This is the most down-to-earth and sensible critique of the 2016-17 Budget I have read. Australia is commiting long term financial suicide by running big (persistent and unwarranted) deficits when it has unemployment in the range of only 5 to 6 per cent.

My only complaint is that the article spreads the blame for our deficits too thinly.

While the Rudd, Gillard and Turnbull all deserve blame, what about the second Abbott/Hockey budget? The much criticised first Abbott/Hockey budget (much of which was blocked in the Senate) actually made an honest attempt to cut spending. The 2016-17 budget indeed admits defeat but so too did the 2015-16 budget with its $35 billion deficit.

We will know when a government eventually brings down a responsible budget,- it will be chacterised by howling screams from the usual suspects that perpetually have their hand inside the trousers' pockets of the poor old taxpayer!

An idiotic critique based on fear of the impossible!

The Australian government has no debt except in the currency it prints. It can never run out of money and (despite what libellous credit ratings agencies say) no matter how big the deficit gets, bondholders have a 100% chance of getting their money back.

Australia may or may not have a structural deficit (there's no reliable evidence either way) but the cyclical deficit is way too small. The government should be stimulating the economy first, and cutting spending later when the private sector is strong enough to take up the slack. 5 to 6% unemployment is still way too high, especially with the current low participation rate. Our very low inflation rate indicates there's room to get it down much lower.

Yes, expected when economic illiterates engage in pork barrelling and welfare for the rich with the rivers of gold we used to have. Telcom used to contribute around 7 billions to the annual budget, Ditto our CBA. Energy was once owned along with the mines that supplied the fuel, consequently power bills were once not only affordable, but promoted energy dependant manufacture.

When it comes to thoroughly scandalous welfare for the rich, we've just learned that some retired public servants, supported by a taxpayer subsidized generous super; also had the hand out for pension entitlements?

And then with stone cold certainty, we have the same hypocrites endlessly complaining about excessive government generosity?

Public hospitals would cost less to run, if first, they were funded strictly on outcomes, and the applicant clientele were means tested before they were admitted?

And all while private hospitals stand idle or go broke!

And the system is top heavy with collating centralists who add around 30% to the cost bottom line? Moreover, money that could be reclaimed if stubborn obtuse obdurate states were simply obliged to grant much more regional autonomy to public schools and hospitals.

And it's beyond me, why culturally mired in waste, self serving senior public servants need to work out of the most expensive inner city air conditioned offices, when the rent bill, and their housing costs, would be more than halved by relocating to much smaller centres, which would be economically assisted by a return to best practise pragmatism.

We used to be able to fund much more just by putting responsible people with proven management skills in charge of multibillion dollar budgets!

Now we select spendathon candidates and overpaid public servants with little or no real world experience straight from uni or unions, and all too often, I believe, control freaks with heads filled with untested, or stone dead economic garbage, and focused on just one thing, party bums on treasury benches, at almost any cost?

And never assisted by rigid recalcitrant austerity zealots ideologically welded to thoroughly disgraced trickle down economic theory?
Alan B.

Aidan,

You think John Stone, an ex-head of Treasury before he went into politics, is an idiot. I can understand what John Stone says, but I cannot follow your idea that there is no problem with borrowing money in "the currency the country prints". What do you mean? You have said this on more than one occasion, but you have never explained it. Please advise. When your claim is never made by anyone else in the business, I'm left wondering why.

Stone refers to "...subsidised loans to churn tens of thousands each year through worthless tertiary 'education' courses."

The cost to the nation of this is ridiculous, from the quality of courses offered and inducements to take them, through to the non-repayment of loans.

T'was once the case that to gain a (fully) gov't funded university place one needed to achieve a certain academic standard in competition against others. This at least ensured a strong cohort at entry and a good completion rate in courses not dumbed down to meet a market. There were limited but rigorous pathways to university. University began at the academic level where high-school left off.

On the egalitarian basis that all should have a university degree, students without the study ethos or academic strength required were half-funded into university. Uni's responded by dropping entry standards and creating 4 year degrees where once they were 3 years, with the first year being remedial. Of course, this was under the guise of broadening the student's education to make them more rounded.

There are always cases of ducks becoming drakes, but not enough to justify the enormous waste Stone refers to, as invested in those passing mickey mouse courses, and those that failed the rigorous ones who will forever owe fee money loaned from the taxpayer.

