Good lesson in basic (conventional) economics. And or, the boom and bust nature of conventionally run economies?
The current problems started in the Howard years, when the then current boom was basically squandered, writing out cheques for folks who'd never ever been entitled to Govt benefits before!
And or, as tax breaks for folks who simply didn't need them? Creating in the process a structural deficit!
Further compounded by tax avoidance on a hitherto unknown global scale.
We've inherited a tax system that had its beginnings with Westminster.
And has since then had layer upon layer of complexity added. Moreover, we apparently collect somewhere around 150 different taxes. With at least 40 of them impacting on the price of a loaf of bread, and others cascading through our manufacturing industries, driving up the price of everything we make here! However, only around 11 of them collect most of the revenue!
We churn money by taking a fuel excise and then returning some of it as rebates!
The rivers of gold that came from mining boom mark one, ought to have been invested in a wealth earning sovereign fund, and income earning assets ought to have been retained instead of sold off, to manage a short term cyclical downturn.
Had we been pound wise instead of penny wise, we would not now be discussing where and what to cut, but rather where to invest the surpluses?
Our tax system is basically broken and ought to be completely jettisoned, and replaced with a single stand alone, unavoidable expenditure tax.
This would allow firms to keep the money currently ripped from the bottom line, just to cover tax compliance costs, around 7% averaged.
It would also act to stop entities like Google and Apple from using extremely sharp practise to avoid a fair share.
Arguably, and expenditure tax can be set at a lower rate than the returned compliance costs, in a win/win outcome for business and the economy.
Incidentally, if anyone wants a (pro bono) more comprehensive explanation of my expenditure tax proposal, give me an Email address.
Rhrosty

The tax system is inarguably far too complex for regular folk, however I have no doubt that lawyers & bean-counters find it quite profitable as is. Unravelling the present mess would, under ALP or LNP gubmunts would necessarily involve a bunch of legal leeches ... how does one convince those grubs to do something, the end result of which has the potential to cause immeasurable financial loss to their erstwhile compatriots ??

In theory at least, the GST was 'supposed' to render the end of virtually all other taxes. What we saw in practice was typical failed lawyer turned male bovine dropping politician double-speak. Sure they got rid of 'some' taxes, but they also decided to describe a whole raft of other taxes as variously a 'duty', 'impost','levy', 'subscription' etc etc. Further down the track, we see not only brand new taxes & what-all springing up to fund the utter ineptitude of officialdom, but they also conspire to raise the GST. Note particularly that every other entity on planet earth that has as much as a nodding acquaintance with budgets encounters situations where income doesn't amount to what was predicted. Difference is that other than the parasites infesting our various parliament houses, the relevant bean-counters look for ways to economize. Clearly the word 'economize' was omitted from the bloodsucking parasites handbook.

to be continued

continued

How many employees, when they find their paypacket isn't covering all the bills, wander off to the boss and demand a payrise ?? Of course not, at least not if you expect any more money from that particular source. What about the mechanic who fixed your car last month. Does he front around and hold his hand out for another thousand bucks because he can't pay his bills ?? Obviously not if he values your custom he won't. Maybe you get fruit & veg from the nice greek down the road, but this time he says 'youa gotta givva me 'nutha fivty fora lasta week'. Dunno about you, but I'll be finding another place to shop. Why then should we accept elected representatives who merrily squander the money we entrust, and then come looking for more, not only once or twice, but time after time after time immemorial ?? Its not as if they lack resources, we also supply whole armies of staff, machinery, every conceivable resource known to mankind & still more, yet year after year they stuffup miserably and come back after more of our hard-earned. ENOUGH I SAY !!

Rhosty

Nice theory, shame about the facts. IMF data show the Australian government’s structural position switched from deficit to surplus in 1997, stayed in surplus until 2007 and has been in deficit since.

http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx

Rhian, that is stunning. I think the link to the specific information is http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/weorept.aspx?pr.x=92&pr.y=10&sy=1980&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=193&s=GGSB&grp=0&a=

It shows the Howard years as being the only years when we have been in structural surplus since 1980. It ends abruptly in 2008.

Why hasn't the media picked this up amongst all the butt covering by the bureaucrats?

This really is the worst government in 30 years, and by a long shot. The structural deficits are far worse now than anything previous in the IMF dataset.

Yes, Graham the turnaround is stunning

you picked the series in dollars of the day, which was always going to make the current deficit look big, but even as a percentage of GDP it was a record in 2010:

http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/weorept.aspx?sy=1990&ey=2014&scsm=1&ssd=1&sort=country&ds=.&br=1&c=193&s=GGSB_NPGDP&grp=0&a=&pr.x=63&pr.y=16

Hi Rhian,

I just chose what was in front of me.

