But Alan, why has Australia needed to borrow through the years of the mining boom?

Why have we got any debt at all?

We shouldn’t have, given the most enormous wealth we have had in the ground, the rate of its extraction and the prices we have been getting for it overseas.

Given that we have been in debt during this period, how on earth are we going to get out of it as the boom winds down? How can it not increase from this point forward?

Oh hold on – could it be that we have had enormous immigration all through this period, and have needed the most enormous amount of money, including borrowed money on top of our massive primary resource income in order to simply keep up the same level of infrastructure and services for this staggering rate of population growth??

One of the biggest factors in balancing the books and achieving a healthy fiscal future is to curtail the ongoing huge demand for infrastructure and many other things that borrowed money is helping us build.

Within a net zero immigration regime, it would surely be a great deal easier to balance the books…. or to keep the imbalance small and manageable.

< At the macro level, the strongest economy in the world – and virtually guaranteed to stay that way. That's measured by income, growth, jobs, inflation, interest rates, taxes, productivity, savings, terms of trade, credit ratings and other variables. >

Well perhaps we need a few more realistic indicators, such as; improvements in the quality of infrastructure and services for the existing population, rather than the amount of new stuff.

An excellent article.
Radio National just reported that 50% of conservative voters do not think government intervention can rectify problems in the economy. Those people obviously understand nothing about the role of a government that has control of a currency area.

A budget outcome should not be an aim. The aim of a currency issuing government should be to increase employment to a maximum so that the economy can build the structural and essential services the community needs. Planning and making the funds available to do that reduces the social security outlays and increases the profitability (and therefore the tax payments) of those supplying the extra materials and services utilised. Those features will tend to reduce the deficit to GDP ratio.

The main causes of business cycles are variations in the enthusiasms of business flowing from herd movements in one direction so that overexpansion in one or more industries leads to prices dropping. The coal and iron ore businesses are the latest illustration of this stampede in one direction followed by a collapse.

Competent governments make fewer mistakes that most major businesses. Consider the string of errors by BHP and RIO. BHP was slow into the iron ore and coal businesses, probably because the company didn't understand the efficiency of rail transport over dedicated tracks. BHP overpaid for Magna Copper, and started Ok Tedi with inadequate regard for the high rainfall. Then a $2 billion failed direct reduction pellet plant. RIO made an overpriced takeover to expend into the aluminium industry and almost went broke. Such mistakes are more costly to a community than government errors although the Collins class subs come to mind.

Given the short time available for planning, the Australian (Labor) Government's stimulus packages were a roaring success only undermined to a limited extent by some state governments' poor management of some school projects and pink bats, the latter mainly in one state.

It is a pity that more Australians do not understand the money theories promoted by the Economics Department of Kansas City University and Australian professor Bill Mitchell.

@Ludwig,

Thanks for these observations.

Brief responses:

Re: “why has Australia needed to borrow through the years of the mining boom? Why have we got any debt at all?”

One reason is that when income was flowing at unprecedented rates between 2000 and 2007, pre-GFC, most was given away to high and middle-income earners in tax concessions or middle class welfare or squandered in poor fiscal management. Like the $5 billion losses on the foreign exchange markets.

When the Coalition left office only 7.3% of GDP was in the bank. Should have been above 50% - like Norway (138%) or Finland (72%).

Then Australia would have no net debt now.

See here: http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/weorept.aspx?pr.x=58&pr.y=7&sy=2007&ey=2018&scsm=1&ssd=1&sort=country&ds=.&br=1&c=193%2C542%2C122%2C137%2C124%2C181%2C156%2C138%2C423%2C196%2C935%2C142%2C128%2C182%2C939%2C135%2C172%2C576%2C132%2C936%2C134%2C961%2C174%2C184%2C532%2C144%2C176%2C146%2C178%2C528%2C436%2C112%2C136%2C111%2C158&s=GGXWDN_NGDP&grp=0&a=

Re: “We shouldn’t have, given the most enormous wealth we have had in the ground, the rate of its extraction and the prices we have been getting ...”

Correct.

Re: “Given that we have been in debt during this period, how on earth are we going to get out of it as the boom winds down? How can it not increase from this point forward?”

That chart shows the repayment rate the IMF anticipates. Relative to other nations, Ludwig, it’s quite readily repayable. The current net debt will have halved by 2018 - provided there is no change of government. Then halved again every two or three years.

Re: “One of the biggest factors in balancing the books and achieving a healthy fiscal future is to curtail the ongoing huge demand for infrastructure and many other things that borrowed money is helping us build.”

No, not really. Balancing the books is only one objective. Jobs, income, quality of life and being a good global citizen are also important. Building infrastructure is necessary for these.

Re: “Well perhaps we need a few more realistic indicators, such as improvements in the quality of infrastructure and services for the existing population, rather than the amount of new stuff.”

Yes. This is actually quantifiable. But to do so doesn’t suit the dominant narrative in Australia at the moment.

Such is Australia’s doom.

@Foyle,

Agree completely. Very well articulated. Thanks.

Cheers,

AA

Hi Alan,

Things must be getting pretty desperate over in France. Do you publish your economic analysis of the EU in the EU? Mmmm, I bet that would make you popular?

You mention that our so called debt problem is “laughable abroad”. What you didn’t say was quite what it is they have to laugh about? The answer is that they have nothing to laugh about because they are economically up the proverbial creek thanks to social democratic incompetence.

You forget that their laughter (?) is driven by economic anguish and not humor.

So let’s get this straight, many of the nations against which you “compare” Australia are up the creek and somehow that makes your comparison valid?

Put another way, the others are doing so badly that this makes us look good? Not to mention that if we keep doing what we are doing we will indeed be up the same creek as them. Paddles anyone?

When are you going to point out the goods things the “other” nations are actually doing to get themselves out of the poo? Then we can determine what, if anything we could adopt, rather than your endless off shore bleating.

Why are the Europeans in such an economic mess?
What did they do wrong?
What are they doing to get out of it?
What progress are they making?

Show us something positive that has worked for the EU, then you might get some of the attention you crave

The authors graph neatly shows the dramatic increase of debt to GDP from the time of the election of the Labor Govt from very low levels.

Energy and water infrastructure under the Labor Party? This was the party which was going to launch into "clean energy" and,advised by its Climate Change fanatics proceeded to fund desalination plants which are now billion dollar white elephants which continue to cost taxpayers money. Some were to be powered by wind farms,another ridiculously expensive left wing fantasy.

School halls for schools which didn't even need them and even asked not to have them built. Fantastic waste.

Insulation? Are you sure you wanted to mention this?

Labor spent much of the future fund generated from the mining boom and now Rudd has instituted a tax on savings accounts which he will undoubtedly use, given the chance.

I'm afraid the old line of "we're doing better than some other countries" goes nowhere. We could do a whole lot better.

Thank you Alan Austin for such a well researched article. And the tone is most commendable too, given the prevailing political climate that has grown up over three years of trying to knock down an "illegitimate" government by hook or by crook.

Sadly, for a clever nation, we don't care much for facts nor analytical rigour. And we seem to have lost that courage of the world-pioneering social vision we had a hundred years ago. Perhaps we have taken Malcolm Fraser's counsel to heart all too seriously - put sports in front of politics.

Hence our journalists provide us daily with headlines as if we are ready to barrack at a footy spectacular. Or titillating ones over nothing: Sexappealgate is bad for Rudd,for instance.

At a more fundamental level, we seem to have developed a mentality of entitlement that is underpinned by a barely submerged right to kick anyone or anything deemed to have stopped us from our entitlement: Why couldn't the government have done better so that we are forever, by a country mile,the bestest in a world in which we can reach our fantastical dreams: MacMansions; Super safe 4X4s to take their precious kids to and from their private schools; ever bigger compensations (read incomes) ever more better packaged to avoid the ambit of taxation laws; et cetera?

Alan,may you live to be 100, with your intellect undiminished and your courage unbridled.

Australia should have much better transport systems - better urban freeways, better regional freeways and, not least, much better public transport: better trains, & better bus terminals & corridors.

The Howard govt missed doing anything for transport infrastructure - they should've at prioritised the Pacific Hwy. It got caught far too much in war-mongering, and neglected the domestic scene.

Thanks for quick the response Alan.

I wrote:

>> One of the biggest factors in balancing the books and achieving a healthy fiscal future is to curtail the ongoing huge demand for infrastructure and many other things that borrowed money is helping us build. <<

You replied:

<< No, not really. Balancing the books is only one objective. Jobs, income, quality of life and being a good global citizen are also important. Building infrastructure is necessary for these. >>

Absolutely. So wouldn’t it be pertinent to build infrastructure with these objectives in mind instead of a very large part of our infrastructure expenditure being put into the duplication of the basics for ever-more people?

Wouldn’t a big reduction in immigration actually allow us much more freedom to build other sorts of infrastructure?

Wouldn’t a winding back of the huge demand for infrastructure that very high immigration creates actually be very good for us in terms of the diversity of infrastructure and real improvements in the existing stuff?

continued

From Jenny Goldie’s article (OLO 12/08/13):

<In 2012, Australia's population growth rate was 1.8 per cent. It meant an extra 394,200 people a year >

< Our annual increase is even greater than the population of the Australian Capital Territory of 379,600. It's twice the size of the city of Geelong. >

Nearly two-thirds of this (235 900) is due to net overseas migration. So that’s the equivalent of a city somewhat larger than Geelong, each year, with all its infrastructure, services and all other life-supporting and quality-of-life-supporting stuff that we are having to pay for in order to provide the same level of everything for ever-more people, due directly to our immigration intake!

This is surely an absolutely critical factor in the whole debt, budget and overall financial picture!

Alan, you wrote:

<< That chart shows the repayment rate the IMF anticipates. Relative to other nations, Ludwig, it’s quite readily repayable. The current net debt will have halved by 2018 - provided there is no change of government. Then halved again every two or three years. >>

Yes, but as we come off the end of the mining boom, discontent in the general community is likely to increase and the demand for our government to spend up on various things will increase along with it. The pressure is very likely to be right on government to cut debt payments and indeed to increase borrowing!

So, surely in the face of this scenario it is highly pertinent for us to slash immigration and hence give ourselves a considerably greater chance of putting money into the things that the EXISTING community really needs, and still be able to progressively pay off our debt!

Interesting article and discussion, thank you all, even Spindoc who has just demonstrated why the level of public discourse is so often abysmal.

Alan,
The other comment of import yesterday from Tony Abbott was his claim on ABC 7.30 that the Coalition Governments can consistently achieve a budget surplus per year of 1% of GDP. In my view he put his foot right in it. I wonder if the Labor Party has enough nous to drive the point home.

Australia has consistently run a current account deficit of about 3%pa average. Using those two figures (1%pa + 4%pa) Modern Money Theory shows conclusively (i.e. with empirical evidence) that private financial wealth must decrease by 4%pa of GDP.

In the Howard era that blight was overcome by private debt, largely in the housing area and on credit cards. Housing loans interest rates were then about 7-8% and long term credit card more than double that.

Yet the government can run a budget deficit at nil% if it choses or it can pay upper crust welfare at about 3% below the housing rate. It just instructs the Reserve Bank, which it owns, to credit the accounts of people from whom it has bought goods and services. That will not increase inflation until the economy starts to boom when the effects I mentioned in my earlier comment will reduce the debt to GDP ratio and having achieved its aims the government can back off (act counter-cyclically.

Why are people scared of government debt but willing pay the banks very high interest rates? The combined banks take about $3 off every citizen's purchasing power on average every day.

The situation described above also arose elsewhere in the world and when the debt bubble deflated, as people lost their enthusiasm and started to attempt to mend their personal balance sheets, the GFC hit.

We were lucky in Australia; our gang of five, Rudd, Gillard, Swan and Tanner (competent economic politicians as a group) and the Reserve Bank Governor acted quickly and almost perfectly. Hence we had no recession.

