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The Forum > Article Comments > From punchbowl to prudence > Comments

From punchbowl to prudence : Comments

By Geoff Carmody, published 14/6/2013

Martin Ferguson noted we must grow our pie before we can distribute it. Our slices of pie, on average, are shrinking.

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The one-sentence explanation of what this article is about in the article list is:

< Martin Ferguson noted we must grow our pie before we can distribute it. Our slices of pie, on average, are shrinking. >

But, sorry, this terms of trade (mentioned 22 times in this short 785-word article) stuff just doesn’t cut it!

Ferguson’s simplistic note also doesn’t cut it.

We need to stop growing the number of pie-slices!

Only then could they actually become bigger as the economy grows rather than ever-smaller despite rapid economic growth!

How this most fundamental point can be left out of any national (or rational) economic analysis is just beyond me. But it happens all the time.

< Falling terms of trade and a weaker $A are telling us it's well past time the policy switches are flipped more decisively from punchbowl to prudence and productivity. >

And one of the most prudent things to do would be to greatly reduce population growth, for two reasons:

To make it possible for the average pie-slice to actually start increasing and

To stop exerting pressure on all our services and infrastructure, all of which demands enormous expenditure just to keep up the same standard for ever-more people without leading to any significant improvements.

Even if we become wonderfully successful at switching from ‘Quarry Australia’ to a diverse value-added economic base, we won’t get ahead if we continue to be critically burdened by enormously high immigration.
Posted by Ludwig, Friday, 14 June 2013 8:50:30 AM
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One has to agree in part with Ludwig; inasmuch as we seem to follow population growth with essential infrastructure. A cart before the horse approach.
We can only kick the destiny of demography a little further down the road, by simply importing people/taxpayers!
We also need an economic growth model no longer dependant on population growth. In an overpopulated planet, population growth is a zero sum game!
We need a new economic model which works for us, instead of making us slaves to it; or, just disposable assets or numbers.
And an economic model composed large of must be's is becoming increasing unworkable, in light of the austerity measures around the world effectively shrinking the entire global economy.
Nor are we insulated from the enormous debt burden, created by stolen debt or so called derivatives, (64 trillions worth) looking for a home or somewhere soft to land.
However, one has to disagree with Ludwig, in his answer of distributing larger slices of a shrinking pie.
As Will Robinson's Robot repeatedly enunciated, that does not compute.
A family of five can never ever equitably share a pie cut into four quarters or three thirds!
Even then the share can only ever shrink, with the size of the smaller and smaller pie!
In other words, nobody but nobody wins!
It's a lose/lose outcome, with often extremely adverse down-line consequences! To be continued. Rhrosty.
Posted by Rhrosty, Friday, 14 June 2013 11:57:49 AM
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My much much bigger economic pie solution, has two essential, must do first parts.
The first part being essential tax reform and quite massive simplification.
All current tax collection methodology needs to be completely jettisoned and replaced with a single stand alone unavoidable expenditure tax.
The destiny of demography compels it!
Set at just 4.8%, this single measure will collect much more tax, by simply including all the current avoiders in the net!
However, the trade off is the end of the need to fund compliance costs, which currently rip around 7% from the averaged bottom line!
The GST ought to be replaced with a funding model that makes the Fed responsible for all public education/health spending.
With regional autonomy and a direct funding model, increasing the actual amounts, (around 30%) able to be allocated at the coal face, without increasing the total spend!
Some of the extra revenue ought to be earmarked for ongoing surpluses, which ought to be invested in an income earning sovereign fund.
And some of it invested in infrastructure, the most urgent being publicly owned power companies, supplying the world's cheapest, carbon free, most localised and reliable energy.
Just these two things would start an exodus back to this country, by energy dependant high tech manufacture.
Which would then have no choice but to quite massively grow our economic pie, along with the products we can then export to the rest of the world.
One of which simply must be mass produced, CNG powered, ceramic cell driven electric vihicles.
The others, a national gas grid and very rapid rail!
After that we need to invest in our own people and their better ideas.
The outcomes at Nissan, Mitsubishi and now Ford; ought to underline for all time, just how unwise it is to depend on foreigners, and their debt laden investment strategies.
The subsidies we've poured into car manufacture, could have financed an employee owned car building co-op, three times over!
Arguably, a vastly superior way of investing public monies in the car industry; and or, our own, beyond the mining boom, industrial future!
Rhrosty.
Posted by Rhrosty, Friday, 14 June 2013 12:42:17 PM
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< However, one has to disagree with Ludwig, in his answer of distributing larger slices of a shrinking pie. >

Why would you assume that the pie is shrinking, Rhrosty?

This seems like a very strange assumption, on which you have based your disagreement with me.

The pie will keep growing in all probability, but just at a slower rate than at present.
Posted by Ludwig, Sunday, 16 June 2013 10:29:03 AM
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Ludwig, parts of the pie are already shrinking and the worse part is
the Europeans slice. The Chinese part also shows signs of shrinking.

There is also some opinion that our slice is about to get smaller.
Then as we put our slice on our plate, suddenly there are now quite a
few more people looking over our shoulder looking for a piece of it.
Posted by Bazz, Sunday, 16 June 2013 12:25:03 PM
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Bazz, it becomes a little more complex when we start talking about our pie slice on the world stage. We could indeed have a shrinking slice of the world pie while still having a bigger overall national pie, if the world average growthrate is higher, or if the average growth rate of the biggest players – China, India, etc, is higher.

The Chinese pie is not shrinking, it is just growing at a slowing rate.

As it concerns the size of our own national pie, I can’t see that it would actually be shrinking any time soon.
Posted by Ludwig, Sunday, 16 June 2013 12:57:40 PM
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