The Coalition paints itself as a fierce believer in the free market, but its latest budget rhetoric and its role at the G20 show that it doesn't always think governments should simply get out of the way, writes Greg Jericho.

Economic and trade gatherings and agreements are odd affairs that involve grandiose predictions of benefits to be gained that are easy to suggest but hard to prove, and a curious mixture of governments who believe governments cannot help the economy while they boast of actually doing that very thing.

Governments can essentially be divided into Keynesians who believe the government can help stimulate the economy, or free-marketeers who think the government needs to get out of the way.

Being a free-marketeer always invokes a fair degree of contradiction. To be thus means saying things like "governments don't create wealth, people do". And yet politicians - including those in the Abbott Government - love to hold press conferences in front of bulldozers espousing how many jobs will be created by this new project which the government is funding.

Similarly, international conferences have behind them the very Keynesian impulse that governments can do things to improve the economy. But the G20's "Brisbane Action Plan" is a nice example of the collision of the Keynesian impulse and the free-market forces that are apparent within many governments.

Among the lauded proposals are the very free-marketeer moves to undertake "product and service market reforms" and to reduce "regulatory burdens and cutting red tape" as well as take "steps to streamline labour market regulation and reduce non-wage costs of labour". But the USA's growth plan actually includes the very Keynesian move to increase the minimum wage, while conversely the UK notes it has imposed a nicely free-market driven plan of a "welfare spending cap".

Regardless of differences, however, the overall optimism for growth by all governments at the G20 was overwhelming. It was almost as overwhelming as at the last great international summit held in Australia, the 2007 APEC meeting in Sydney. The final communiqué of that summit stated, "We are confident that robust economic growth will continue."

Of course, within 12 months the GFC had hit and the IMF titled its World Economic Outlook, "Rapidly Weakening Prospects Call for New Policy Stimulus".

Events have a habit of getting in the way of international communiqués.

That's not to say we shouldn't have these meetings, nor should the leaders not agree to do things.

But we need to retain come sense of perspective. The Brisbane Action Plan is geared toward achieving the "ambitious goal of lifting G20 GDP by more than 2 per cent above the trajectory in the October 2013 IMF World Economic Outlook baseline by 2018".

Except since October 2013 the IMF has largely revised down the prospects for GDP growth among the G20 and the world economy:

Only the UK has seen its prospects improve in any significant way - it is now expected to grow by 3.25 percentage points above the October 2013 estimates (i.e. the G20 baseline).

Australia's expected growth is the same as it was in October 2013. This is relevant because the IMF based its October projections upon those contained in the May budget and Australia's G20 "Growth Plan" is essentially the budget re-packaged - both include the same forecasts for growth, unemployment and the budget deficit.

So nothing in our G20 plan will provide Australia with any "extra" growth above what we already expected. The only argument in favour of our plan is that in April this year the IMF downgraded Australia's expected GDP growth in 2014 and 2015:

The May budget (as any budget attempts to do) introduced measures to improve the growth estimates, and thus the IMF upgraded its growth forecasts in October.

But it's likely these forecasts are already out of date.

Everyone, including Joe Hockey, expects the MYEFO next month to reveal that the budget deficit has increased by up to $51bn. Fairfax's Peter Martin is even reporting that the MYEFO will show growth in 2015-16 to be just 2.1 per cent instead of the 3 per cent predicted in both the budget and Australia's G20 growth plan.

But Hockey, despite having you believe he is a fierce free-marketeer, is actually a closet-Keynesian and is sensibly not going to cut expenditure too quickly, for fear such cuts would harm economic growth. Thankfully, his free-market belief doesn't extend to purposefully driving Australia into a recession.

The changes in growth predictions in just six months highlights how ephemeral is growth and perhaps why leaders love to aim for it in international agreements.

Free-trade agreements on the other hand generally have a free-marketeer impulse but they also include the same love for hard-to-prove growth figures.

Such was the case with the Australian-China free-trade agreement announced on Monday. We're told the agreement will be worth $18bn to the Australian economy. Unfortunately, the Department of Foreign Affairs and Trade didn't release the full agreement, but it did provide us with a page telling us all how great the deal will be for our economy. And sure, it might be. Certainly the benefits to the dairy and services industries seem promising.

Is this extra $18bn likely?

Back in 2004, the then trade minister Mark Vaile told parliament that the free-trade agreement with the USA (AUSFTA) would "create 30,000 jobs in this country and deliver $6 billion to the bottom line of our economy".

Did it?

Well, since it came into effect our exports to the USA have increased nearly 11 per cent, but our imports from the USA have increased nearly 26 per cent, meaning our trade deficit with the USA has increased 39 per cent:

But as the Productivity Commission noted when it reviewed free-trade agreements in 2010 , this in itself doesn't mean the AUSFTA was a failure, because increased imports may have meant more cheaper goods for Australian consumers and businesses.

The commission found there was no certainty that any increase in either exports or imports was due to the AUSFTA. Given politicians in 2004 were boasting about increased exports and jobs, this is not really a great sign for the China agreement.

The Productivity Commission didn't suggest we shouldn't do free-trade agreements, but mostly this was because if other nations have them and we don't, there is the danger that we could be somewhat shut out of some markets.

So will Australia be better off in four years because of the G20 agreements and the China free-trade agreement? Possibly, although free-trade can often mean pro-business, which need not be good for an economy.

It's why the ACTU is particularly worried about the provisions for "reducing barriers to labour mobility" which will allow Chinese businesses to import labour to work on projects where there is a skill shortage. Given our current lack of a skills shortage in many areas should, in reality, be tough to prove.

Similarly, as Kyla Tienhaara has pointed out, there are concerns about the fact that the Australia-China agreement includes a "provision allowing for 'investor-state dispute settlement' or ISDS".

Free-market/libertarian think tanks love ISDS, not so much because they hinder economic-growth stifling regulation, but because they allow the companies who fund them to sue governments for regulations which may adversely affect their profits - regulations like plain packaging on cigarette packets.

Whatever the case, there is one guarantee for any economic growth achieved by 2018: whoever is in power will claim responsibility for it. Regardless of whether they are Keynesian or free-marketeers, all governments do that.

Greg Jericho writes weekly for The Drum. His blog can be found here and he tweets at @grogsgamut. View his full profile here.