Correction; Figures in brackets should read (1% + 3% = 4%)

Well no, public debt is not much of a problem, or no worse in comparative terms than having, an income of $100,000.00, and borrowing $50.00.
Hardly a problem if needed for income earning infrastructure, but a very big one if used for essential recurrent spending?
However, the same can't be said of private debt.
The highest median house prices in the English speaking world is a problem, as is the economic impact of quite extraordinary rents, that force over a million or so families to regularly go without essential staples. (Sydney is now the most expensive city in the world!)
Negative gearing was supposed to increase housing stocks, but it has done anything but!
And the record burgeoning foreign debt, well over one and a half trillion, is a problem; as is servicing it, largely at commercial rates, [which someone somewhere has to pay?]
Done no doubt to avoid tax.
Little wonder we Aussies now pay a 30%+ premium at the checkout!
We need to borrow quite differently.
Thirty year self terminating bonds ought to be at least trialled. This gets the foreign capital, minus the price gouging/tax avoiding foreign ownership.
If these foreign guests, or around 95% of corporate Australia, weren't successfully avoiding tax, the govt would likely not have to borrow at all, but get busy building an income earning sovereign fund.
Particularly if all govt service was rationalized, and made the respective responsibility of just one tier.
A doable measure that would reduce govt costs by around 30%!
Genuine tax reform is the final piece of this puzzle; which if done properly, would end all avoidance as well as costly compliance!
Which in most cases, is likely to bite deeper into the bottom line, than a single stand alone expenditure tax, which is all that's needed!
Rhrosty.

Alan, you are pushing the labor party line ... sigh... again. Debt is good and we want to waste more.
We Australians have rejected that European socialist stupidity.
Don't believe me?
Take a look at the recent polling. Labor's polls are going south so fast the will soon be in a position worse than they were with Gillard.

If they continue with their massively negative and deceitful campaign then that is also very likely to accelerate.
Btw even with the extraordinarily harsh and what will be eventually useless, PNG solution the boats keep coming...

Sorry but this whole article is a fail.

Get the real picture on Australian debt.
http://www.australiandebtclock.com.au/

A government does not produce anything. It only has the monopoly of force to legally steal from its citizens.

A better solution to all the government ineptitude is to have a smaller and therefore less wasteful government. Allow people to keep what they earn and don't punish them for being productive and you would have a vibrant economy.

Will this happen, No you will instead vote for the politician that promises you the most kick backs, They will borrow to give you what you want and your kids will be left holding the bill.

>> Alan, you are pushing the labor party line ... sigh... again.

>> "Debt is good and we want to waste more." <<

posted by imajulianutter, Friday, 16 August 2013 11:39:15 AM

Debt is not necessarily waste. It is if it is used for non-growth areas.

Debt for investment, especially in productive capital works, is a good thing. Especially if the works produces a satisfactory Return on Investment, like the NBN is projected to do - 7% pa.

AdrianM
What is your view on the Tobin Tax, which could provide the government with revenue and leave personal income untaxed?

Rudd the $250bn man, now has his regular apologist Alan Austin.

AA is trying to persuade us that the more than $10 000 of debt incurred by Rudd and his moronic treasurer is not so bad, and comparing it with the EU countries that have suffered under decades of socialism.

It is like saying that Joe Bloggs is not so bad as he only beats his wife once a month, where there are lots of people that beat their wives several times a week.

Considering tax revenue is about $400bn p.a. the debt is more than 50% of annual government revenue.

Hi Alan
you say "The third widespread falsehood is that Australia avoided recession after the GFC hit in 2008 because it had no debt". Have you got a source for this?

I really am surprised anyone actually reads this bloke.

The posts are at least interesting, in showing just how thick some people can be.

Good morning all,

Thanks for these contributions.

@Spindoc: Yes, Most European nations fared badly through the GFC. They wish they had effected similar stimulus spending in 2009-10 to Australia's.

@Atman, re “Energy and water infrastructure under the Labor Party?”

Information on Australia’s infrastructure development is all here:

http://www.infrastructureaustralia.gov.au/

Re: “School halls for schools which didn't even need them …”

No. Assessments from auditors and independent inquiries show the buildings were appropriate and are overwhelmingly appreciated.

The insulation scheme was not the failure the Opposition and media would have you believe. See here:

http://www.independentaustralia.net/2013/politics/we-really-must-talk-about-the-pink-batts/

Both the BER and HIP were effective. Of course, the campaign in the media to denigrate these two excellent programs was effective also.

Re: "'we're doing better than some other countries' goes nowhere."

Atman, Australia is doing better than everywhere. Not just in the world today, but anywhere, any time, ever.

@Ludwig, re: “Wouldn’t a big reduction in immigration actually allow us much more freedom to build other sorts of infrastructure?”

Not sure. The argument regarding immigration and population is for another forum. But a steadily growing population is certainly not inconsistent with increasing prosperity and standard of living. It is a vital part of being a good global citizen.

Re: “as we come off the end of the mining boom, discontent in the general community is likely to increase …”

The mining boom has not ended, Ludwig. It is transitioning from the investment to the production phase.

The media in Australia didn’t print this – they suppress most important info, as we have discussed before – but China’s iron ore imports for July was an all-time record. Looks set to expand further.

Provided Australia gets the tax and royalties settings right, wealth and income will continue to flow.

@Foyle, re Mr Abbott. Unfortunately, as has been shown abundantly, nothing he says can be believed, can it?

Re the current account deficit and its impacts, not sure. Many comparable economies seem to have similar deficits – New Zealand, Canada, the USA, France, Brazil.

Agree with all your other observations.

More soon …

Cheers,

AA

Alan,
The New Economic Perspectives blog provides, on the top of the home page, access to the whole of Professor Randall Wray's book, "Modern Money Theory" subtitled "A Primer on Macroeconomic for Sovereign Monetary Systems". Professor Wray and Australian professor, Bill Mitchell are producing a text book on the subject.

The third blog in the MMT list links to a page showing how the sectoral balances combined in the sovereign currency area, expressed as percentages of the GDP, always net to zero.

The way I manage to remember how the balances system works is that, if the current account is balanced (exports value equals imports value) a domestic budget deficit outcome increases private financial wealth. If a current account deficit is added then, if the budget outcome doesn't increase to the same proportion private financial wealth decreases. That is the point I was making about Abbott and other neo-liberal politicians. People may feel wealthier because their home value has increased but the total financial saving held by citizens will have decreased.

From many of the comments posted about your article it is obvious that many of the commentators understand very little about monetary theory.

All money necessary to facilitate the operation of a sovereign area has to be created by the sovereign government using key strokes with the Reserve Bank. For example the Social Security Department instructs the Reserve Bank to credit the account of each private bank (or building society etc) with the total amount to be distributed on pension day and lists the account of the individuals who are to receive the increase in their account with the each bank.

The sovereign government spends first then collects taxes but only needs to collect enough to keep inflation at bay during a boom. Even Malcolm Turnbull seems to understand this as he advocated tax cuts rather than cash handouts at Christmas 2008. But, that favoured those who were least likely to spend the handouts and therefore was too slow.

The posts by JD Alt at NEP are an easy introduction to MMT. The other authors are all competent.

Check this link for debt vs GDP, it goes back to 1989.

You may notice that our debts grow during the Labor governments and get paid back by Coalition governments. The most notable aspect is the speed with which Labor governments mismanage our taxes. It climbs from their first year in power regardless of what surplus they were left.

http://www.tradingeconomics.com/australia/government-debt-to-gdp

The rate of growth of the Australian debt is not only greater now than at any time in Australia's history but also greater than the rate that occurred in the bench-mark nations like Greece and Ireland.

The fact is no lasting benefit or infrastructure has occurred through this debt accumulation. Nothing. The debt has brought nothing.

As for the GFC response of this government being worthwhile, that canard is answered here:

http://www.onlineopinion.com.au/view.asp?article=15130

Greetings again,

@Rhrosty, re: “Hardly a problem if needed for income earning infrastructure, but a very big one if used for essential recurrent spending?”

Correct. One insidious iniquity is your Coalition and mendacious media decrying increased borrowings – but completely ignoring increased productive assets and overall wealth.

@AdrianM, Are you referring to the tax performance difference between the Coalition and Labor?

See here: http://stats.oecd.org/Index.aspx?QueryId=21699

Taxation peaked in 2004. Since 2007, the tax take has declined steadily.

Are you arguing for a continuation, or reversion to the Coalition’s higher taxes?

Yes, the debt clock matches the IMF forecast – will peak this year, then decline gradually until 2017, then more rapidly.

But is this really sensible? With interest rates low and investment opportunities for future growth and prosperity, why not borrow more?

Ever bought a house, Adrian?

@Shadow Minister, re: “AA is trying to persuade us … comparing it with the EU countries that have suffered under decades of socialism.”

Australia has the best economy the world has ever seen, SM. Compared with every other nation ever.

Refer links provided here: http://www.independentaustralia.net/2013/politics/we-really-must-talk-about-all-these-lies/

Re: “Considering tax revenue is about $400bn p.a. the debt is more than 50% of annual government revenue.”

Agree, SM. Nothing to worry about.

@Rhian: Yes, the data is in the paragraphs immediately following that quote – going right through to the third last paragraph.

The IMF is probably the most helpful source.

@sonofgloin:

Re: “Check this link for debt vs GDP, it goes back to 1989”.

Correct. But if you check charts going back earlier, they disprove your contention.

Re: “You may notice that our debts grow during the Labor governments and get paid back by Coalition governments.”

Partly true. But why is this problematic, if borrowing builds the economy?

Have you ever bought a house, Sonofgloin? Or delved a mansion from the living rock?

@Foyle: Mr Turnbull’s tax cut proposal simply didn’t work. That is the strategy most governments tried. It failed comprehensively. The strategy that worked fairly consistently – in Australia and Poland most notably – was maintaining taxes, but increasing infrastructure investment.

No?

Cheers,

AA

Hi Alan
I was not asking for the GDP data, but for who has said that the cause of Australia's comparatively strong GDP growth is its low debt.

We had a discussion on a similar point before, but the quote then was comparing debt before and after the GFC, which of course was correlated.

the billions spent on wasteful Green schemes could of cleaned up the planet many times over. Instead we needed to be seen as leaders of the 'greatest moral challenge of the decade. ' The only winners are those who have cashed in un the gullible gw believers. Now Labour having wasted billions have decided its all a scam anyway.

Only read the first part, very bias.

Debt.
I challenge you Allen to show me our $300billion odd in new assets.

I also challenge you to explain how the likes of the failed insulation, cash fir clunkers, fuel watch, grocery watch, live export debacle, the list goes on, were asset building projects.

I would also ask how do you consider the illegals issue to be a good thing.

As for the GFC, my tip is it's effect will all of a sudden disappear from labors radar, come September 15.

What ever way yo look at it, $300+ billion is a lot of money, especially considering it's been accumulated in less than six years.

Finally, if we are in such great shape, with low debt, why are so many of our retired tax payers doing it so tough?

After all, having contributed most of their lives, only to be expected to live on about $16,000 a year is hardly what I would call living beyond their means.

May I suggest you wake up to yourself and look at how the real people are doing.

But dont worry, because the real people will tell you on September 14.

It is remarkable that supporters of this author can say this:

"a domestic budget deficit outcome increases private financial wealth"

Tell that to the Yanks after Fannie Mae and Freddie Mac. Incompetent governments can mask their lack of fiscal rectitude as this wretched ALP/Green does with such things as the NBN.

Still when the author says "why not borrow more?" the disciples can't be blamed for their own nonsense.

and yet Societe Generale’s Albert Edwards has a different perspective.

http://business.financialpost.com/2013/06/13/australia-is-a-leveraged-time-bomb-waiting-to-blow-socgen/

“We repeat the prognosis we gave this time last year that Australia is a leveraged time bomb waiting to blow. It is not a CDO, but a CDO squared. All we have in Australia is, at its simplest, a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China. Yet even with Australia having enjoyed a commodity export boom it still managed to rack up a current account deficit of 4% of GDP last year! Australians have been living beyond their very ample means for a long, long time. Of all the economic bubbles I have seen over the last 30 years in this industry, this one is even more obvious than the rather prominent nose on my increasingly haggard face. And its ultimate fate is obvious to me too.

