The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, November 14, 2012

Koukoulas goes to war with McCrann/Henderson

Pretty amazing correspondence from Koukoulas to McCrann, and McCrann to Gerard Henderson...

An open letter to Terry McCrann (full letter can be found here and also see here)


Dear Terry

As the Herald Sun economics writer (is that akin to the cordon bleu chef at McDonalds, or peeling potatoes at Heston Blumenthal’s The Fat Duck I wonder?) you wrote to Gerard Henderson last week about the facts concerning the 1974-75 Budget. For those who didn’t see that contribution, I reproduce it below in full.

Before looking at your lack of self consciousness as you again fail to contemplate facts, I offer an opportunity to you to put your credentials next to mine.

My brief CV is below. Terry, can you please present your CV and let’s have readers decide who might be better placed to discuss budget matters and, in fact, any issue relating to the economy? Is it you or me?

The reason I do this is in part because you assert:

* I recite “my assertions are the facts”;

* that I “have little knowledge of history and even less analytical rigour”;

* that I don’t “understand that in those days budgets were in August”;

* that some of the budget figuring “is beyond your correspondent”;

* “he clearly does not understand that the Treasury ones [data] he quotes are quite literally made up”;

* and finally, “Koukoulas seems unable to understand the arithmetic.”

Terry McCrann to Gerard Henderson – 2 November 2012

Your occasional correspondent, former Julia Gillard advisor Stephen Koukoulas, is apparently of the genus of Labor Party shills that believes if you put your fingers figuratively in your ears, close your eyes, and just keep reciting, “my assertions are the facts, my assertions are the facts,” that you can make them so.

Unhappily for him, though, the facts of the Whitlam government’s dreadful 1974 budget are obtainable. For someone like Koukoulas who has little knowledge of history, and even less, it would appear, of analytical rigour, he would no doubt find puzzling the source I have used.

As you know Gerard, it is what is known as an original or primary source: the actual budget documents of the time. And more specifically, the 1975 budget, which had the full numbers in all their awfulness of the outcome of the 1974 budget for the 1974-75 fiscal year.

The relevant page from that budget is reproduced below. Two broad points need to be made upfront. Presumably Koukoulas does not understand that in those days the budgets were in August, so they contained essentially finalised figures for the preceding year ended 30 June. Unlike today’s May budget, which has “estimates,” usually wrong, for the financial year still to finish.

Secondly, the 1975 budget was not a creature of the incoming Fraser government dressed up to make the Whitlam Government’s total economic irresponsibility look worse. Apart from the fact that would simply not have been possible to achieve, the 1975 budget was brought down by Labor treasurer Bill Hayden, who back then, before the scales would subsequently fall from his eyes, was still a rusted-on “true believer”.

Indeed, I can vividly remember personally praising Hayden for aiming to exactly halve the growth in fiscal spending from 1974-75’s 45.8 per cent to “just” 22.9 per cent.

As you and your readers can see, the facts of the 1974 budget are as I stated in my previous correspondence – and you, with one trivial mistake excepted, did as well.

Outlays leapt as noted 45.8 per cent – as you wrote “close to 50 per cent.” The budget deficit exploded to $2.57 billion. In those days it was broken down into a domestic and overseas deficit. Perhaps one day, I’ll explain why to Koukoulas.

The domestic deficit in 1974-75 was stated as being equal to 3.3 per cent of GDP. It is a calculation perhaps beyond your correspondent, but for his benefit and that of your readers, the total deficit was equal to a little over 4.3 per cent of GDP.

In an impressive combination of yawning ignorance and rather clunky abuse, Koukoulas has plucked purported figures for the 1974 budget from a table in the back of the current 2012 budget. He seems completely unable to understand that they are merely a theoretical reconstruction of the actual numbers, in an attempt to put them on the same cash basis as the modern budget numbers.

Koukoulas accuses me of making up numbers; he clearly does not understand that the Treasury ones he quotes are quite literally made up. They exist only in the Treasury computer. They are not, as he implies, “revised” or to “improve accuracy” – as for example, GDP numbers are revised, often years after the event.

