Did Paul Keating mismanage the economy around 1988 when Peter Dutton joined the Liberal Party?
By Louise Evans, Tiffanie Turnbull and James Lane
“Paul Keating almost destroyed my Dad’s small business with his heartless mismanagement of the economy and he inspired me to join the Liberal Party.”
Home Affairs Minister Peter Dutton. May 14, 2019.
Former Labor prime minister Paul Keating described the coalition’s home affairs minister Peter Dutton as the most “mean-spirited” politician he’d encountered in 50 years and urged voters to dump him. “At this election, those electors in Dickson have a chance to drive a political stake through his dark political heart,” Mr Keating said. Mr Dutton hit back, tweeting that as treasurer Mr Keating’s mismanagement of the economy “almost destroyed” his father’s small business and inspired him to join the Liberal Party. 
AAP FactCheck examined Mr Dutton’s claim that Mr Keating mismanaged the Australian economy around 1988 when he joined the Liberal Party.
Mr Dutton joined Liberal Party aged 18 in 1988. He won the north-western Brisbane seat of Dickson in 2001 and went on to claim successive victories in a seat of aspiring small business people and industrial sheds. 
He served as workforce participation minister in 2004 and later revenue minister and assistant treasurer from 2006 under Prime Minister John Howard until Kevin Rudd toppled the coalition government in 2007. 
When Tony Abbott became prime minister in 2013 Mr Dutton cascaded from sports minister to health and then found his niche as immigration and then home affairs minister under prime ministers Turnbull and Morrison. 
In August 2018, Mr Dutton staged a failed bid to become prime minister. His campaign to overthrow Malcolm Turnbull backfired when Scott Morrison defeated him in a Liberal leadership ballot 45-40. 
He holds his seat of Dickson by a 1.69 per cent margin. He accused his Labor challenger Ali France, who had her leg amputated following a 2011 car accident, of using her disability as an “excuse” not to move into the electorate. He later apologised. 
Mr Keating attacked Mr Dutton on ABC Melbourne radio in the last week of the election campaign describing him as mean politician who should be voted out.  Mr Dutton’s replied by criticising Mr Keating’s record as treasurer claiming his mismanagement of the economy was a trigger to join the Liberal Party in 1988. “It’s why I’m so passionate about not letting Bill Shorten repeat history and drive a stake through the hearts of small businesses around the country with his higher taxes,” Mr Dutton said. 
Mr Keating served as treasurer in the Hawke Labor government from 1983 to 1991. In 1984 Euromoney magazine voted him Finance Minister of the Year for his decision to float the dollar and allowing foreign banks to operate in Australia. 
AAP FactCheck compiled key economic data from when Mr Keating took over as treasurer through to 1990 after Mr Dutton had joined the Liberal Party. The data included GDP figures, inflation, interest rates, balance of payments and budget surplus/deficit.
World Bank 1988 data showed Australia's GDP was $235.7 billion - $14,257 per capita - and growing at 5.68 per cent the year Mr Dutton joined the Liberal Party. The nation’s GDP had been growing between four to five per cent annually since 1983, aside from a dip to 2.51 per cent in 1987. GDP growth slowed following 1988, turning negative in 1991.   
According to a 1994 research paper from the parliamentary library, Australia’s inflation was at seven per cent in 1988, and stayed around that mark until 1991. Unemployment had been slowly falling from 10 per cent in 1983 to 7.2 per cent in 1988, and continued to fall until 1991. The report, which focused on Australian inflation and unemployment from 1964-1993, pinpointed low inflation and low unemployment as markers of economic health. 
Historical economic Reserve Bank statistics show that when Mr Keating became treasurer in 1983 interest rates were 12.5 per cent. In 1987 they had risen to 15.5 per cent, in 1988 they were 13.5 per cent and in 1989 they’d risen to 17 per cent, falling to 16.5 in 1990. 
The balance of payments - the difference in payments into (imports) and out of (exports) a country - was negative $11.2 billion in 1987-88. In 1988-89 it was negative $18.5 billion and negative $22.3 billion in 1989-90. 
The budget was in deficit by $3.3 billion when Mr Keating became treasurer in 1982-1983. He reduced it until 1987-88 when he returned the budget to a surplus of $1.45 billion. The 1985-86 budget had a deficit of $5.1 billion and in 1986-87 a deficit of $2.4 billion. The 1988-89 budget had returned to a surplus of $5.4 billion and in 1989-90 a surplus of $5.9 billion. 
