There was a time when our currency was pegged to the price of gold, and inflation was virtually unheard of.
We weren't like a economic dog chasing its tail, in a never ending cost wage spiral; and indeed, lived through a period of unprecedented prosperity, were the third wealthiest nation on the planet, and a creditor one at that!
Almost every backyard had a veggie patch, chooks, the occasional house cow and an assorted variety of fruit trees.
One could virtually live for months off what we grew or swapped!
If you bought a brand new fully imported car, you automatically paid a substantial luxury tax?
I mean, we've been making our own cars since 49 and assembling others before that?
Consequently, we sold more to the world than we bought from it, and the modern phenomena of a trade deficit was virtually unheard of!
Now we seem to want to import everything, largely to satisfy the needs of high rise dwellers, in unnecessarily overcrowded cities; and people living on blocks too small to hold anything except say, the MacMansion and the obligatory swimming pool?
At the same time, oil was as cheap as chips, so was electrical power, before it became privatised, gold plated and price gouged; and too expensive for the average pensioner.
And parental homes were really packed to the rafters, until intending newly-weds, could save a considerable deposit for their own home.
Ditto, a reliable serviceable used car.
Even so, one wage was enough for those purposes and raising, a family, largely because people were content with enough!
Nonetheless, things could be better than they were, in the good old bad old days, if we but eliminated the parasitical profit taking middle man, and completely unnecessary, unproductive, but extremely expensive practise/service.
Just eliminating these two, would virtually halve the cost of living and or doing business, which in turn, would make making things here profitable once more!
Rhrosty.

One of the key factors that has not been mentioned is the Keynesian racket of euthanaising the rentier. The reserve bank acts to cause 2.6% inflation per year, which brings huge benefits to both borrowers and governments. An honest tax policy would then exempt the first 2.5% of interest from taxation, both as income for the saver and deduction for the borrower. But of course this does not happen.

Hopefully we will like Japan shortly enter a period of deflation, which will have the huge benefit of forcing governments to be honest. Downward bracket creep will cut governments income, forcing them to cut welfare. As cash will gain value by simply being put under the mattress, there will be no way that banks can enforce a negative real interest rate, as they can now. But with the entire media (ABC and commercial) constantly baying for lower interest rates the authorities will move heaven and earth to try and stop it happening. Everyone screams about a cut to welfare and pensions, but the drop in income of retirees is not mentioned.

Nevertheless, it will be an interesting time. We may even see an answer to one question from Keynesianism:

"When you have euthanaised the rentier, from whom will you borrow?"

Plerdsus wrote;
"When you have euthanaised the rentier, from whom will you borrow?"

You need to define your borrower. A Sovereign (currency issuing) Government does not need to borrow before paying the accounts of all of its creditors. The government can simply owe the Reserve Bank (which it owns) more and the creditors less and do so by computer key strokes. The government only borrows because it had to do so when on a gold standard and because fund-rich people like a safe, government guaranteed, repository for their savings.

The government buys or funds as it sees fit and only relies on and sets its level of income (taxes and other charges) by deciding whether a budget deficit or surplus is appropriate in the current economic situation in the area using its currency. Any budget deficit wends its way through the economy in multiple transactions gradually being absorbed until it all ends up in the accounts of savers. Over a business cycle the government can safety afford to run a budget deficit in proportion to the growth over that cycle but growing in a counter cyclic fashion.

The banking system lends money it does not have and relies on the inflow of other funds or on the overnight lender of last resort, the Reserve Bank, if it pulls up short in its daily balance. For every loan created the borrower is a debtor and the bank creates for itself an asset, both of which exhaust as the loan is paid out. If the banks are not adequately prudential in their lending, their loans cause asset value inflation and that bubble ultimately bursts.

Rhosty, those glasses are thick and rose tinted. The things you decry are choices people make living in their McMansion etc. We have a small rural block (cheap !), we have a small orchard of fruit trees, a large garden of veggies, our own chooks for eggs and meat, shoot feral rabbits for extra meat (until the city idiots take guns away completely) & collect and store all our own water and power. These are choices we made.

As to pensioner affordability, most of them were knocked off the perch by age 60- 65, 40 years ago. Electricity was horrendously expensive, people juts didn;t have A/C's and the plethora of equipment they have today, eg a fridge a freezer and a beer fridge, 3 TV's, 2 computers etc etc (no wonder the CAD's a shocker) that and people have a propensity to complain... a lot. House prices aren't expensive, if they were expensive people would not be buying them. They are more then some people want to pay for sure but I remember complaining about house prices when I wanted to buy one in the '80s.

Interest rates are low because the economy is in the toilet, you don't get low interest rates when things are okay. It's a policy I disagree with but then that's simply a reflection of Government (Gov sets RBA policy) and Government is simply a reflection of the voter. TO quote the immortal George Carlin, think about how dumb the average voter is and then 50% of them are dumber still :)

It's interesting though, so many people complain about what a crappy job Government do, then want them to take on more ... asking someone who is no good at something to take on more of the burden is arse backwards.

The CAD is a huge problem and eventually we will have to pay the piper. Primary Industry provides some 70% of the export dollars, for a tiny portion of the GDP. They are the guys doing all the heavy lifting, while Aussies sell houses, pet grooming and personal training business to each other.

The chronic current account deficit is due to everyone on average , consuming more than they are producing.

With 1.2 million extra people every 3 years doing the same, it is no mystery that successive pro-population growth Labour and Liberal Govts are just increasing the mess.

In addition, the Opportunity Cost of spending billions on growth infrastructure , means that our universities, schools and manufacturing research and development are falling by world standards.

Stabilise population growth, then we can be like say,Denmark . With just 5 million people , they export all over the world.

Cheers,

Ralph ( Bennett)

Denmark, like the rest of pragmatic Scandinavia, is a social democracy, with a higher personal tax rate, and indeed, a much higher happiness index?
Many of their industries, were kick started as govt owned corporations, and many still are.
Meaning, engineers built things, rather than profit hungry bean counters!
Why, they even build their own very capable jet fighters, and tiny Norway builds world class ships, and has a sovereign fund that is in the trillions!
[Imagine the changes and improvements,we could have here, if only we applied their, govts should be in business pragmatism, to our resource rich lucky country!]
Hence the world wide market for quality Scandinavian goods that invariably outlasted the designed obsolescence of the bean counters, only interested in maximised profit taking!
The median house in Oz, used to cost 2.5 times the average salary, now its closer to ten, courtesy of indolent or patently corrupt govts, with an agenda, that self evidently, didn't include serving the people?
Why, folks could even save for, buy and pay off their homes,in three or four years, while they camped out at the oldies.
And the very best wedding present the oldies could give them!
I don't ever recall the price of power ever doing anything but going up and up and up; and indeed, well before the onset of a carbon tax; and very much faster than inflation, so we can rest assured, it was considerably cheaper than now, particularly for industry.
So, all the pensioners fell off the perch, what, 40-50 years ago?
Well, we will be able to remove all those subsidies on everything, now that all the old folks have gone!
Rhrosty.