Former Labor treasury adviser and bureaucrat Martin Parkinson warns of Labor deficits

When a former policy adviser and chief bureaucrat under two Labor treasurers says Jim Chalmers can’t manage money, pay very close attention.

Martin Parkinson is hardly an anti-Labor figure.

During the early 1990s, he served as a policy adviser to Labor treasurer John Dawkins, working in the ministerial office when Paul Keating was prime minister.

Two decades later, from 2011 to 2013, he was Treasury secretary under another Labor treasurer Wayne Swan.

This was back when Dr Chalmers, who is now treasurer, was Mr Swan’s chief-of-staff as Kevin Rudd undermined Julia Gillard to get his old job back in the years after the global financial crisis.

Incoming Liberal prime minister Tony Abbott saw Dr Parkinson as so tied with Labor’s climate change policies that he replaced him as Treasury chief in 2014.

Which makes Dr Parkinson a critic of this Labor Government worth taking seriously.

Despite Australia still having relatively low unemployment, Treasury is only forecasting Budget deficits in coming years.

To Dr Parkinson, that is bad economic management.

“If we take the Budget papers as correct, it takes a decade to get back to a headline surplus,” he told The Australian Financial Review.

“Even then, we get a surplus in part because of the assumptions on terminating expiring programs. But we know terminating programs don’t always terminate.

“We are consuming today, and our children are going to pay for it with their tax burden.”

When Dr Parkinson first worked for a treasurer in 1992, Australia’s unemployment by year’s end had hit 11.2 per cent, which was then the highest jobless rate since the 1930s Great Depression.

There were 960,500 people looking for work when Australia had a population of 17.6 million people, compared with 686,800 now in a nation of 27.8m people and a much lower 4.4 per cent jobless rate considered to be full employment.

Despite a prolonged period of double-digit unemployment, government payments made up 26 per cent of gross domestic product in the 1992-93 financial year - less than the 26.8 per cent forecast for this financial year.

In fact, Labor’s government spending now is higher than the 25.7 per cent level of GDP during the GFC in 2009 and the 23.8 per cent level in 2012 when Dr Parkinson was Treasury’s chief bureaucrat.

Last week, Liberal Party frontbencher Andrew Bragg made the point to the National Press Club, that under Bob Hawke’s Labor government, Keating as treasurer managed to get Federal Government spending as a proportion of GDP down from 27.5 per cent in 1984-85 to 22.9 per cent by 1989-90.

Instead of engaging with an important point, Housing Minister Clare O’Neil resorted to a juvenile, personal attack implying Senator Bragg’s policy exploration was mentally deranged.

“A crazed, almost manic, ideological fever dream. It was genuinely unhinged,” she said, focusing more on the speech’s other call to dilute the National Construction Code.

It’s a pity excessive government spending isn’t being taken more seriously or given more serious attention by Labor, considering that Reserve Bank governor Michele Bullock has been stressing that public spending adds to overall aggregate demand in the economy.

While the cash rate was last week left on hold at 4.35 per cent, Ms Bullock confirmed a rate cut was most definitely not considered.

“Before anyone asks, no, the board did not discuss an interest rate cut at this meeting — it only discussed a raise and a stay,” she said.

“We didn’t consider an interest rate cut.”

While Dr Chalmers delivered two surpluses on his watch, by virtue of higher commodity prices that raise company tax revenue, his other three Budgets have been in the red when fewer Australians than usual need Centrelink because they can’t find a job.

If this dire situation of endless Budget deficits, during a time of low unemployment, can’t be turned around, it will be time for the Treasurer to find a new job, after being called out by someone on the Labor side who knows what he’s talking about.