The performance of the Australian macroeconomy : ten years of John Howard

This paper attempts to assess the performance of the Coalition government under John Howard in the management of the Australian macroeconomy. Given the problem of defining an appropriate counterfactual, we make comparisons of the Coalition Government with the previous Labor Government using a number of different methods. Firstly we compare the averages of the key macroeconomic variables for the period of each government and then compare changes over the tenure of each government. Secondly, we use the method of ‘difference in differences’ that is, we compare the performance of the Australian economy with another economy. This allows us to control for any features of the world economy that may be driving all the economies. A crude comparison suggests that the Labor party performed better on growth, while the Coalition performed better on inflation, unemployment, and current account deficit. However, when we compare the changes over the term of office of the two parties, Labor did better than the Coalition on real interest rates. Different counterfactuals provide us with different answers. In general, we find that the performance of the Australian economy is driven by world factors and that the different governments have a very small role in macroeconomic developments