And I've done this quick blog post (and given you a credit) http://www.ambitgambit.com/2013/05/23/imf-says-howard-ran-structural-surpluses/.

I get angrier and angrier when I see the partisan nonsense being spouted by various organs of government, as well as some of what used to be the serious press.

Rhian, all you've confirmed is the boom and bust nature of economies, and the fact we were still enjoying quite robust terms of trade up to and including the first aspects of the GFC in 2007. Or a Chinese economy that was still growing at around 10-11%?
You also seem to be able to exclude the effect on our economic performance, by the stubbornly high dollar, arguably never the result of Govt policy, or which economic levers were being pulled.
Also apparently ignored is the role of treasury officials in providing economic advice and forecasts for all Govt.
One notes the recent response of Ford, and its plans to shut down its Australian manufacturing arm.
And or, that the end of compliance costs, as advocated by me, [as part of reform,] which by the way, cascade and multiply through every part of vehicle manufacture, could add 7% or more to that entity's bottom line.
Which would be enough to enable a break even Ford, to shelf its current closure plans indefinately.
I'm not interested in point scoring, or incredibly unimportant minutia.
Just on getting people to lift their gaze above the usual blame or kudos shifting, and instead focus on the big picture, and the best outcome for Australia and Australians!
An outcome. which is simply not served by the current economic model, or artificially created division?
I would like to see reform, e.g. which would finally allow entities, with as many as 150,000 people on various payrolls, and as much as a trillion invested in offshore accounts?
Finally get to pay some tax on their commercial ventures, in completely fair commercial competition.
Rather than endlessly sermonise about the missing morality of others?
Ditto other international entities, currently avoiding a fair share of tax and with as much as two trillion tax avoided dollars, allegedly squirreled away in secret accounts?
Rhrosty.

Rhosty

All I addressed was your claim that Howard took us unto structural deficits, which is simply wrong. The whole point of estimating a structural budget position is to estimate an underlying budget position offsetting the effects of the business cycle. Far from reflecting the “boom-bust” nature of the economy, as you maintain, it is precisely these effects that structural balance estimates adjust for. It’s not a perfectly precise science, but it is possible to come up with reasonable estimates, as the IMF has done.

As the article implies, the Government’s failure to publish its own underlying budget balance estimates is probably because they do not like what those estimates would show. In fact, the usual form is that the IMF’s estimates are calculated after extensive discussions with Treasury anyway. It’s a fair bet that any Treasury estimates would be very similar to the IMF’s.

Rhian, Howard did give away much of the rivers of gold that flowed from mining boom mark one! Undeniable! It was economic circumstance and serendipity that gave his Govt. their seemingly good results, not good economic management. He can hardly be credited for the quite remarkable performance of the Chinese economy, without which there would have been no mining boom mark one, or rivers of gold to be handed out as welfare for the rich, pork barrel vote buying and entitlements for folks who previously, were never ever entitled!
Mineral recovery money comes only once, and the rivers of gold should have been invested in an income earning sovereign fund, rather than short term political results!
He even engaged in a bidding war with Rudd in 2006 to give even more tax breaks! His bid was 32 billions and Rudd's 30 billion.
Had we retained 2006 tax rates, treasury would have an additional 39 billions today.
There is a structural deficit that can only grow, with a rising population and a shrinking taxpaying demographic.
At the end of the day, it matters little who did what and how much they contributed to a growing structural deficit.
What really matters is how we fix it.
I contend, doing what you've always done, just get you more of what you got!
It follows therefore, we need to do something very different!
And I've outlined that something else in considerable detail elsewhere.
Rhrosty.

So what is your argument Rhosty? That Howard would have been so incompetent as to leave tax cuts in place that were unsustainable? That Labor was incomptent, so they left them in place?

All this, when I thought your argument was that it doesn't matter how much governments borrow, they can't go broke, and don't need to worry about it.

Rhosty
Australian government tax receipts as a percentage of GDP hit an all-time high of 24.2% of GDP in 2004-05 and 2005-06. Under Howard.

http://www.budget.gov.au/2013-14/content/bp1/download/bp1_bs10.pdf
(Table 2)

So the best you can argue is that the Howard government would have taken us into structural deficit if it had won the 2007 election and implemented its promised tax cuts. Than may be right, but it assumes that the government would have made no fiscal adjustments at all in response to the GFC, which seems unlikely.