The lie to that is the fact that the source you quoted for the 1974 budget numbers was published in 1982, some seven years after the 1974-75 fiscal year. Written by the distinguished Reserve Bank economist Bill Norton, whom Koukoulas seems never to have heard of.

The Koukoulas-(modern) Treasury numbers are not a “revision” but an inevitably crude attempt to adjust the earlier numbers to provide some hoped-for comparability with the modern numbers. If Koukoulas had more understanding of both statistical method and the structure of budgets, he would understand how approximate and indeed unreliable such an adjustment is.

Koukoulas seems particularly offended at being accused of “springing to the defence” of the 1974 budget. This demonstrates he has as little understanding of language and rhetorical method as he does of budgets and history. That he literally does not understand what he is writing.

How else could anyone characterise his abusive attack on your comments on the 1974 budget? If he’s not “defending the budget” what is he doing? Especially, as he seems to think it was triumph – his now, the budget’s then – that its spending jumped by only 39.6 per cent in 1974-75, not your “close to 50 per cent?”

As I noted, the correct increase was 45.8 per cent. As I further noted, even using his made-up, for want of a better word, lower figure, it would be the equivalent of lifting budget spending today by $140 billion, in a single year.

From his response, Koukoulas seems unable to understand the arithmetic. Given his former role advising Ms Gillard, perhaps that explains an awful lot about recent budgets. And the word “awful” is used advisedly.

Terry McCrann to Gerard Henderson – 19 October 2012

Gerard, it takes an impressive level of clueless stupidity for even a Labor apologist to spring to the defence of the 1974 Whitlam budget – the budget that defined that government as the worst and most destructive in Australia’s history. Until that is, first Kevin Rudd came along to top even Gough Whitlam in sheer bumbling awfulness. For him of course, subsequently to have to cede the title of Australia’s worst ever prime minister, to Julia Gillard.

But up stepped former Gillard advisor Stephen Koukoulas to pompously ridicule your criticisms of the 1974 budget and the numbers you used [See MWD Issue 158]. And get it absolutely and totally wrong. Apart from one minor mistake, which you have acknowledged, your numbers were correct.

Koukoulas thundered that your ‘howler of howlers’ was to claim the budget deficit increased substantially in 1974-75. When instead, the government recorded a budget surplus. Actually, and I quote from the 1975 budget papers, the 1974-75 budget had a deficit of $2.57 billion. In today’s terms, that does not sound much, but it was equivalent to 4.3 per cent of that year’s GDP.

Today such a deficit would be around $65 billion. Fancy, that, much like the deficits that Gillard and her treasurer Wayne Swan, who Koukoulas used to, ahem, advise, have presided over. And they’ve done it every year. Back in 1974-75 though, the Whitlam budget lifted government spending by an almost incomprehensible 45.8 per cent in a single year. Koukoulas claimed it was “only” 39.6 per cent.

Showing just how clueless he is, Koukoulas ridiculed the difference between your reference to the increase being almost 50 per cent and his “correct” figure for the increase, as – “worth around $36 billion in a single year”.

Being completely unaware that his 39.6 per cent would be like lifting budget spending now by a mind-numbing $140 billion or so in a single year. Something I think that even the team of Koukoulas, Swan and Gillard would draw some breath at.

Koukoulas’ mistake was the simple one of someone that understands little of budgets and even less of history. He’s just taken his numbers out of the current budget papers. These are a reconstruction of the real numbers, to try to put them on the same basis as the way the modern numbers are done. To my mind, the real numbers are, well, the real numbers, and are as I and you have stated.

Koukoulas exposes himself by making a snide reference to the author of the source you quoted. W.E. (Bill) Norton was a distinguished head of the Reserve Bank’s research department – an economist who actually knew what he was talking and writing about. Unlike your unfortunate correspondent.

Terry McCrann

News Ltd