I find it hard to understand how anyone, let alone this bias author, can predict that we can repay our debt, when the former Gillard government promised a surplus (at any cost), then warned it may be a deficit (surprise surprise), then announced it may be as high as $8 billion, then, only ten weeks later dropped a $30 billion bomb shell.

All this in the space of a little more than ONE YEAR.

Now I could be more forgiving if we had fully funded education reform, NDIS, and the NBN was paid for and on time.

The reality is, these are little more than unfunded dreams, dreams that will now become the libs problem.

If this mob had managed to pay for these, we wouldn't have to be robbing from our pensioners in order to fund Rudds illegals debacle.

I have to agree with Ludwig, when he said how on earth could we accumulate so much debt during a huge mining boom.

I'll tell you how, it's called total incompetence, and it's this incompetence that will see this mob thrown out on their ear.

Alan,
In response to your questions
Are you referring to the tax performance difference between the Coalition and Labor?
You make the mistake of thinking both political parties are different.
They are two sides of the same coin. Socialist, Australia has degenerated into a welfare/nanny state. "From each according to his ability, to each according to his need" is a slogan popularized by Karl Marx. Now it is more like Tax the rich they have plenty of money.

Are you arguing for a continuation, or reversion to the Coalition’s higher taxes?
No I am arguing for lower taxes for all and a considerably smaller government. Ever heard of Libertarian-ism.

Ever bought a house, Adrian?
Yes, And I bought after the boom, I paid it of in full, by working hard and forgoing all unnecessary spending. The amount of money I had to had over to the government for this privilege was disgusting.

But is this really sensible? With interest rates low and investment opportunities for future growth and prosperity, why not borrow more?
So you want to double down, and cure a debt problem with more debt? With interest rates at 50 year lows which way do you think they are more likely to go, down or up?

Greetings all,

Travelling currently. Sorry if responses are not always prompt.

@Cohenite, re: “The rate of growth of the Australian debt is not only greater now than at any time in Australia's history but also greater than the rate that occurred in ... Greece and Ireland.”

Correct. Savings are needed at the right time in the cycle and spending is needed at the right time. When the GFC hit, it was necessary for most governments to either spend banked cash or borrow to spend. Australia did both.

Australia alone acted swiftly and decisively. Zoomed up from 12th ranked economy globally to number one. Most nations now wish they'd done likewise.

Re: “The fact is no lasting benefit or infrastructure has occurred through this debt accumulation. Nothing.”

Nonsense, Anthony. Huge increases in valuable dividend-producing assets. Best-managed economy in the world. By a mile. Some say the best the world has ever seen.

@Rhian, re: “I was not asking for the GDP data, but for who has said that the cause of Australia's comparatively strong GDP growth is its low debt.”

Are you looking for comments in these OLO discussions, Rhian, or Coalition politicians, or economists?

Peter Costello seems to claim zero debt and money in the bank did the trick here:

http://www.news.com.au/national-news/peter-costello-says-he-saved-australia-from-global-financial-crisis/story-e6frfkvr-1225786274775

Is that what you mean?

@rechtub, re: “I challenge you Allen to show me our $300billion odd in new assets.”

Refer here, Rehctub: http://www.infrastructureaustralia.gov.au/

And National Accounts at the Bureau of Statistics, Catalogues 52 and 55 for starters.

It’s not just the asset value now, Rehctub, but their value in the future. And future outlays they will avoid.

“I also challenge you to explain how the likes of the failed insulation ... were asset building projects.”

Refer here regarding insulation:

http://www.independentaustralia.net/2013/politics/we-really-must-talk-about-the-pink-batts/

The others we can pursue later, perhaps.

Re: “I find it hard to understand how anyone ... can predict that we can repay our debt, when the former Gillard government promised a surplus (at any cost), then warned it may be a deficit ...”

Go with the International Monetary Fund forecasts, Rechtub. Don’t listen to politicians.

Cheers,

AA

I read Alan's article on HIP, what a joke. It basically sums you up as a poor scholar and propagandist.

You should try and get it published in academia rather than a very poor website

I wrote an academic piece on the HIP in 2010.

Funny enough, there has been not one academic criticism of my article in the form of a published article (in the humanities and public policy journals at least). I wonder why, if AA can be so certain how good the HIP was?

Who knows, perhaps someone will do so in the future, but hopefully there is not one Australian humanities academic who would dare to defend the indefensible.

One thing is for sure, though, I will be there to defend my piece in response to truth and common sense in line with what most Australians know of the badly designed and implemented HIP.

However, I suspect that the HIP will be always noted as a major policy debacle, as suggested by other academic pieces since

Hi AdrianM,

Thanks for responding. Appreciate this.

Re: “You make the mistake of thinking both political parties are different. They are two sides of the same coin.”

I actually agree with you to a significant extent. But not entirely. The data shows overall taxes are higher under Coalition governments and the weighting is more towards lower income earners. Under Labor, overall taxes are lower and the disparity is skewed more towards those better placed to pay.

Pretty sure this principle was valued well before Karl Marx articulated it, and is accepted today by many who don’t agree with much else Marx said.

Re: “Australia has degenerated into a welfare/nanny state”.

When did this happen, and how are you measuring this, Adrian?

Washington-based Heritage Foundation publishes an economic freedom index which reflects progress in freeing capitalists from government obstruction and over-regulation. Its latest survey ranks Australia first among OECD nations and third in the entire world – just behind Singapore and Hong Kong. Australia's current score is higher than the Coalition ever achieved.

Re: “So you want to double down, and cure a debt problem with more debt?”

What debt problem, Adrian? Did you read the article?

When you bought your house, Adrian, did you take out a mortgage? The day after, did you wake up say “Omigod! I suddenly have a terrible debt of $250,000! What an appalling money-manager I am!”

Or were you quietly satisfied that you were building your assets for future security?

Re: “With interest rates at 50 year lows which way do you think they are more likely to go, down or up?”

They are still declining at the moment, Adrian. So definitely time to borrow and build productive assets. When they start to rise will be time to slow the borrowing or stop it altogether. Above a certain point and it will be time to accelerate repayments.

This will be no problem at all for Australia – nor for Denmark, Estonia, Finland, Norway and Sweden.

Please read the piece, Adrian, and point to anything you think is not supported or not reasonable.

Thanks. Cheers,

AA

Forgot to add, looking forward to the judicial inquiry into the HIP, which I suspect is going to unravel some interesting truths.

Maybe they will call AA as an expert witness to counter what will be overwhelmingly embarrassing realities in regard to Aust governance under Labor.

I heard an interesting factoid,

Australia grew debt at a rate faster than most European countries, which meant that the debt is skyrocketing.

I see that Australians are beginning to remember why Rudd was fired in the first place, and the polls are beginning to fall for labor again.

Hi Alan,

<< @Spindoc: Yes, Most European nations fared badly through the GFC. They wish they had effected similar stimulus spending in 2009-10 to Australia's.>>

Great answer Alan, now tell us what was the question again? It doesn’t take you long to start ducking the hard ones does it?

Throwing an ever increasing cloud of selective “information” at the converted might get them excited however, as always when push comes to shove you bail out on anything that requires you to actually have an answer rather bomb us with links and information.

Alan Austin>> Partly true. But why is this problematic, if borrowing builds the economy?

Have you ever bought a house, Sonofgloin? Or delved a mansion from the living rock?<<

I agree with your premise Alan, but I contend that our burgeoning record breaking $300 BILLION debt accrued in six years built the “mansion” of overpriced contracts and abysmal planning and management protocols.

We may not have the highest debt ratio to GDP… that goes to the Hawke Keating government, but in raw dollar terms we have triple the debt they built. The only reason we at are 20 odd percent of GDP now is because mining had set record dollar export figures. With the largest tax receipts in our history Labor has sent us broke, we live off others money.How rediculous is that, not rediculous to some it appears.

I will list some of the mansions you alude to Alan:

The BER where BILLIONS were overcharged by prime contractors,

Young lives and hundreds of millions stolen by the Batts scheme,

A 60 , 70, 80, BILLION dollar (who knows , they won’t tell us) NBN program for that is ill conceived, poorly enacted and way under roll out targets,

A failed Grocery Watch, a failed Fuel Watch,

Aboriginal housing scheme with spent budgets but no houses built,

Billions spent on a Dept of Climate Change that changes nothing,

Illegal boat entry costIing $12 million per boat/ slash Cancer treatment funding and national dental scheme,
Etcetera etcetera etcetera…

What are you defending Alan?….why are you defending Alan?

Hi Allan,

Reading through your responses I can see that most of where we disagree is philosophical.

A comment like this "Under Labor, overall taxes are lower and the disparity is skewed more towards those better placed to pay." To me suggest that I am a cow to be milked for all its worth.
So because I have motivation and a desire to better my personal environment, I must there fore be expect to support those that can't be bothered or unwilling to? Why not support a flat tax across the board for everyone? that would be a far more equitable solution than having the few pay for the many.
Before you think I am rich I earn $70k from which I must support my family. So I am not some high flyer, I would like to be, but the government (this is all governments) has ensured that I will be punished for being too productive.

Welfare nanny state, Just look at the rules and regulations that are in place to protect ourselves from ourselves. When i grew up i could ride in the back of a ute, When you did this you knew not to do stupid shite or you get a Darwin award, Now it is illegal to ride in the back of a ute, because you might get hurt. Is just one example.

What debt problem, Adrian? Did you read the article?
You want to use the $275B number for your argument, I use the $4.6T number as that is the real amount of debt in Australia, as all Australians are on the hook for the government debt and their own.
So using $275B is just playing with statistics and only showing a small part of the bigger picture.

End Part 1

Part 2
When you bought your house, Adrian, did you take out a mortgage? The day after, did you wake up say “Omigod! I suddenly have a terrible debt of $250,000! What an appalling money-manager I am!”
Or were you quietly satisfied that you were building your assets for future security?

Actually I did, I view a home as a massive consumption item, that is not an asset only a liability. Due to the way the money flows, out of my pocket not in. Being mortgage free just means that the liability is reduced. Also I often ponder what better uses I could have had for all that coin that I have tied up in it.

So definitely time to borrow and build productive assets.
This is not the role of government (unless you believe in Communism). It is the role of private enterprise and a free market.

When they start to rise will be time to slow the borrowing or stop it altogether.
When this happens it will be to late, Ever heard of make hay will the sun shines. The time to pay down debt is when the rates are low and the interest accrued is small, if you load up on more debt and wait till the rates increase then you will find that more of your money goes to paying the interest on the loan not the principle of the loan.

This is what happened to the Club Med countries. They kept borrowing until the rates went up and then found they couldn't make the repayments.

http://www.yourstrawman.com/

Many people think that there are hundreds of other laws which they have to keep (and new ones every other day), but that is not so. Those other things are called "statutes" and keeping them is optional for you, the human, BUT they are not optional for your fictitious strawman, and that is why the people who benefit from those things want to persuade you to represent your strawman and so become subject to all of their invented restrictions and charges.

If you knew that they were optional, would you agree to:

* Give most of your earnings away in taxes and similar charges?

* Pay to own a vehicle?

* Pay to own a television set?

* Pay to drive on roads which were built with your money?

* Be forced to join armed services if you are told to?

* Send an army which is supposed to represent you, into another country to murder innocent people there?

Were you ever told that these things are optional? If you agree to represent your strawman, then these things become binding on you. These are some of the "statutes" which 'politicians' keep inventing in order to make you poor, make them and their friends rich, and keep you in a position where you have to do everything they say, no matter how much that harms you and does away with your natural rights and freedom.