Why does the taxpayer fund the first year of these longer degrees? Most students now don't work out they're academic failures until well into their second year, by which time their debt may well be substantial.

The public has already funded secondary education. Why should it fund students who did not make the most of that by funding first year uni courses that hold the truly capable back from finishing their degree earlier, forcing them into broadening courses? One of my friend's sons did a unit in bongo drums at uni, just to get his points up (FGS!) and now owes a debt for it.

I'm not sure I've got the three to four year degree thing right. What is the case is that it takes at least year longer now to achieve the same academic standard as it once did. The "Melbourne Model" it's called, which is widely adopted.

More bums on seats, more drain on public funds. Going from fully funded places for those with the nouse and ethic, to half funding for all (with or without the goods) has led to too much gov't funding, wasting the time of the truly academically able, and some pissy "degrees"

ttbn,
"You think John Stone, an ex-head of Treasury before he went into politics, is an idiot."
Yes, based on what he said here I think it's pretty clear. He has failed to comprehend the consequences of floating the Australian dollar even though he was in charge of the Treasury when it was done.

"I can understand what John Stone says, but I cannot follow your idea that there is no problem with borrowing money in 'the currency the country prints'. What do you mean?"
Regardless of how big Australia's debt is, Australia can ALWAYS borrow as many Australian dollars as it needs because it owns the Reserve Bank which creates them. So even if nobody else was willing to buy bonds (which is itself an extremely unlikely situation) we can always borrow directly from the Reserve Bank.

Generally the government borrows on the bond markets instead of directly from the Reserve Bank, partly for historical reasons (from before the dollar was floated) and partly because it's good for bank liquidity. But it always can with no adverse consequences. Unfortunately because it's one of the last things governments resort to when their economies collapse, there's a widespread myth that it's the cause of the collapse, even though that doesn't stand up to even the most basic scrutiny.

"When your claim is never made by anyone else in the business, I'm left wondering why."
The claim has been made on Lateline and in the SMH, but not in great depth. I'm often left wondering why those who contradict it aren't questioned further on the matter.

We're a nation driven by handouts and powered by debt.
Its not an economy its a false economy.

It's only good to borrow when you getting something back in excess of what you borrow.
e.g. borrow at 3 percent to invest in something giving an 8 percent return.

You don't borrow money to flush down the toilet or invest in something that devalues.

The last official act of any government is to loot the treasury.

Printing more currency devalues that already in circulation, increasing national debt in AUD. Why is it so superior to borrowing foreign money?

It is seen as a desperate move and resultant currency devaluation has this view built in. Existing and prospective overseas investors take a very dim view of it.

There's no magic pudding.

Luciferase,

"Printing more currency devalues that already in circulation,"
True to some extent, but the amount it devalues is very small.

"increasing national debt in AUD."
Our national debt is in AUD. It stays the same whether the AUD rises or falls.

"Why is it so superior to borrowing foreign money?"
Firstly because there's zero risk of running out of AUD. Regardless of the economic circumstances we find ourselves in, we're totally immune from the problems that Greece has.

Secondly because values of floating currencies are largely self correcting. Borrowing foreign money and using it to buy AUD would raise the short term value of the AUD, but that would make our exports more competitive and our domestic industry less competitive against imports, which would force the AUD's value back down. And paying off the loan would force the AUD's value further down.

And having a negative balance of trade also has the effect of making us more reliant on debt. Google "sectoral balances" for more details.

Thirdly because if everything goes wrong and government investment fails to deliver the expected productivity increases, the market would devalue the AUD. This would mean that if the borrowing is in foreign currency, our debt would be significantly bigger.

"It is seen as a desperate move and resultant currency devaluation has this view built in."
The resultant currency devaluation would be very small. Borrowing money directly from the RBA is functionally equivalent to borrowing it on the bond market; government debt rises by the same amount either way.

It's borrowing in foreign currencies that results in the really big devaluations. Some countries have ended up with hyperinflation after being unable to borrow enough foreign currency to pay off a foreign currency debt when the bonds mature.

"Existing and prospective overseas investors take a very dim view of it."
Not the ones who understand how the monetary system works.

"There's no magic pudding."
We have unlimited credit, and it can be used to grow the economy. Whether you regard it as a magic pudding is up to you.