Graham,

I'm not an economist, so I'm trying to understand.

How much furniture (government assets) did Mr Howard sell to achieve his surpluses?

I've heard the figure $72 billion dollars worth....

If the situation is so dire, why didn't Oz experience debilitating recession?

Why are interest rates and unemployment figures at reasonable levels?

Why is that seen as so bad?

Greetings again,

@Individual, re: “Does that mean Australia is also first in being the brockest Nation with the most money owing?”

Australia is among the least brockest, Indi.

Australia’s net borrowings are only 11.6% of GDP.

Of the 35 advanced economies on the IMF database, only five small, rich nations now have lower net debt to GDP — Denmark, Estonia, Finland, Norway and Sweden.

@Graham, re: “The economy was a basket case in 2007 because of John Howard …”

No. Still in the world’s top ten economies. But only just, and falling. Precarious is a better descriptor.

Re: “yet by 2013 it is the leading economy in the world because of Labor.”

Correct.

Re: “But all Labor has done is spend $300 B more than we earned and has touched nothing else?”

Not at all, Graham. The spending built urgently-needed infrastructure, provided jobs, and guaranteed sustained GDP growth – alone in the developed world.

Other accomplishments include lower taxes, lower interest rates, higher productivity, increased value of the Aussie dollar, less business red tape and better balance of trade.

Re: “And how do we keep warm when you have burnt all the furniture?”

There's no risk to Australia’s furniture.

Re: “And if spending more than you earn is such a good idea, why were the USA, Japan, the UK, France, Spain, Italy, Greece, etc. hit so heavily by the GFC, and little old Australia, who had run a decade of surpluses wasn't?”

Debt and surplus were completely irrelevant to how nations fared through the GFC. Made no difference whatsoever.

The IMF’s database shows nine countries were in net surplus in 2007 — apart from some oil-rich dictatorships and poor African states. These were Australia, Bulgaria, Chile, Denmark, Estonia, Finland, Kazakhstan, Norway and Sweden.

If low debt was a cushion, we would expect all these nations to have survived particularly well through the GFC. They didn’t. All except Australia fared disastrously.

Re: “ultimately appeals to authority lead nowhere.”

Correct.

The authorities are a postscript to the hard data, simply to affirm that there's theoretical underpinning to the solid evidence.

Cheers,

Alan

Alan Austin and Marilyn
Thankyou for your educated rationality, a breathe of fresh air. As for the rest I won't waste my time by debating such a load of bollocks.
Den 71

DEN71, just a little friendly advice.

It is much more hygienic to use a toilet, or even the back of a tree trunk.

Peeing in each others pockets is totally unproductive.

Hi Poirot. Howard didn't sell any furniture to achieve his surpluses. He did sell government assets to pay down debt, but you'll also find he left us the Future Fund where he put the proceeds of some of these asset sales - it's current worth is $89B.

The issue isn't that the situation is dire at the moment, it's just heading in that direction. The sludge was building up in the system faster than ever before. Net government debt from $0 to $300B in just 6 years, and no sign that was going to change because deficits of tens of billions are locked in. The wages system changed to be more restrictive than before Bob Hawke. Productive sectors of the economy mugged with taxes to prop up unproductive sectors.

It's a lot harder to heal an economy than wound it. The longer Labor was in power the harder the healing was going to get.

Alan, your reductionist approach to economics doesn't help with analysis. For example your concentration on government debt ignores all the other things that worked for Australia - a floating currency that rapidly adjusted, more or less maintaining export prices in real terms; a flexible employment market which allowed people to move to part time while their employers were adjusting to the new reality, rather than being stood down; a lack of government interference in the economy, meaning that business adjusted quickly to the new conditions and found new markets.

But your argument doesn't hold up even on its own terms. There are a lot of countries with a better government debt position than Australia http://en.wikipedia.org/wiki/List_of_countries_by_public_debt. I haven't looked at all of those, but let's just take Chile, one that you cite. In the last three years it has grown around 20% and appears to have money in the bank, rather than debt. So, on the basis you have chosen to argue, net debt does count.

Oh, and I wouldn't describe school halls and roof insulation as "urgently needed infrastructure".

Hi Graham,

Thanks for getting back.

Re: “Howard didn't sell any furniture to achieve his surpluses.”

There’s a compelling case that high income-earning assets like airports, if retained, would have enabled medium-term rather than short-term debt retirement – but far greater long term income and wealth.

Re: “The issue isn't that the situation is dire at the moment, it's just heading in that direction.”

Not at all. Forward projections have always been positive. Even current Treasury forecasts – supposedly “blown out” recently – show Australia’s net debt at 12.66% of GDP now, projected to fall to 5.61% by 2018.

Japan, by comparison, has net debt expanding each year until 2018 to 154.8% [IMF]. The USA's debt will expand next year to 89.67%, then reduce marginally to 86.57% by 2018.

Re: “The sludge was building up in the system faster than ever before. Net government debt from $0 to $300B in just 6 years …”

Yes. Like taking out a house mortgage. Sudden rise in debt. Huge long-term gains.

Re: “your concentration on government debt ignores all the other things that worked for Australia …”

Precisely. But it’s not my concentration on debt. This has been the obsession of the Coalition and the media since the late Keating years when it was discovered this was stick with which to beat Labor.

Questions: How did debt at the end of the Keating period compare with the debt at the end of the Fraser years?

Why wasn’t debt an issue in 1983 – when interest rates were more than double?

Re: “There are a lot of countries with a better government debt position than Australia …”

Depends what you mean by better, Graham. What is optimum in these low interest rate times for a country with triple A credit ratings, low borrowings and high income?

Which other economies do you consider successful? What are their borrowings?

Australia could double its current net debt and still have less than a third of that of Belgium, the UK, the USA, France, Iceland, Israel and Japan.

Would then achieve much greater long-term benefits. No?

Cheers,

Alan