Since 1980 we sold off 4 state Govt banks and the Commonwealth. Through the fractional reserve system of banking they can create from nothing $10 worth of loans with $1 worth of deposits. Now our Govt borrows from private OS banks for money for growth and inflation. In our $1.5 trillion economy this is $90 billion pa which is created as debt by the private banking system.

Should the private banking system own our increases in productivity by virtue of creating from nothing the money to equal it?

So we now have to sell off resources cheaply just to get enough money for our country to function. Private investors want and profit and eventually take out more money than they give. We have to go back to creating our own credit or become just another poor country in the South Pacific.

@ Cohenite
Re; "a domestic budget deficit outcome increases private financial wealth"

That statement of mine is easy to prove.

The article you quoted by Anthony Cox only considered the first round of the expenditure of the $21 billion cash hand out. The $21b first round was spent into businesses and thus became the source of the incomes spent in the next round and so on almost ad infinitum.

In each round some more of the residual is bled off into savings and profits but even profits become someone else's income and are re-spent. Eventually after enough spending rounds all the $21 billion ends up as financial savings. That is simply double entry accounting.

The $21b was created by key strokes, to increase demand for goods and services in an economy that was flagging, and it ended up as increased savings in the private sector.

You need to read the MMT Primer I mentioned. It is free.

@ Rehctub and others

In a sovereign (money issuing) country a major principle is that the sovereign government can always pay the debts it incurs that are denominated in the currency it issues. It just key strokes the credits to the account of its creditors and owes the payment to the Reserve Bank which it owns on our behalf. Should or does it worry you if you owe money to yourself? No!

In Australia the government tends to borrow the money by selling bonds to the financial institutes but that is simply upper class welfare that increases the profitability of banks.

As I wrote earlier the government spends first and only taxes later to remove any excess demand. During a boom the tax may need to be at a level that produces a government surplus but in ANY situation a sovereign government surplus will reduce demand and reduce employment in the economy.

Too many people follow the foolish or deceitful views of Abbott and Hockey that sovereign government debt is no different to private debt. There are no real similarities.

Again please improve your understanding.

Hi Alan,

It would appear that you have passed the peak of your capabilities on OLO. You have been challenged and found wanting. Like a pebble doing a “Barnes Wallace” across the pond, you temporarily cause few ripples before sinking to the bottom of the pond.

When it comes to anything of substance you are more at home with the sediment at the bottom of the pond rather than demonstrating any capacity to sustain your position on the surface. Superficial, shallow, embedded in detail rather than substance and reluctant to engage in any debate that challenges you confected position.

We are indeed fortunate that you live in France, the home of those who resist all attempts to visit reality.

The questions remain, are you going to answer them?

Debt should only be attached to money that already exists. If inflation money + growth money gets created as debt,this means the more growth we have the more debt we incur.

The debt money will always exceed the growth money, since our inflation money is nearly the same our growth rate of 3%.Even if we sell off all our resources and public assets, in the long term, the debt can never be repaid.

This is why there is so much money in the gambling derivative market. Our banks have a gambling derivative exposure of $21.5 trillion which is 6 times their assets,which are our mortgages. They cannot be bailed out.

Our true Govt debt of State and Federal is more like $ 500 billion.
http://www.barnabyisright.com/

Spindoc and Arjay,
Alan's article made quite a lot of sense to anyone who has knowledge of Modern Money Theory (MMT), a theory that only started to be thoroughly understood about 15 years ago, 25 years after the conservative, Nixon, forced the world off the gold standard (MMT is basically updated Keynesian Theory and although I first read the General Theory 35 years ago it is only now that I am close to understanding most of it).

All money is now an IOU, a promise that can be exchanged for some goods or some service at a later date.

The $A currency and key stoke entries by the sovereign government have value because the sovereign and state governments will only accept payment of taxes, fines and other charges in the $A whether the moneyowed be paid by cheque, cash, or direct debit. Businesses follow the government's practice.

Bank money is all loan money which matures (goes out of existence) as the borrower repays the bank. Sure new bank IOUs are created for each new loan.

State government are like the countries of Europe which gave up using their own currencies. They have to raise or borrow what they want to spend and they have to repay what they borrow or roll the loans over.

Any currency issuing government does not have to borrow to spend. They spend first and tax to the extent necessary as dictated by the economic performance of the currency area. If the currency area is in a slump the best quick move is to provide money to people who will spend it, preferably on local products. For the longer term, the schools building program was a first class move.

For the third time in these comments, if you want to make sensible comment please read the MMT Primer at New Economic Perspectives and some of the blogs by professors Wray, Black, Hudson or the wealthy hedge fund proprietor Warren Mosler. All the contributors (bloggers) are listed on the RHS of the home page and the easy starters are the items by J D Alt.

One can only stand back and marvel at someone who can say, apparently sincerely this:

"Huge increases in valuable dividend-producing assets. Best-managed economy in the world. By a mile. Some say the best the world has ever seen."

Gobsmacking; what dividend producing assets?

Speaking of assets Foyle says:

"The $21b was created by key strokes, to increase demand for goods and services in an economy that was flagging, and it ended up as increased savings in the private sector."

That is simply not correct; read the analysis in the links provided as to where the $21 billion went; into consumerables and private debt reduction; the consumerables, in an immense irony, were supplied by imports mainly from China and the reduction of the equivalent of credit card debt allowed those reducing that debt to increase their personal debt further.

Another link to the professor Yongding analysis of China's response to the GFC provides a stark comparison of where Australia went wrong:

http://twnside.org.sg/title2/ge/ge25.pdf

China's investment was not a bread and circus donation to citizens which was so small it encouraged only non-productive consumption but a tightly regulated investment in Fixed Assets which not only provided ongoing economic stimulus but also foreign investment.

That is, in Australia there was no second round residual into the economy. The reason for that as I explain is that the products purchased were imported products. There was no direct benefit to the economy at all; in fact it had a -ve effect because it increased the interest debt.

Anyway one can only hope 7th September will resolve this mess once and for all.

Foyle totally ignores the counterfeiting derivate market which is destroying our economies. World GDP $70 trillion. World phoney derivative market $ 700 trillion. This is enough money to make every person on this planet a millionaire.

Good morning all,

Thanks for these observations.

@Chris Lewis, Spindoc, Hasbeen and Runner:

The article sought to demonstrate (a) Australia with debt below12% net and 21% gross [of GDP] does not have a debt problem, (b) powerful forces in Australia lie about this continually and (c) many people believe them.

Can you see how your responses – insisting there is a debt problem without any counter-argument to the data provided – seem to affirm points (b) and (c)?

@Sonofgloin, re: “burgeoning record breaking $300 BILLION debt …”

Do you accept that most countries now have higher liabilities than before, just as most have larger populations, larger workforces, higher output, greater wealth and more assets?

Your challenge is to show how Japan, for example, with burgeoniong record-breaking134.3% net debt has a debt problem, then the USA at 87.9%, then New Zealand at 26.4%, then Australia at 11.6%.

Yes, most nations now have higher debt. That’s what GFCs do. To the question “which nation in the world has handled the challenges of the GFC best?” how would you answer, Sonofgloin?

Re: “Young lives and hundreds of millions stolen by the Batts scheme.” This is exactly what the media want you to believe, Sonofgloin. It is simply not valid.

Did you read this?

http://blogs.crikey.com.au/pollytics/2011/04/24/the-csiro-gets-hip-to-debunking-media-hysteria/

@Chris Lewis, re: “However, I suspect that the HIP will be always noted as a major policy debacle, as suggested by other academic pieces since”

Is there any academic rebuttal to the CSIRO’s finding that the rate of fires, injuries and deaths during the HIP fell to one quarter of the rate prevailing during the Coalition period?

@AdrianM, yes we have several philosophical differences, it seems.

Taxation = punishment. Really?

If you are on $70k, Adrian, your tax impost has fallen significantly relative to those on higher incomes. Have you calculated what you are now saving?

Do you want to go back to 2007 tax rates?

@Arjay, re: “Debt should only be attached to money that already exists.”

Why only money, Arjay? Why not Debt should only be attached to assets that already exist?

Cheers,

Alan A

Hi Alan,
Taxation = punishment. Really? No it = Theft

If you are on $70k, Adrian, your tax impost has fallen significantly relative to those on higher incomes. Have you calculated what you are now saving?

Do you want to go back to 2007 tax rates?
You missed the point, I could easily earn $100K+ but intentionally choose to earn $70K so as to give the government as little as possible.
If we change the tax brackets as you suggest, then I would just adjust my earnings to suit. As being debt free I only have to pay for what I consume.

Debt should only be attached to assets that already exist?
Alan Austin,
Of course it should but in most cases it gets quickly separated from the responsibility of those who cause massive debt & then it is us, the taxpayers again to pay for it.
I say debt should be attached to those who borrow by pretending to do it on our behalf.

Arjay,
"Foyle totally ignores the counterfeiting derivate market which is destroying our economies. World GDP $70 trillion. World phoney derivative market $ 700 trillion. This is enough money to make every person on this planet a millionaire".

I started campaigning about the cost to economies of fancy derivatives when the Bulletin was still being printed. I found this comment, dated June 1998, in a letter to a now prominent former work compatriot,

"My concern these days is that nearly everywhere genuine productive activities are being undermined by the rise in power terms of basically parasitic financial institutions and the dead load that these institutions and other unnecessary service industries impose. It is a sorry reflection on all of us that banks fill so many places in the top ten companies list in Australia."

Cohenite
You completely ignore the spending flows that I mentioned. Those flows follow in sequence from the initial spend of the $21b. When the first round of spending is complete each dollar is part of either someone else's income to be re-spent or savings. Did you give any thought to how and where the leakage from those flows into profits and savings go? Part of the savings go towards paying taxes which the Reserve re-credits to the government and the private banks deduct from their customers accounts.

The banks will probably then use the residuals to purchase government bonds. The interest on those bonds is unnecessary upper class welfare. Read the theory I recommended.

The China situation was nothing like Australia's. China had plenty of scope to build things we already have, such as car factories. Australia also needed affordable housing. The currency issuing government always need some shovel ready projects and it would probably be an improvement if that could be organised directly through local government.

If we don't have a industry policy soon we will have no industry. It the car industry fails the steel industry will follow.

"Bail In" is planned for Australia. http://www.youtube.com/watch?v=VlNEAkt5Nfw The CEC have the proof and see also http://www.barnabyisright.com/ This has all been planned by the Financial Stability Board and APRA approves it.

If our banks get into trouble they will have the power to convert your savings to their shares. When banks get into trouble their shares become worthless.

Arjay,
The Australian banks were all ripe for a government take over on 15th or 16th of September 2008. It many ways it is a pity that the Federal Government didn't take that option rather than guarantee the depositors although either would have achieved the necessary goal.

As I understand that aim of the bail-in laws is to put people and companies who buy of bank bond in the same position as shareholders in the event of a bank failure. I am not sure that that puts depositors at any disadvantage.

Chifley lost an election when Menzies opposed his plans to privatise the banks. Immediately after winning the election Menzies took the next best step and regulated the banks tightly.

Howard started the process of deregulation with the Campbell Inquiry and followed that up later with the Wallis Inquiry. Fortunately in Australia the deregulation didn't go as far as it did in the USA and some other countries.

