Governing in Good Times: fiscal policy and tax reform in Australia, 1996-2006

Abstract

Over the course of a decade in office since 1996, the Howard government has pursued a policy and a politics of fiscal responsibility. Moving the budget out of deficit, retiring the Commonwealth government's accumulated debt and running continued surpluses to hedge against future demands have been the main expressions of this policy. The virtuousness of this has been contrasted with the record of previous governments, in particular with the record of the Keating government, which left office after 4 years of economic sunshine with an undisclosed deficit of $10 billion on top of a greatly swollen public debt. In addition, the Howard government has staked a claim to being a government of tax reform—having reformed the indirect tax system by introducing the GST in 2000, and having reformed the direct tax system by making a number of accompanying and following adjustments to the personal income tax. The economic and financial data suggest, however, that the Coalition's budgetary achievements must be credited much more to good fortune than to good government. The challenge—unprecedented in a generation—has been of governing in good times, indeed of governing in extraordinarily good times. At the same time, tax reform has been much more modest than many of the Howard government's market-oriented supporters would have liked.