The proliferation of forensic soaps on TV has not only given us some great characters, but promoted a quest for proof. Politicians are alert to voters’ instinctive search for evidence, but are adept at confusing simple questions. Consider the economy. The most sensitive human organ is the hip pocket nerve, and every voter puts economic management close to their top ballot test. Not surprisingly, Government and Opposition are now arguing over their economic credentials. Each cites data from different decades, which given the epochal changes between terms in office, makes forming a sensible judgement on this basis unrealistic.
Voters with a serious interest in the track record of governments as economic managers may prefer a different test: how did Australia’s economy perform under the current and previous governments relative to the performances then of comparable economies? This recognises the reality of globalisation, and that domestic economies must be managed in light of offshore developments. It also recognises the cyclical nature of the global economy and eliminates good or bad forces that were unique to the times and beyond the control of the Australian government.
I propose to use five standard measures of economic performance to answer this question: growth in gross domestic product; inflation; money market interest rates; unemployment; and the exchange rate. These, respectively, cover performance of the economy as a whole in terms of its growth, and success in containing price pressures which are usually accepted as detrimental to sustained growth; voter’s 'misery index' of interest rates plus unemployment; and a measure of financial performance relative to other nations. The yardstick nations are our close neighbour New Zealand, major trading partner the United States, and Canada and the Netherlands, which are similar in size and culture to Australia and seem (to me at least) well governed.
The critical test for each government is: during its term in office, how did Australia’s economy perform relative to international yardsticks? This will be measured simply by the change in each of the five indicators between the calendar years that bookended the terms in office. The intuition is that this reflects relative economic improvements achieved by the government whilst in office. Two periods will be covered: the Hawke-Keating government from March 1983 to March 1996 (that is, changes between calendar years 1983 and 1996) and the Howard government from March 1996 to June 2007. The table shows the results which — to