From 1998 Howard ignored the advice of the then Governor of the Reserve Bank and the G7 finance ministers. See the press release of 31 October 1998.

just watching the cec report
interesting points made re bail-in..plus the eposit insurance sceme
[99percent of deposits..protected[up to 250,000]..

protected how?
up to 50%..lol
if you dont 'get it;now
you wont miss it then..vote cec

went to web site
http://www.cecaust.com.au/
but only showing cec from last week
http://vimeo.com/72081635

trust govt?
http://investmentwatchblog.com/trust-government-not-after-watching-this/

who is profiteering from all this terror?
http://www.alternet.org/civil-liberties/5-companies-make-money-keeping-americans-terrified-terror-attacks

arming egypt
http://www.globalpost.com/dispatch/news/regions/americas/united-states/130816/top-10-american-corporations-egypt-military-us-aid

avoid paper gold
http://investmentwatchblog.com/gold-silver-demand-to-overwhelm-manipulation-andy-hoffman/
http://blogs.marketwatch.com/thetell/2013/08/16/golds-wild-ride-whats-next-for-the-yellow-metal/

gold or not
http://www.zerohedge.com/news/2013-08-16/gold-or-tungsten-heres-how-know

first blush..of hyper inflation?
http://www.blacklistednews.com/What_Is_Going_To_Happen_If_Interest_Rates_Continue_To_Rise_Rapidly%3F/28164/0/38/38/Y/M.html

The yield on 10 year U.S. Treasuries is up nearly 120 basis points since the beginning of May, and almost everyone on Wall Street seems convinced that it is going to go much higher.
http://intellihub.com/2013/08/16/the-steps-to-a-free-society-4-ways-to-wake-people-up/

the iceland hero
http://www.activistpost.com/2013/08/the-man-who-changed-iceland-message-for.html
http://investmentwatchblog.com/warning-george-soros-is-putting-a-put-call-on-the-sp-500-betting-that-its-going-to-collapse/
http://investmentwatchblog.com/warning-the-countdown-to-the-economic-collapse-has-begun-everything-is-being-put-into-place-for-the-fierce-storm-that-is-approaching/

http://investmentwatchblog.com/game-over-the-world-is-a-stage-full-of-puppets-paid-actors/

faulse flag$?
http://12160.info/profiles/blog/show?id=2649739%3ABlogPost%3A1289950&xgs=1&xg_source=msg_share_post
http://www.redressonline.com/2013/08/israels-foul-mouthed-pr-genius-and-its-slick-army-bloggers/

http://rinf.com/alt-news/breaking-news/stock-market-crash-just-ahead-2/60011/
http://www.realclearpolitics.com/articles/2013/08/16/elite_ignorance_119616.html

Just to put things into perspective, a quote or 2 from the Business section of the Philippine Daily Inquirer, 17 Aug.2013, "Gov't debt rose to P5.45T in end-June", by Michelle V. Remo:

"Govt documents showed that the outstanding debt amounted to P5.45 trillion as of the end of June, up 6.9% from P5.1 trillion a year ago.

If the estimated 94 million Filipinos would be made to equally share the burden of settling the gov't's outstanding debt, each would have to shoulder about P58,000

With the economy's robust expansion and what the DOF said was a modest rise in govt borrowings, the proportion of the outstanding debt to the country's gross domestic product by the end of this year is expected to fall to 48.7%."

Count your blessings.

"You completely ignore the spending flows that I mentioned"

No I didn't Foyle because there isn't any; based on Leigh's study of the House-hold Assistance $21 billion GFC package that $21 billion was spent on the following:

Spent 40.5%
Saved 24.0%
Paid off debt 35.5%

The 40.5 was mainly spent on imported manufacturing goods thus increasing the negative balance of trade; the 35.5 debt reduction was mainly small debt and saving was into small deposits which are not used for "residual" or "leakage" flow-ons through the economy.

There was no lasting economic benefit from the $21 billion which set the expenditure tone for the rest of Rudd government. There has been no lasting infrastructure benefit from the $260 billion debt. Arguably Rudd and Swan's stimulus exacerbated Australia's economy rather than assisting it.

The main purchasers of government bonds are super funds and self-funded retirees not banks.

Debt is no a bad thing if worthwhile, ongoing projects are the result. I have challenged AA to provide an example of a lasting benefit from Rudd's deficiet, perhaps you can help him.

I wrote:

>> Wouldn’t a big reduction in immigration actually allow us much more freedom to build other sorts of infrastructure? <<

Alan, you replied:

>> Not sure. The argument regarding immigration and population is for another forum. But a steadily growing population is certainly not inconsistent with increasing prosperity and standard of living. It is a vital part of being a good global citizen. <<

With great respect, I find it very hard to reconcile anyone having a detailed knowledge of economics and finances as you do, but not having a feeling about this enormously important, or at least potentially enormously important, factor.

And I would most definitely say that this factor sits very strongly within this debate and is not something that should be excluded from it and discussed elsewhere instead.

Surely one of the most fundamental basic tenets of economics, and all its fiscal factors, is to be very mindful of supply and demand. As I have said many times on this forum, it is crazy that so many economists seem to be blind to, or just blithely accepting of, the fact that we have very rapidly increasing demand for just about everything, with no end in sight…. and that all our efforts are being put into chasing the tail of this demand by working only on increasing supply.

This ever-increasing demand is created by high population growth, which is due 60+% to immigration. It is the single most adjustable economic/fiscal factor!

continued

I wrote:

>> as we come off the end of the mining boom, discontent in the general community is likely to increase <<

Alan, you replied:

<< The mining boom has not ended, Ludwig. It is transitioning from the investment to the production phase. >>

No it hasn’t ended. I didn’t say it had. But as it winds down, or changes into a different form with a lower overall profit intake and employment rate, discontent will grow and there will be increased pressure on our government to spend up. Debt repayments may take a lower priority, or indeed further borrowing may result.

In short, the outlook is not good for addressing our debt, which flies in the face of the IMF anticipated rate of repayment.

In short, the outlook is not good for addressing our debt, which flies in the face of the IMF anticipated rate of repayment.
Ludwig,
That is the main reason for getting a Coalition Government back in the seat. They'll weather it by slowly re-introducing economic sense but unfortunately it'll take longer than Labor took to ruin it all.

Greetings all,

Fascinating discussion.

@Cohenite, re: “There was no lasting economic benefit from the $21 billion which set the expenditure tone for the rest of Rudd government.”

Do you accept Australia’s economy was 12th in the world in 2007, behind the USA, Switzerland, the Netherlands, Denmark, Japan, Norway, Singapore, Finland, Iceland, Taiwan and Luxembourg?

Is it is number one now? If not, which is?

Is Australia’s economy today healthier than any economy the world has ever seen? If not, which is?

Will this not yield lasting benefits?

Re: “There has been no lasting infrastructure benefit from the $260 billion debt. Arguably Rudd and Swan's stimulus exacerbated Australia's economy rather than assisting it.”

How do you arrive at that, Anthony?

Australia’s stocks of roads, railways, energy and water facilities, schools, insulation, social housing, defence housing and other public assets have increased substantially. No?

Are these are not lasting? Or not infrastructure? Or not benefits?

Seems a nonsensical claim, Anthony.

@Ludwig, Re: “as it [mining boom] winds down, or changes into a different form with a lower overall profit intake and employment rate, discontent will grow …”

Why? Demand, trade and profits are all likely continue for at least 60 years.

Discontent results from widespread malicious misinformation, Ludwig. I can remember when the Coalition and the media condemned Labor relentlessly for years for daring to open trade with China. Similar misinformation and similar discontent back then. No?

This forum deals frequently with the malicious lies from the Coalition and the media precisely to reduce widespread needless discontent.

People well informed about the economy have no reason for discontent.

Re: “… and there will be increased pressure on our government to spend up.”

Australia has enormous capacity yet to spend, Ludwig. You could triple your gross debt tomorrow and still be better placed than Canada, Germany, the UK, the USA, France and Singapore. No?

Re: “In short, the outlook is not good for addressing our debt, which flies in the face of the IMF anticipated rate of repayment.”

The data simply does not support this pessimism, Ludwig.

Cheers,

Alan A

Cohenite,
The figures you quote just prove my point.

Spent 40.5%
Saved 24.0%
Paid off debt 35.5%

There is no distinction between savings and paying off debt as neither individuals nor companies can pay off debt except from savings. Just assuming that the 40% spent was on imports then the current account deficit increased by $8.5billion. Savings and debt reduction was $12.5B (all savings in any economic sense). The sum of $8.5B and $12.5B is $21B which is the amount the government deficit increased by.

If instead the assumption is that the 40.5% was spent on domestic goods, with no leakage to imports, then the all the domestic expenditure would leak from the flows to savings and instead of the financial saving only increasing by $12.5B the financial savings of the Australian private sector would have been the whole extent of the $21.0B increase in the budget deficit. If the $8.5Bspent on exports was spent, for simplicity's sake, on Korean cars then the flows to saving from that money would occur in Korea.

Look at the situation from a government surplus example. Had a government decided to increase the income tax take by $21B would not the whole of that $21B had to come from taxpayers (private sector)savings?

The main point I made is that Abbott claims the Coalition would run a 1% surplus say . If he does and the current account deficit remains at 3% of GDP then the private sector annual financial savings will drop by 4% of GDP. That is why when Howard reduced the deficit the private sector debt increased so substantially.

This is one of the easiest parts of Modern Money Theory to prove. Read the blogs I recommended.

Your source proved my case without realising he was doing so.

This puts it clearly:

"After the 2010 election, prime minister Julia Gillard expanded Kevin Rudd's agenda. The people-smuggling industry, climate change complex, trade union movement and public service, which expanded by 13,000 full-time positions, enjoyed enhanced patronage at great expense to the wider population.

Indeed, to pay for these ideological flights of fancy, Australians have picked up an open-ended tab currently running at more than $13,000 per person. That's from zero in six years. For a family of four, this is equivalent to an unwanted debt of more than $52,000 with little tangible to offset for it.

True, this borrowing is on the never-never. And yes, Australia's debt-to-GDP ratio is still low when judged by the standards of near-bankrupt economies. But it is real and growing at a disturbing rate. So far, the government has demonstrated the same nonchalance to debt shown by countries now on the brink and, while Labor may promise a surplus, this time in four years, you wouldn't bet on it. We've been here before. The government may blame China, the decline in our terms of trade, the high Australian dollar or poor Treasury modelling. But a predicted surplus of $1.5 billion that turns into a $30bn deficit is no near miss. It reflects a rash government that leaves no margin for error. That's where the fault lies."

Alan,

A $52 000 debt for the average family of four in just 6 years is spending of crisis proportions. The GFC could just have well been fought off for a fraction of this.

Hi Shadow Minister,

That quote sounds like something The Australian would run. The same elements of reality. The same distortions. The same truths assiduously avoided. And the same blatant lies.

There is no truth or wisdom to be found in The Australian, SM.

Re: “A $52 000 debt for the average family of four in just 6 years is spending of crisis proportions.”

Not at all. First up, the numbers are not correct. Where did you get them? The Australian?

The actual figure is just over $12,100. See the IMF data here:

http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/weorept.aspx?pr.x=45&pr.y=10&sy=2007&ey=2013&scsm=1&ssd=1&sort=country&ds=.&br=1&c=193&s=GGXWDN&grp=0&a=

Second, even if $52,000 were true, and if we allow 20 years for the four individuals to pay it off, that’s only a principal of $650 a year each.

What will be the income from all the productive assets purchased with the $52,000? More or less than $650 per year each?

What would the payments be over the same period if Australia’s unemployment had doubled, and if growth had collapsed?

This is precisely what happened in many countries which applied strategies with lower stimulus spending than Australia’s. No?

Re: “The GFC could just have well been fought off for a fraction of this.”

No. The opposite is true. Every developed country in the world spent less than Australia. Can you name any country which emerged as well?

Can you name any country which got the quantum of stimulus spending right?

Re, “spending of crisis proportions.”

Australia has net debt at 11.6%. Scheduled by the IMF to rise slightly, then fall to 9.7% within five years.

Do you think this is a crisis, SM? Really?

So how would you describe New Zealand’s at 26.4%?

What descriptor for Canada at 34.6%?

How would you characterise Germany at 57.2%

What terminology for the UK and the USA – both above 80%?

Do you have any words left for Japan at 134%?

