David Leyonhjelm is in parliament but apparently has little understanding of money or the role of a currency issuing (sovereign) government.

Banks create loan balances which in fact put borrowers in a debtor position and the banks hold the loan as an asset. But loans have to be repaid and incur interest which reduce the spending capacity of the borrower.

A sovereign government spends by instructing the Reserve Bank, which it owns on our behalf, to create a credit balance in another entities account. It credits a supplier in payment for goods or services or gives a pensioner some money to sustain their living standard.

In effect, the currency issuing government creates demand and one person's expenditure becomes the income of others in a long train of transactions with the funds gradually flowing as savings (unspent income) into the reserves of financial entities, with the Reserve Bank, or back to the government as taxes.

Those reserves are the financial wealth of the private sector.The currency issuer spends first and taxes later, preferably to remove from the private sector money that is otherwise likely to have adverse effects in the market place such as pricing the younger generation out of the housing market.

It is a simple accounting fact that, if the sovereign government runs a surplus, the financial holdings of the private sector diminish. In such situations the private sector can only maintain its standard of living by borrowing. That is why the Howard era led to such high levels of private debt which was a major cause of the problems inherited by the Labor governments. Those governments understood that deficits are sensible outcomes when there is underemployment.

David needs to understand Modern Money Theory.

Typically, David like all of his selfish and self centred, self serving ilk, wants to cut the budgets of other folk, self evidently, the most vulnerable?

All while presumably collecting a state government pension and a handsome senate salary? For what?

I would have thought just cutting a few subsidies to folk that don't really need them would have been a better way to get the budget into balance/create a surplus!

Subsidies for the very rich on their super, would be the first to go, followed by negative gearing.

Then we need to also dismantle most if not all family trusts; given they are today little more than onshore tax havens? And made entirely redundant by real tax reform!?

Then there is the 60 odd billions per the multinationals successfully avoid. And David and his ilk adroitly avoid the real tax reform and vast simplification that would fix most of this?

But instead, opt for cuts that well may see the most vulnerable taking to the streets. with the begging bowls that announce we have arrived as a third word country with a third class parliament, too obtuse to usher in the sort of reform we need to end all and any real funding shortfalls!

It's just too easy and just requires the missing leadership required to force through real tax reform, i.e., an unavoidable expenditure tax, which given the current level of massive avoidance, could be as tiny as 5%, taken in lieu of all other tax measures, which would be repealed.

Including the ubiquitous and cascading GST and ultra regressive fuel excise?

But no, as usual David, bereft of all other ideas, attacks those who need our official charity the most?

If we all of us paid a fair share according to our actual means, we wouldn't need to invent clever avoidance schemes or use tax havens!

Which given the application of the missing intelligence, would should cost more than paying a fair share of a common burden!?
Rhrosty.

U R spot on David. The wastage is still incredible. Look at the recent junket for those travelling to Paris. Julie Bishop flying jet around with her boyfriend certainly makes the corrupt unionist look not to bad. The public service is still filled with fat cats many who have never lived in the real world and go on stress leave at the drop of a hat. You are now able to double fleece the tax payer if you are on maternity leave. one poster described Turnbull as Rudd on steroids. Might be a little exaggerated but not to far from the truth. We have learnt nothing from Greece. No wonder so many study to get useless arts degrees in order to get on the tax payer funded gravy train.

Like a lot of his prognostications Senator Leyonhjelm gets a bit right...only a bit! A little knowledge can be a dangerous thing! His use of the analogy of the priest asking for chastity "but not just yet" relates to the pagan convert to Christianity St Augustine of Hippo, Africa, who lived between the 300's and 400's AD ..to whom were attributed the words "Lord make me chaste but not just yet!" ...or as written in his famous Confessions "Give me chastity and continency..but not yet" Really nothing to do with "priests" as the Senator has used in his analogy.

One of the real problems is we pay public servants too much money for jobs they can,t do.

I base that on the following statistic.
Finance Department show nearly $10 billion went to pay external "management and business professionals" and on "administrative services" in 2014-2015.

Why pay someone if they have to go out and pay someone else to do something?

Philip S, governments are keen to cut the public service workforce because they think that makes it more efficient. But more often than not, it's a false economy and they end up having to pay more for consultants to do the work instead.