It's amazing what a difference shifting from opposition to government makes. Yesterday while announcing his commission of audit, the treasurer, Joe Hockey, also stated that he would raise the Australian government's debt ceiling from $300bn to $500bn.
The December debt ceiling date is no surprise. It was known when the budget was released in May, but the former government in its infinite foolishness, decided not to raise the ceiling for fear of looking like it was maxing out the "credit card" prior to the election.
The reason for their fear was due to long run attacks by the Liberal party – notably Joe Hockey – that raising the debt ceiling was a sign of economic mismanagement.
For example, in May 2012, Hockey said, "Australians are right to be concerned about handing Wayne Swan yet another increase in our nation's credit card limit." He then went on Alan Jones to argue that the government could not make claims that it was making savings if it was also increasing the debt ceiling from $250bn to $300bn.
Suddenly it seems increasing the debt ceiling by not just $50bn but $200bn is not a sovereign risk issue, nor a sign that the government is not going to make savings, nor that the government is unable to curb its "debt addiction", nor that the government cannot deliver a surplus.
Now Joe Hockey tells us that "what matters is not the debt limit". What is important is just the "level of debt" and that "the credit rating is what matters".
But the Treasurer's reasoning is correct — we should wish to avoid a US-style debt ceiling fight.
Oddly, however, he seems only to have realised this in "recent times". But the US had a debt ceiling fight two years ago in 2011. Back then, Hockey said the lesson was: "Don't keep spending too much money. Don't accrue that debt". He suggested rather cryptically that Australia could "end up in a position where Australia refuses to increase its debt ceiling".
The only way that could possibly happen is if one side of politics blocked the increase, and the only side of politics suggesting anything like doing that was Hockey's.
Watch what he does, not what he says, I guess.
But despite the utter hypocrisy, it remains a very good decision.
The debt ceiling should never be a political fight. In the first place it is an arbitrary number — and increasing it does not affect the way market views Australia's debt position. No one thinks a debt ceiling is any real ceiling, because just as it was arbitrarily set, it can be arbitrarily raised.
All the debt ceiling ends up becoming is a political football used by the opposition party to suggest the government are profligate spenders.
As a rule I believe consumer confidence reflects the reality of the economy, rather than drives it, but when purely political actions serve to destroy confidence, then that has real economic consequences in terms of spending, investment and job hiring — all of which are decline when confidence falls.
So Joe Hockey is right to ensure Australia avoids such foolishness. Wayne Swan should have had the courage to do the same thing when he was Treasurer. The only problem is had he done so, Joe Hockey would have likely threatened to block it.
To the victor go the spoils and also the irony.