Australia is simply not in “crisis” at 11.6%, SM. The only people in the world who think it is are readers duped by the Murdoch media in Australia.

Cheers,

AA

Secondly with the comment:

"Do you accept Australia’s economy was 12th in the world in 2007, behind the USA, Switzerland, the Netherlands, Denmark, Japan, Norway, Singapore, Finland, Iceland, Taiwan and Luxembourg?"

The answer is NO. I have looked at various criteria, and the countries mentioned certainly don't have better economic measures.

"Is it is number one now? If not, which is?" Norway, Singapore and Taiwan are all doing better.

"Is Australia’s economy today healthier than any economy the world has ever seen? If not, which is?" No, it was healthier prior to 2008.

"Australia’s stocks of roads, railways, energy and water facilities, schools, insulation, social housing, defense housing and other public assets have increased substantially?"

It has increased but only minimally, and certainly no where near $260bn worth.

It's too late, Alan. The LNP has run around for months screaming the sky is falling in, equating us to Greece and Cyprus, and it appears to have been successful while undermining confidence with the aid of the Murdoch press.

Unless Labor squares off on this directly and hits the LNP head-on over the economy in this last couple of weeks it won't fly. Demonstrating that debt management is under control and that unneeded "cuts, cuts, cuts" are the LNP's solution is what is required at saturation pitch.

That the LNP says it has all its costing and budgeting in place but refuses to divulge this until election week, says it all. Meanwhile it refuses any Treasury scrutiny claiming some "prominent Australians" will do this better whilst maintaining that everyone's going to be a winner.

This is not an election, it's a heist.

Luciferase,
You and Alan Austin are among the few on this discussion who understand what has happened since 1996 and particularly over the last six years.

In Summary;
1. Howard sold public assets and managed to increase private sector debt substantially.

2. Over his time as Treasurer to Fraser, and as PM, Howard reduced financial system regulation (first strengthened by Menzies) and even ignored the requests, from 1998, of Ian Macfarlane (then Reserve Governor) to retighten the system. The G7 press release of 31 October 1998 made similar suggestions to all western political leaders.

3. Criminal 'liars' loans' in the USA and elsewhere, and speculation in idiotic derivatives, causes a bubble which, as always, burst, leading to what is known as the GFC. Offering a liars' loan to a economic illiterate poor person was like showing a bucket of money to a state treasurer.

3. The Gang of Four (Gillard, Tanner, Swan and Rudd) plus the Reserve Bank used updated Keynesian policies to save Australia from the GFC consequences. I listed the four politicians in that order as that is how I personally rank their competence.

4. Abbott and Hockey have campaigned dishonestly on the budget position for three years and the Australian public, especially the 20-30% in the middle of the income and wealth and voting distribution do not have the knowledge to understand what has been happened. As A UK politician once said, "Conservatives mislead the lower classes to vote against their own best interests."

So it looks like we are in for another round of bubble and bust under neo-liberal nonsense! A Lucky Country? Not in MHO!

I wrote:

>> as it [mining boom] winds down, or changes into a different form with a lower overall profit intake and employment rate, discontent will grow … <<

Alan, you responded:

<< Why? Demand, trade and profits are all likely continue for at least 60 years. The data simply does not support this pessimism, Ludwig. >>

But history has shown that even small downturns in profits and employment rate cause considerable consternation and have our government jumping up and down trying to stimulate the whole caboodle.

Notwithstanding some terrible mismanagement, if we can accrue debt during the best of times, we really are not likely to alleviate that debt when things pull back even just a little bit from the best of times.

Our political reality is that we have two parties competing to show who can create the most meaningful short-term gains. It is actually not in their interests to concentrate on the bigger picture. If they fail to impress in the short term, they will be out on their ear at the next election!

The whole system is strongly geared towards the short term and hence towards spending big and borrowing in order to do so. This is the general pattern in democracies the world over, is it not?

<< The data simply does not support this pessimism, Ludwig. >>

Well I certainly hope you are right Alan. But I can’t see it.

continued

Alan, you wrote:

<< Australia has enormous capacity yet to spend, Ludwig. You could triple your gross debt tomorrow and still be better placed than Canada, Germany, the UK, the USA, France and Singapore. No? >>

Yes, we have enormous capacity to spend…. if we are not worried about accruing a whole lot more debt… and tying ourselves into eternal big interest payments and just about no chance of getting out of the debt spiral.

But if we want to balance the books, or keep our debt small and manageable, we have scant little capacity to spend. Certainly we have considerably less capacity to spend if we want to do this than our current magnitude of spending.

And this is where our enormous immigration rate comes right into the picture. If want to moderate our national spending rate, then we really do need to moderate the rate of increase in the demand for everything.

We absolutely need to look at the demand side of the equation as well as the supply side…. and to STOP just leaving the (rapidly increasing with no end in sight) demand side completely out of the discussion!

I put it to you Alan that a much-reduced immigration intake should go hand in hand with a plan to reduce debt.

Indeed, the concept of achieving a sustainable Australia needs to go hand in hand with our whole economic and financial strategy.

BTW, it is great to see an article author come back and fully partake in the discussion. And in such a patient and polite manner. This doesn’t happen often enough on OLO!

Australia may well have a low debt : GDP ration compared to many other countries - its good to know the facts.

It would also be good to know why Australia has had to borrow so much when we are supposed to have been living in a 'mining boom' ...

How come the overseas companies that made super profits are paying next to no 'minerals resource rent tax' ? And how come our banks have been propped up by government, enabling record profits to be extracted from ordinary citizens ?

How much of the "credit-card debt" has been spent of welfare / subsidies as against expenditure on infrastructure ?

Apart from some school halls and pink bats in a few thousand homes, our highways are third world; our railway system is broken (a single track between Sydney and Brisbane ..) yet we dream, of a 'very fast train' ... and we've been talking about a 2nd Sydney airport for 30 years !!

I borrowed to buy a house, but damned if I would continue borrowing to meet my normal living costs.

AA,

Maths not your strong point I see. The figure you quote is per person, and is out of date I used $13000 pp. To get to the average family you multiply by 4.

1) Unless you were planning to use child labour, the pay back time would be significantly longer.

2) How much income do you get from the $9bn cash hand out, the pink batts, or the vastly over priced school halls? The income from this huge expenditure is virtually zero.

3) Unemployment doubled? unlikely. The school halls pushed up construction costs due to the lack of labor, and so the stimulus was largely wasted.

4) "Australia has net debt at 11.6%. Scheduled by the IMF to rise slightly, then fall to 9.7% within five years." Only because Labor will be in opposition. With Labor in government, the debt has continually risen in spite of record revenues. The crisis is the inability of labor to reign in spending which threatens our AAA rating.

5) That other countries are in a worse condition, is like the man with one eye compared to the blind. It is still better to have both eyes.

Greetings all,

@Ludwig, re: “if we can accrue debt during the best of times, we really are not likely to alleviate that debt when things pull back even just a little bit from the best of times.”

What are the best and worst of times, Ludwig?

Was the boom from 2000 to 2007 the best of times when Australia failed dismally to save income generated – then 2008 onwards the worst of times since the Great Depression?

Re: “we have two parties competing to show who can create the most meaningful short-term gains.”

Really? Would you agree the present Government has pursued long-term national benefit at the expense of popularity and electoral success? It certainly looks like being thrown out on its ear – despite sound management.

@Shadow Minister, yes, Norway, Singapore and Taiwan are in the top twenty. Norway and Singapore are in the top ten, along with Switzerland, Israel and Canada. Taiwan isn’t.

All are well behind Australia.

Norway experienced four negative quarters through the GFC – to Australia’s one; and five negative quarters since – to Australia’s one.

Norway currently has GDP growth at an annual rate of negative 2.7%. Australia has been positive since the devastating floods in 2011.

Norway’s taxation rates is 42.9% – to Australia’s 25.6% [OECD figures]. Inflation is double its interest rate. Norway ranks 31st on economic freedom by Heritage Foundation to Australia’s 3rd.

Singapore copped four consecutive negative quarters in 2009/10 – three of them greater than 8%! Then five negative quarters since 2010.

Along with most of the rest of the world, Singapore’s jobless virtually doubled through 2009 from 1.7% to 3.3%. Australia's moved up from 4.5% to 5.8%.

Singapore is doing worse on GDP per capita, labour costs, retail sales year on year, and interest rates – with a puny 0.03% offering no return on savings. Much worse on productivity, with seven out of the last nine quarters all negative.

Singapore also fails on economic contribution to the world. Australia, for example, resettles around 30,000 refugees each year. Singapore around none.

Taiwan lags even further.

Cheers,

Alan A

Hi Alan,

Seen the latest polls. In all the marginal seats apparently the libs lead them all. Both lab and lib msrginal. What is more significant is that in each of the major cities the seats polled show 2 party preferred 40:60. Ie Corangamite, in Melbourne. Forde in Brisbane, Bradbury's and Bowens in Sydney. Why would the other metro sests be any different. Now do the sums. Oh Dobell is similar.

How dumb were labour to switch back to Rudd.

His polling was always going to fall back to where it was before Gillard knifed him. You know after Gillard knifed him it took 3 months for her polling to reflect anger at her. The same is now happening to Rudd. Lab primary vote will be at 30% within days if it' s not there already. But here is the killer. For months now polsters have been saying there is a relatively large number of disengaged who refuse to answer their polls. The leftie media are now claiming they are mostly young people who haven't been interested. Well Alan I reckon they are people so angry with lab that they have their cricket bats lifted and their teeth gritted in anger waiting for election day.

Enjoy

Keith.

Shadow Minister,
Your points 2, 3 and 4 make little sense.

2) "How much income do you get from the $9bn cash hand out ...."
My comment;
How much income does who get? When each recipient spends, the next business in line gets income some of which goes to pay labour and other costs and some goes to savings. In the third round the same thing happens and after enough rounds the whole cash hand out ended up in private sector savings probably paying off debts incurred by that sector due to the Howard surpluses. Expenditure on imports are lost from the Australian economy.

3) "Unemployment doubled? unlikely. The school halls pushed up construction costs due to the lack of labour, and so the stimulus was largely wasted."
My comment;
The school halls increased employment and savings in every industry that supplied materials for the projects. The costs increased because under our federal system the states diverted some of the money to pay their own bills.

4) "Australia has net debt at 11.6%. Scheduled by the IMF to rise slightly, then fall to 9.7% within five years. Only because Labor will be in opposition."
My Comment;
Over six years, all of the total government deficits together, over and above that necessary to compensate for the six year deficiency in the current account, ended up in the savings and debt reductions of the private sector. Over any period;
Gov. sector deficit = Priv. sector surplus + current account deficit

Read up on sectoral balances at the Modern Money Theory primer I have recommended several times.

Ratings by agencies have no meaning for a money issuing (sovereign) government.

<< What are the best and worst of times, Ludwig? >>

Alan, according to economists, politicians and their ilk, the best of times are when we have maximum export income, low unemployment and high economic growth.

When this falters, even slightly, there is increased pressure on government to spend, spend, spend, in order to stimulate the economy and placate increasing unrest, is there not?

Things don’t have to be particularly bad in order for there to be a whole lot of pressure on government to increase borrowing…. and with their inherent short-term outlook, most governments readily kowtow to this.

<< Would you agree the present Government has pursued long-term national benefit at the expense of popularity and electoral success? >>

YES!

And look what’s happening to them – they’re about to be thrown out on their ear!

Notwithstanding some considerable degree of mismanagement, their very desire to work towards long-term goals has not gone down well with the votership.

So as I say, it points strongly towards governments, of any persuasion, being strongly inclined to strive for short-term achievements, and that those who buck this trend pay for it, big time!

Let’s face it; even without the pink batts debacle, border-protection corruption and other misdemeanours of the Rudd/Gillard government, their long-term strategies would not have gone down well.

So given this inherent huge problem with our political system, coupled with the huge problem of our political system: the worship of continuous growth, whereby we have a rapidly increasing demand for everything - how on earth are we ever going to get into a position where we can actually reduce expenditure and increase debt repayments?