AMP chief economist Shane Oliver told AAP FactCheck while there were issues with housing affordability, inflation and interest rates during the period covered by this data, on balance the economy was “very strong”.
"The early-80s recession was long gone, we’d survived the balance of payments problem in the mid-80s, and we’d also survived the 1987 share market crash, and so by 1988 the economy was doing exceptionally well," Dr Oliver said. “Growth was good, unemployment was low and budgets had moved into surplus. Overall the economy was in pretty good shape.”
Dr Oliver told AAP FactCheck Mr Dutton’s claims Keating had mismanaged the economy were not accurate.
“I think that Labor did a pretty good job of managing the economy then with a lot of challenges. Why haven’t we had a recession in 30 years? Well part of the reason is Hawke and Keating,” Dr Oliver said.
Managing Director of Market Economics Stephen Koukoulas said the 1988 economy was volatile, rather than particularly strong or weak, but agreed the claim that Mr Keating had mismanaged the economy was wrong.
“We just had a stock market crash [in 1987] in the US - the Dow Jones fell 25 per cent in one day. You don’t just get the US stock market falling in one day and have no consequences here in the Australian economy,” Mr Kouloulas told AAP FactCheck.
“It was only part way through that reforming period where we had the floating of the Aussie dollar in 1983, we had terms of trade problems, we were going to become a banana republic - that was 1986. So we were in this position where the economy hadn’t yet benefited from the full reforms. It was very different times to what is was today.”
Both economists agreed that although, with the benefit of hindsight, the government should have cut interest rates earlier and more aggressively to help limit the impact of the 1991 recession, that did not amount to mismanagement.
Based on this evidence AAP FactCheck finds Mr Dutton’s claim that Mr Keating had mismanaged the economy around 1988 when he joined the Liberal Party to be false.
- False - The checkable claims are all false.
1. ‘Peter Dutton hits back at ‘heartless’ Paul Keating over ‘dark political heart’,’ by Richard Ferguson. The Australian. May 14, 2019: https://www.theaustralian.com.au/nation/politics/paul-keating-calls-on-voters-to-drive-stake-through-duttons-dark-political-heart/news-story/766e041777d9c2df3012d1e14922a155
2. ‘Tenacity key to Dutton’s style’, by Paul Osborne. The Newcastle Herald/AAP. August 20, 2018:https://www.theherald.com.au/story/5594778/tenacity-key-to-peter-duttons-style/?cs=7576
3. ‘Dutton has 'no regrets' after failed coup’, by Matt Coughlan and Daniel McCullough. Illawarra Mercury/AAP. August 24, 2018: https://www.illawarramercury.com.au/story/5604752/dutton-has-no-regrets-after-failed-coup/
4. ‘Dutton battles to hold Qld seat of Dickson’, by Aaron Bunch. The Canberra Times/AAP. May 15, 2019: https://www.canberratimes.com.au/story/6125825/dutton-battles-to-hold-qld-seat-of-dickson/?cs=14231
5. ‘Golden Treasurer: is Wayne Swan really the world’s best?’, by Alex Millmow. The Conversation. September 21, 2011: https://theconversation.com/golden-treasurer-is-wayne-swan-really-the-worlds-best-3482
6. ‘GDP current US$ - Australia’. The World Bank: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=AU
7. ‘GDP per capita current US$ - Australia’. The World Bank: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=AU
8. ‘GDP growth annual % - Australia’. The World Bank: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=AU
9. ‘From There to Back Again?: Australian Inflation and Unemployment 1964 to 1993’ (page 7). by Michael Warby. Parliamentary Research Service. June 9, 1994: https://www.aph.gov.au/binaries/library/pubs/bp/1994-95/94bp09.pdf
10. ‘Australian Economic Statistics 1949-1950 to 1996-1997 Occasional Paper No. 8’. (Table 3.21b) Reserve Bank of Australia: https://www.rba.gov.au/statistics/frequency/occ-paper-8.html
11.‘Australian Economic Indicators’, by Ian Castles. Australian Bureau of Statistics (page 19 Table 3.1 balance of payments). December 1991: http://www.ausstats.abs.gov.au/ausstats/free.nsf/0/EE37C6865AB5EC2ECA25769300185058/$File/13500_12_1991.pdf
12. ‘Final Budget Outcome - Appendix B: Historical Australian Government data’ (page 85). Australian Government: https://www.budget.gov.au/2017-18/content/fbo/download/07_Appendix_B.pdf
- First published May 16, 2019 18:15 AEST