, public debt did fall under Howard — but the fall actually began in 1994, during the last two years of the Keating government. However this is not a plug for Paul Keating, because the periods of falling government debt under both Keating and Howard had something else in common: a growth in private debt that dwarfed the fall in government debt. While Howard and Peter Costello kept the public eye focused on the $20 billion reduction in public debt they achieved over their term, private debt increased by $1.3trillion.
GDP during the Howard Golden Age increased too, but by only $600 billion, less than half as much as the increase in private debt.
Again, this is not to praise Labor, since Keating held the reins in 1993 when the private debt bubble took off. But Howard had them in 1999 when Australia’s private debt exceeded its GDP for the first time in its history.
Can we keep it up, and borrow enough to make Tony Abbott into the Liberal Party’s Golden Boy Mark III (let’s not forget John Howard’s hero Sir Robert Menzies)? To paraphrase Tony, “if you want John Howard’s economic performance, you have to have John Howard’s private debt performance”: to sustain Howard-like growth in aggregate demand, we’d need to emulate the rate of growth of private debt that occurred on his watch.