Hi Ludwig,

Thanks for your responses.

Re: “Alan, according to economists, politicians and their ilk, the best of times are when we have maximum export income, low unemployment and high economic growth.”

Correct.

Re: “When this falters, there is increased pressure on government to spend, spend, spend, in order to stimulate the economy and placate increasing unrest, is there not?”

Not really. The Government’s stimulus spending decisions were not responding to community unrest. The media was actually demanding that the spending stop. The Government did what it considered right, regardless of the clamour of the malicious media.

Re: “Notwithstanding some considerable degree of mismanagement, their very desire to work towards long-term goals has not gone down well with the votership.”

First, there was little actual mismanagement. Much baseless media condemnation.

Second, voters don't respond to what the Government is doing. Voters respond to what the media declares the Government is doing. The media in Australia, as has been proven abundantly, are determined serial liars.

Re: “So as I say, it points strongly towards governments, of any persuasion, being inclined to strive for short-term achievements, and that those who buck this trend pay for it, big time!”

No. It points to governments having to do what Rupert Murdoch and Gina Rinehart tell them to do regardless of the interests of the nation – or pay for it big time. We are now observing Mr Abbott kowtowing to them both.

Re: “Let’s face it; even without the pink batts debacle, border-protection corruption and other misdemeanours of the Rudd/Gillard government, their long-term strategies would not have gone down well.”

There was no pink batts debacle, Ludwig. 100% media fabrication. See here:

http://www.independentaustralia.net/2013/politics/we-really-must-talk-about-the-pink-batts/

The border protection “corruption” was the result of the Opposition and minor parties blocking the Government’s intentions relentlessly. No?

Re: “So given this inherent huge problem with our political system … how on earth are we ever going to get into a position where we can actually reduce expenditure and increase debt repayments?”

Australia is doomed, Ludwig, as long as the media maintains the destructive control it now exerts.

Cheers,

AA

Alan you can be quite insensitive at times. The media did not fabricate the deaths of four young men during the pink bats fiasco. The coroner laid that at Rudds door.

http://undergrounddocumentaries.com/the-true-cost-of-health-care-full-lecture/

abc FACT* check
http://www.abc.net.au/news/2013-08-19/joe-hockey-exaggerates-debt-figures/4897264

Debt going to $400 billion'

On Mr Hockey's claim that Labor's legacy will be debt "going to $400 billion", ABC Fact Check consulted the Treasury's Pre-Election Economic and Fiscal Outlook released on August 13.

It contains a figure almost that large, $370 billion, which represents Treasury's debt projection at the end of the four-year forward estimates period. That is, it is the projected debt for 2016-17.

The Treasury projection Mr Hockey chose to describe Labor's legacy was its figure for gross debt.

The $370 billion figure in this year's PEFO refers to Commonwealth Government Securities (CGS), or government bonds, on issue. This is what economists and governments refer to as gross debt.

In contrast, the figure Mr Hockey chose to describe the Coalition’s legacy was its figure for net assets – that is, assets less borrowings.

To make a comparison using like-for-like, Mr Hockey should have used Treasury’s projection for net debt – that is, borrowings less assets.

For the 2013-14 year, Treasury forecasts net debt of $184 billion. At the end of the forward estimates period in 2016-17, it projects net debt of $217 billion.

We left the country with net assets of $70 billion, where if we are elected on the 7th of September we inherit debt going to $400 billion.
Joe Hockey

To make a correct claim, Mr Hockey could have said: We left the country with net assets of $31 billion where if we are elected on the 7th of September we inherit net debt of $184 billion going to $217 billion.

When the Coalition left office in 2007, gross debt was $59 billion (and was more than outweighed by government assets, resulting in net assets of $31 billion). Currently, gross debt is $268 billion.

Another correct claim Mr Hockey could have made is: We left the country with gross debt of $59 billion where if we are elected on the 7th of September we inherit gross debt of $268 billion going to $370 billion.

Either way, the change is less dramatic than Mr Hockey claims.

http://www.abc.net.au/news/2013-08-19/joe-hockey-exaggerates-debt-figures/4897264

http://undergrounddocumentaries.com/fiat-empire-full-version/
http://12160.info/main/mobilepage/desktopMode?target=%2Fxn%2Fdetail%2F2649739%3ABlogPost%3A1290901
http://www.moneynews.com/FinanceNews/Detroit-banks-derivatives-swaps/2013/08/16/id/520795?s=al&promo_code=148D4-1

http://undergrounddocumentaries.com/making-a-killing-the-untold-story-of-psychotropic-drugging-full-version/

Foyle,

Your trite explanation of Keynesian theory is ignorant that of the money dished out a large portion was put in savings not spent, and the vast majority of the rest was spent on electronics with the money flowing overseas. The estimate of the value of increased economic activity was about 1% of the cash doled out. i.e. about $8.9bn of the $9bn was wasted.

Similarly investigation of the school halls debacle showed that the buildings done for public schools cost about 2x what equivalent buildings done for private schools cost, that most buildings were far from being top priority issues for the schools, and that the resultant shortage of construction labor for non government work, meant that the scheme was way beyond what was required to save jobs and productive construction was delayed.

Finally, your comment on sovereign money issuing governments has been proven wrong many times in pre war Germany, Zimbabwe and Greece. This leads me to believe that you have no economic qualifications whatsoever. I would recommend you study the economics of Keynes and Friedman before some of the "fringe" economists.

AA,

It could be easily argued, especially in hindsight that the 2007 ranking of Australia 12th behind the USA, Switzerland, the Netherlands, Denmark, Japan, Norway, Singapore, Finland, Iceland, Taiwan and Luxembourg was a serious miscalculation using the wrong measures, and that Australia's economy and economic management based on low debt, strict banking regulations, healthy balance of trade, and showing near record consistent growth for more than a decade, was far more secure and stable, than any of the other supposedly better countries.

Greetings again,

@Imajulianutter, re: “The media did not fabricate the deaths of four young men during the pink bats fiasco.”

First, it was not a fiasco. Refer:

http://www.independentaustralia.net/2013/politics/we-really-must-talk-about-the-pink-batts/

Second, the workers' deaths are raised by critics of the Government with no interest in truth. They use those tragic accidents for cynical political gain.

The truth is that the insulation industry rate of house fires, accidents and deaths DROPPED during the Rudd stimulus period to ONE QUARTER of the rate during the Howard years.

Refer:

http://blogs.crikey.com.au/pollytics/2010/02/24/did-the-insulation-program-actually-reduce-fire-risk/

Total deaths by electrocution during the first Rudd period was about HALF the rate that prevailed during the Howard years.

Re: “The coroner laid that at Rudds door.”

No. The opposite is true, Keith.

The Coroner noted the obvious fact that accidents would not have occurred if the rapid-rate scheme had not been implemented.

But culpability for the deaths, he made abundantly clear, was shared three ways.

1. The state authorities:

“Under our constitutional arrangements, workplace health and safety is primarily within the domain of State Governments.”

2. The companies:

“That the employers of the three people whose deaths were investigated by this inquest failed to adequately discharge their responsibilities is evidenced by their conviction of offences under electrical and work-place safety legislation.”

3. In one case, the victim:

“Despite being directed not to use metal staples Mitchell chose to do so and died as a direct result.”

Please read the Coroner’s report, Keith, not Australia's lying media.

@Shadow Minister, re: “It could be easily argued … that the 2007 ranking of Australia 12th behind the USA, Switzerland, the Netherlands, Denmark, Japan, Norway, Singapore, Finland, Iceland, Taiwan and Luxembourg was a serious miscalculation using the wrong measures ...”

Not at all, SM. Appropriate criteria were used: growth, employment, productivity, balance of trade, interest rates and taxation rates.

The period 1998 to 2007 was boom times for the Western world. No-one regards that as a period of sound economic management in Australia – except the Coalition and the mendacious media. Australia started 6th-ranked in the mid 1990s but slipped back to 12th by 2007.

Cheers,

AA

Out of the estimated $1.5 quadrillion dollars’ worth of derivatives on the planet right now, roughly $500 trillion is specifically related to interest rates.
http://etfdailynews.com/2013/08/19/this-could-trigger-a-major-sell-off-for-the-stock-market/
http://www.zerohedge.com/news/2013-08-19/indian-rupee-collapses-worst-day-20-years

http://www.blacklistednews.com/NAFTA_on_Steroids%3A_The_TransPacific_Partnership_and_Global_Neoliberalism/28227/0/0/0/Y/M.html

http://www.youtube.com/watch?v=-d0N8UdrbDE

<< There was no pink batts debacle, Ludwig. 100% media fabrication >>

Alright Alan, let’s presume that you are right. I am pleased to have read your assessment of this, which certainly puts it in a very different light to what I’ve heard in the media, or in any prior analysis.

But you surely can’t get Rudd off the hook for his amazing stuff-up with the corruption of border-protection and reinitiation of onshore asylum seeking, or for his or Gillard’s ineptitude in failing to clamp down on it once it had become obvious that the number of arrivals had greatly increased and was set to accelerate.

<< Australia is doomed, Ludwig, as long as the media maintains the destructive control it now exerts. >>

I do indeed share your concerns, at least to a fair extent, about the media.

But we do have an abundance of political analysis going on constantly, not least on the ABC and SBS…. which begs the question; why have I not heard the pink batts story in anything like the way that you have expressed it in your IA article? Surely not ALL of our media is highly biased!

You support the overall aim of the government to reduce emissions, which they attempted to tackle in one way via the home insulation pink batts scheme. But you seem to have no feeling at all about our ridiculously high immigration rate.

Well, surely the two are at complete odds! Pink batts, the carbon tax, solar panel rebates, etc, etc are all good aspects of a long-term strategy to reduce our national emissions. But we have an ever-rapidly increasing number of emitters!

These programs might reduce the average per-capita rate of CO2 emissions somewhat, but the number of ‘capitas’ is hooting ahead at a much greater rate!

So this is another huge reason for us to pull right back on our immigration intake.

continued

As I said to you previously, a much lower immigration rate should be seen as an essential move in the interests of reducing debt and in the management of our whole national financial and economic paradigm.

Well, it should also be an essential move in line with this government’s push to reduce emissions, be climate-change positive, and develop alternative energy sources to fossil fuels.

Alan, you support Labor. Well, so do I ahead of the Coalition. But only just.

Both really are terribly remiss, first and foremostly because of their worship of continuous rapid growth of which they uphold very high immigration as the fundamental driver. Labor is just so incredibly contradictory when it comes to working on long-term goals! Which is only slightly better than the Coalition which seems to have scant little interest in the longer term at all!

Funny,

I recall the coroner's report being particularly scathing of the Labor government fast tracking the scheme in spite of numerous warnings of the predictable consequences.

AA,

As far as the economic parameters were used, it depends largely on the weightings. Most Australian economists regard 1996-2007 as a relatively sound economic management compared to the shambles from 2007 to today. As far as the voting public is concerned the vast majority consider the coalition far more competent economically.

Whine Swan is widely regarded as a joke who produced huge deficits even while supposedly the economy was growing.

Tonight's debate will be interesting. Last week's debate was declared a draw, even though Labor's vote plummeted subsequently.

Greetings again,

@Ludwig, re: “you surely can’t get Rudd off the hook for his amazing stuff-up with the corruption of border-protection”

Not sure. Whatever Labor tried – under Mr Rudd, then Ms Gillard, now Mr Rudd again – was blocked by the Coalition on the right and the Greens on the left. We will never know how their policies may have worked in practice.

Re: “failing to clamp down on it once it had become obvious that the number of arrivals had greatly increased”

Hard to say, Ludwig. Their policies were thwarted at every turn. This seems one of few failures by Labor to get their program through the hung Parliament. Tragically, hundreds of lives were lost as result.

