Aidan wrote: Our debt is low by international standards and we have unlimited credit because we own the RBA.

Sorry, Aidan, but you have not realised that there are two things that NO government in the world can do.

These are to make a foreigner lend us money, and to print foreign exchange.

Sure, we own the RBA and can print unlimited amounts of Australian dollars; but do you have any idea what those dollars would be worth if it did so? Zimbabwe provides an excellent example if you don't.

We are able to borrow at low rates because we are in a group of less than a dozen countries with an AAA credit rating. If we overborrow and lose that rating the interest rate required would rise substantially.

Even now, overseas borrowers require a premium loading on loans to us. This does not include exchange risk, as the loans are in US Dollars. That is why the RBA rate is 2.25%, and you can still get 4.02% on deposits. Presumably the rate being paid to overseas lenders is a bit more than that.

We have a gross foreign debt of around 2 trillion dollars, of which around 80% is in foreign currency. If overseas lenders refuse to renew loans, the RBA cannot help, as they don't have enough US dollars, and cannot print any. The banks here would have to choice of paying the rate the foreigner requires, or defaulting. You can be sure that if Westpac is paying 10% to overseas lenders, the people borrowing from them will be paying more.

We also have the problem that we do not have a self-contained economy. That is to say, we have mountains of iron ore and bauxite for which we have no use, and we must import many items unobtainable in Australia.

Economics is not called the miserable science for nothing.

One can only hope that the coming deflationary depression is not followed by a major war like it was last time.

We should lower the standard of living; and entirely unearned undeserved rewards!

i.e, someone like Alan Jones may earn millions every year, and therefore pay the current top tax rate of 48 cents in the dollar.

However, if he and his ilk invests the maximum amount they're able, into their super, they are forgiven 33 of those tax cents, bringing their tax down to just 15 cents in the dollar.

And that on its own costs the nation 40 billions per and rising, in foregone tax!

Moreover, we stand alone as the only economy to shoot itself in its own economic foot with negative gearing, which is estimated to cost internal revenue between 5-15 billions per!?

Family trusts may cost more that both of those combined?

However, because this number is cleverly hidden, it's hard to know how much revenue is being redirected, and if all the schemes are indeed legitimate?

A very wise man said, at some point complexity always becomes fraud!

Without question these "tax avoiders" are the real leaners, and the real lifters are those expected to carry the tax collection can for them.

Yes some do need to do some long overdue belt tightening; just not those folk whose financial belly button is already rubbing hard against their financial spine!

And we can hugely stimulate growth without acquiring bad government debt!

There are two types of debt, good debt and bad debt.

Good debt built the Snowy mountains scheme and the Sydney Opera House.

Government involvement was essentially limited to underwriting the finance commitments, thereby obtaining the essential funding at half the cost of the private sector!(the snowy's have long since paid for themselves and now earn a handsome profit)

And we stand almost alone as yet to try self terminating thirty year bonds, to get some quite massive money earning projects; (that pay for themselves) up and running, along with the massive economic stimulus that in turn, will provide the non mining economy!

OUR GRANNIES, OUR WAR WIDOWS,SINGLE MUMS AND OUR ORPHANS HAVE ALREADY DONE ENOUGH BELT TIGHTENING THANKS, PLERDUSOREOUS!
Rhrosty.

I know of some people, who seem able to afford to play the pokies as they please, live in luxurious mansions, on acreage estates; often frequent markets, where the produce they grow (hobbies) as surplus to their needs, earns a tidy untaxed profit?

Have over a hundred thousand in the bank?

And seem able to take regular annual holidays to some distant overseas locations, where an allegedly inherited property; pays for the entire holiday and then some?

Yet given current guidelines and a very limited burden of proof, are still able to collect a full or part pension, and all that goes with it!?

It's time some of these patent leaners did their fair share of the lifting!

If you worked hard and did well? So what!

And how much avoided tax along the way, contributed to that?

Well don't answer, given if you have, an honest answer now, would be the most unexpected outcome!

Moreover, many of the things that government provide as services made much of that possible; as did the opportunities Australia alone, enable success stories handed out on a veritable platter, and impossible elsewhere!

Be grateful for that, and the opportunities, rather than thinking that you in some way via your apparent success, are now owned a living in whole or in part; via the public purse/patently disingenuous and mendacious misrepresentation of your means and circumstances!

AND IF THE CAP FITS?

For mine, you and all like you have had all the breaks you have earned, or not?

Welfare is for the needy, not the patently greedy!

Start and do some of the lifting, even where that is a new and novel approach!
Rhrosty.

plerdsus, our dollar will fall, but it certainly won't go into freefall like Zimbabwe's. Zimbabwe had effectively declared war on its main export industry and was discouraging foreign investment. Whereas if our dollar falls our exports get more competitive and its rate stabilizes. IOW we get the competitiveness benefit of lower wages without the huge blow to ordinary people.

For the last two decades the Australian government has had a policy of not borrowing any foreign currency, so Australia's not going to pay any more with a lower dollar. Some Australian corporations have borrowed foreign currencies but that's their problem not ours. And you can be sure that those borrowing from Westpac won't do so at 10% if those borrowing from Bendigo Bank are doing so at 5%. What Australia must do is ensure credit in Australian dollars is always available.

omni, you seem to be assuming that the trajectory is linear, or worse still exponential.
But a sinusoidal trajectory would be a much better fit.

Trying to reduce the deficit too soon won't reduce the peak debt; it will just delay it. What we should be concentrating on is creating the conditions most conducive to private sector growth. Right now a lack of aggregate spending is reducing opportunities for the private sector to make money. With more public spending, there's more opportunities for the private sector to make money, so they'll employ more people and pay more tax. Once we get near full employment then it will be a good time for the government to start cutting spending.

Gonski and NDIS, though costly, will also improve productivity and hence revenue. And a floating dollar ensures terms of trade are ultimately self correcting.

And we will never be Greece. Japan has much higher debt than Greece, yet has escaped the problems because it has its own currency, as we do.

It is a pleasure to find a subject on which I can agree with Rhosty. Soundly financed infrastructure, which generates enough income to service the debt and have something over towards capital repayment, is undoubtedly a good thing. The Snowy Mountains and Sydney Harbour bridge are excellent examples.

The problem today is people keep pushing projects such as the Sydney-Melbourne fast train, which, like other passenger train services, would not even cover operating costs, let alone give any return on capital. The ticket price would be limited to the air fare, as very few would pay more for a slower trip.

The other old chestnut that Rhosty rolls out is the attack on the rich. Apparently Rhosty does not realise that if someone borrows, someome else has to save, and that they won't save unless it pays them. The twentieth Century is replete with examples of countries, of which East Germany is the best example, where socialism resulted in mass emigration, followed by walls, observation towers and the rest. It is a sad fact of human nature that these idealistic attempts at equality could only succeed by havng everyone at the same level, but at a level at or near the lowest paid in the capitalist system.

Today we live in an area where tax levels in Australia are much higher than in neighbouring Asian countries, so that anyone with a bright new idea is well advised to emigrate to somewhere where he can reap a reasonable reward for his efforts.

As for the widows and orphans the Rhosty mentioned, they currently enjoy some of the most generous pensions in the world, and would be stupid to risk their loss.

The best advice that we should follow today comes from Mr. Micawber, who said:

Annual income £20, annual expenditure £19/19/6, result happiness.

Annual income £20, annual expenditure £20/0/6, result misery.