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