Cutting to the chase, UBS's economists conclude that fiscal policy was less parsimonious under Howard/Costello compared with Rudd/Gillard, and the overall approach less credible:
"[I]n the three years to 2005/06 – through the first phase of the current commodity boom – real government expenditure averaged 4.0% per year (above real GDP growth of 3.4%) as tax revenue surged 8% per year. Nominal outlays growth through this period averaged 7%. As the second phase of the mining boom gets underway, in the current year, outlays are expected to have been up a real 0.5%, and forecast to average about 1% per year over the coming few years, well below the 3-4% per year during the first phase of the recent boom.
Of course, this follows a period during the GFC where outlays were rising at an historic pace, so arguably delivering spending restraint from a now higher base should not be that difficult. However, while the size (and content) of the fiscal easing during the GFC is open to question, the notion that this was directionally appropriate ‘countercyclical fiscal policy’ is not.
Fiscal policy was eased during a period of rising unemployment and falling confidence and activity. This contrasts the first phase of the commodity upswing, when spending measures accumulate to a stunning 4½% of GDP stimulus by 2007/08 (well above the current government’s GFC response), as the unemployment rate was falling and private real domestic demand was accelerating from 4% to 8%, sharply above trend."