Whether we blame Labor or the Opposition or the Greens depends on our allegiances, it seems.

Re: “why have I not heard the pink batts story in anything like the way that you have expressed it in your IA article? Surely not ALL of our media is highly biased!”

There are several similar analyses in the aternative media. For example:

http://inside.org.au/a-mess-a-shambles-a-disaster/

No, you won’t find this analysis in the mainstream media, which includes the ABC these days. The result of Rupert Murdoch’s dominance is that no journalist wanting a career in jourmalism will veer away from the official pro-Coalition line, however far this veers away from the truth.

Re: “you seem to have no feeling at all about our ridiculously high immigration rate.”

No, Australia’s immigration rate is relatively low. Has frequently been much higher.

As long as it’s balanced – which seems the case – Australia can sustain this rate.

@Shadow Minister, re: “Funny, I recall the coroner's report being particularly scathing of the Labor government fast tracking the scheme in spite of numerous warnings of the predictable consequences.”

Is this because you recall reading the actual report, SM? Or do you recall reading fictitious news reports in the Murdoch media?

Remember, SM, they distort, fabricate and lie. If you read them, you will end up believing the opposite of the truth.

Not much of a life, really.

Cheers,

Alan

http://investmentwatchblog.com/when-qe-infinity-turns-into-a-pipedream-hot-money-evaporates-rout-follows-see-emerging-markets/

now..Consider the following.

The Fed has only $50 billion or so in capital. With the Fed now owning over 30% of the ten-year market, every time bonds drop and yields rise, the Fed will erase..ALL of this capital.

Indeed, Mark Hussman of Hussman Funds notes that even a 100 basis point increase in yields will wipe out the Fed’s capital six times over.

And therein lies the core problem: by expanding its balance sheet so dramatically, the Fed has in effect spread the financial crisis from a private banking level to a public/ sovereign level.

Put another way,..when the next Crisis hits, it will not be Wall Street banks that go bust..but the Fed itself.

Anyone who believes the Fed can “exit” this position is delusional. The single biggest trade for the last four years has been frontrunning the Fed’s asset purchases...When the Fed reverses course and begins selling assets,..everyone will dump Treasuries in anticipation.

Indeed, we are already witnessing this with foreign nations selling Treasuries in record amounts in June when the Fed first hinted at tapering its QE programs. Japan and China alone dumped $40 billion that month (of a total $66 billion sold by foreigners that month).

By the way, this was the single largest Treasury dump by foreigners since August 2007. We all remember what followed that (the first round of this Crisis).
http://investmentwatchblog.com/the-fed-is-insolvent-do-you-still-think-the-crisis-is-over/#

Sure, the Fed could print money to deal with this. But if Treasuries begin to collapse while the Fed is already buying them… and it can only buy more by money printing,

then...
hyper inflation
along with..main street stagflation
http://investmentwatchblog.com/the-feds-game-plan-is-to-stagflate-and-lie-wallstformainst/
from
http://investmentwatchblog.com/the-fed-is-insolvent-do-you-still-think-the-crisis-is-over/

Read more at http://investmentwatchblog.com/the-fed-is-insolvent-do-you-still-think-the-crisis-is-over/#dBaiBxGEcbrohw1z.99

http://www.federalnewsradio.com/20/3427055/Feds-as-doomsday-preppers

http://investmentwatchblog.com/banksters-blowing-secure-bubbles/

http://12160.info/video/fbi-partners-with-banks-and-blames-mortgage-fraud-on-poor

AA,

I heard that portion of the coroner's verdict repeated over the radio, and what was reported in the media was an accurate reflection. I read widely, and am not so delusional that I have to quote my own articles. It must be so sad that your world is so small.

Rudd's campaign is in flames, and his latest vile treatment of a make up artist has reminded the public of why he was dumped previously.

Abbott will be the next PM unless there is a miracle for labor, and then the liberals can open the cans of worms that Labor has left behind, starting with a productivity review of the NBN, and an audit of the school halls and other disasters.

The Confidential Memo at the Heart of the Global Financial Crisis
http://www.vice.com/en_uk/read/larry-summers-and-the-secret-end-game-memo

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn't believe it.

The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3 percent unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.
http://whatreallyhappened.com/node/264284

The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank. If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed
http://intellihub.com/2013/08/22/what-would-it-take-to-bring-about-change/

Whatever just happened
hit all three markets at the same moment.
http://www.cnbc.com/id/100968086

For quite some time I have been concerned that a financial system crash is inevitable, and the US Government and Wall Street, in order to duck the blame for causing this disaster in the first place, might stage a false-flag computer attack against the financial system computers, to blame on those gosh-darned Iranian/Syrian/Russian/Chinese cyber-terrorists. We call that scenario the Virtual 9-11, and you can read more about it HERE.
http://whatreallyhappened.com/WRHARTICLES/virtual9-11.php

more redflag/blackflags
http://www.nypost.com/p/news/business/economy_imperiled_as_qe_bag_of_tricks_7m5oznZ9Rsqfk7SANJibyK

http://jonrappoport.wordpress.com/2013/08/15/nbcs-meet-the-press-hits-lowest-rating-in-21-years/

http://12160.info/page/this-will-create-panic-crush-the-fed-send-gold-soaring-21-august-
http://investmentwatchblog.com/news-of-chemical-weapons-attack-in-syria-published-one-day-before-massacre-happened/

http://www.veteransnewsnow.com/2013/08/22/226358-syrian-rebels-damascus-chemical-cache-found-by-assad-army-state-tv/

huge 911 march?
http://ampacus.webs.com/

<< Whatever Labor tried – under Mr Rudd, then Ms Gillard, now Mr Rudd again – was blocked by the Coalition on the right and the Greens on the left. We will never know how their policies may have worked in practice. >>

Alan, this is simply not the case, as the tried and proven policies of the Coalition were there for all to see. For ages Labor went right out of its way to do anything but implement any of these. It slowly started to implement some similar policies but only a long time into the renewed onshore asylum-seeking saga, as it became apparent that they had to in order to make any progress on the issue.

So it certainly wasn’t a case of the Coalition and the Greens blocking their initiatives. It was a case of damned awful management after Rudd’s damned awful decision to water down border-protection policy.

<< Australia’s immigration rate is relatively low. Has frequently been much higher. >>

Not so! It is right up there near the record level.

<< As long as it’s balanced – which seems the case – Australia can sustain this rate. >>

What is balanced about it?? How can there be anything balanced about a very rapid rate of population growth? How do we achieve any semblance of balance in economic terms if we have an ever-rapidly increasing demand for everything?

You applaud Rudd for the home insulation pink batts scheme and other initiatives directed at reducing emissions and addressing climate change. But you seem to be completely overlooking the fact that while this is helping to reduce average per-capita emission rates, the number of capitas is rapidly and unendingly increasing, which surely sits in complete and stark contradiction to national emissions reduction efforts!

If we want real balance, we need to reduce our immigration intake down to net zero. Which by the way would still be substantial. It would still allow for a significant skills, refugee and family reunion intake.

How can we realistically analyse and organise our economic, financial and debt regime without doing this??

Greetings all,

Thanks again for these comments.

@Shadow Minister, re: “I heard that portion of the coroner's verdict repeated over the radio, and what was reported in the media was an accurate reflection.”

Did you hear the Coroner speaking, SM? Or did you hear a journalist tell you what Rupert Murdoch wanted you to believe the Coroner said?

This is important, SM, because one is the opposite of the other.

Here are the direct quotes again from the Coroner himself:

Regarding the state authorities:

“Under our constitutional arrangements, workplace health and safety is primarily within the domain of State Governments.”

Regarding the companies:

“That the employers of the three people whose deaths were investigated by this inquest failed to adequately discharge their responsibilities is evidenced by their conviction of offences under electrical and work-place safety legislation.”

And, regarding one of the victims:

“Despite being directed not to use metal staples Mitchell chose to do so and died as a direct result.”

Remember, SM, the Australian media lie to you continually.

@Ludwig, re asylum seekers, my recollection is that this was one of very few areas where Mr Rudd’s platform was distinctly different from Mr Howard’s. There were pretty sound reasons for this at the time.

Refer here:

http://info.humanrights.curtin.edu.au/local/docs/Australia%20and%20asylum%20seekers.pdf

The Opposition and the Greens certainly thwarted Labor’s reforms:

http://www.abc.net.au/news/2011-09-01/greens-rule-out-asylum-seeker-law-change/2864924

So we will never know what may have eventuated had their preferred reforms been implemented, will we?

Re immigration: refer here:

http://www.indexmundi.com/g/g.aspx?c=as&v=27

This seems to show the rate has declined steadily since 2008. Do you know what the rate was in the 1940s, the 50s, the 60s and the 70s, Ludwig?

Re: “How can we realistically analyse and organise our economic, financial and debt regime without doing this [reducing immigration intake down to net zero]?”

One of the contentions in this series of pieces is that Australia currently has the best-managed economy in the world. And, possibly, the best the world has ever seen.

So, if this contention is valid, and this has been accomplished with steady net migration, then the case would seem sound for a continuation.

No?

Cheers,

AA

Alan, thanks for the links.

Re: the first one - There were certainly NOT pretty sound reasons in 2007 for the corruption of border protection policy!

The issue of onshore asylum seekers and people being held in detention centres was done and dusted. Rudd was nothing short of the most extraordinary fool for tampering with that.

Your link, which was written in 2011, does nothing to support Rudd’s move. In fact, just the opposite, as Rudd’s antics reopened the whole divisive saga of how asylum seekers should be treated: how vulnerable people are affected by being placed in detention compared to the enormous pull factor that would be created if they were just accepted with open arms straight into the community.

Re: your second link – The Malaysian solution was a hare-brained idea!

It is a prime example of the silly Rudd/Gillard government being willing to do anything except the tried and proven policies of the Howard government! As much as I denounce the Greens’ whole asylum seeker policy, I think that they were right on this occasion to oppose the Malaysian plan. If Rudd had moved early on to implement similar polices to those of Howard, he would have won the support of the Coalition and the position of the silly Greens wouldn’t have mattered.

Re: your third link – You said in an earlier post:

<< Australia’s immigration rate is relatively low. Has frequently been much higher >>

But the graph shows that the current immigration intake is right up near the record level.

See also: http://en.wikipedia.org/wiki/File:ABS-3401.0-OverseasArrivalsDeparturesAustralia-TotalMovementArrivals_CategoryMovement-NumberMovements-PermanentSettlerArrivals-A1830884F.svg

It is surely irrelevant as to what it was several decades ago. Suffice to say that the intake in terms of total numbers per annum was never anywhere near as high then as it is now.

continued

<< One of the contentions in this series of pieces is that Australia currently has the best-managed economy in the world. And, possibly, the best the world has ever seen. So, if this contention is valid, and this has been accomplished with steady net migration, then the case would seem sound for a continuation. >>

No! Alan, just as we need to move our economy away from such a high dependence on minerals and gear up manufacturing and all manner of value-adding industries, and just as we need to be basing it less on fossil fuels and more on renewable energy sources, we need to very seriously consider the implications of continued high population growth.

In short, the way we operate now has enabled us to have a strong economy, but that is certainly not an argument for continuing to do things in just the same way. I’m sure you would agree that there is a quite massive need for change if we are to maintain a strong economy.

And I will maintain that very high immigration is one of the really big factors here. If we do really well at addressing all the other important issues, we will still be very hard-pressed indeed to hold on to a healthy economy, and quality of life, if we don’t start steering ourselves towards a stable population pretty soon.

As I keep saying; supply and demand is all-important in this economic analysis! And yet we really are only hearing about the supply side, which is simply crazy for as long as we have a rapidly increasing demand for everything!

Our economy is so highly geared towards duplicating basic services and infrastructure for ever-more people.. and struggling to fix up the existing services and infrastructure that are overburdened by the rapidly increasing population.

For as long as we have very high population growth, we need very high economic growth just to stand still!