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The Forum > Article Comments > There's plenty to downsize > Comments

There's plenty to downsize : Comments

By Des Moore, published 10/10/2006

Peter Costello's latest budget outcome reveals that high spending by the Government is still a dire problem.

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Fozz, you've made some good points. i too am not a big fan of the current classification of 'employement' by the abs.

are we at record low levels of unemployment? i don't know. however, what i do know is that the labour market is extremely tight. you can see it through upward pressure on the wage level and the multitude of articles on skill shortages. this would indicate to me that unemployment is indeed at a fairly low level.

ok, so higher wages / employment, progressive tax structure = higher tax revenue that transmutes into an eventual surplus.

Now the thing to remember about this surplus is it is provisioning for a specific purpose. as the baby boomer generation begins to retire the government has to bring on to their balance sheet a superannuation liability of about $70bn. that's a lot of money. and it's a lot of tax.

now i'd rather the government fund a portion of that liability with tax generated from the generation that is set to enjoy the benefits. if we spend up big now on infrastructure and the like, then in 10 years time that burden has to be carried by the current working population who receive no benefit from it.

i think there's a term - 'intergenerational accounting' that explores these sorts of situations. i don't think that anyone could argue that baby boomers have had a hard time of it, and this provisioning ensures that the aging generation are taking responsibility for some of the policy actions over their working lifetime.
Posted by peff, Saturday, 14 October 2006 3:43:23 PM
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peff

Major asset sales under the Government have totalled $46.1 billion.

Retirement costs in the Government sector are also rising. When our Government was elected the unfunded superannuation of the Commonwealth was $66 billion. This year it is estimated at $95 billion.

Government surpluses since its election $64.2 billion.
(source Peter Costello).

To me this adds up to a deficit of $10.9 billion, take the $30 billion in the Future “slush” Fund and it equates to $40.9 billion in infrastructure that has not been spent.

I don’t really give a rats, but it is your generation that will have to pay for this lack of spending. Remember all the Commonwealth employees are not going to retire on the same day and demand a lump sum payment.

Don’t get too hung up on baby boomer demographics, the bulge will pass in 10 years. Remember money not spent now will have to be spent later by your generation.
Posted by Steve Madden, Saturday, 14 October 2006 6:07:10 PM
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Steve,

i guess it's a trade-off between spending today or tomorrow. i'd prefer to provision for the future - that is forgo current consumption in return for greater future consumption, where you'd prefer the reverse. fair enough. i'm sure both methods of approach have merit.

however, i would argue that given the current business cycle, tax revenue is healthy and the economy is booming - now might be a good time to set something aside for a rainy day. particularly given Australia's attitude towards savings and the current account defecit.

just a quick one about government asset sales (as i'm not too sure what you were trying to convey with the figure in your last post). let's assume the government owns a building in Canberra. it's worth $100. the current government wants to up spending a bit so sells the building for $100 (the same applies to bonds). fantastic, additional revenue. however, now the government, who also inhabits the building has to pay rent. and in fact the government sold it on a lease-back agreement whereby the government will lease the premesis for $10 a year for 10 years. there's no net end benefit. if you deploy the sale of assets as a response to burgeoning liabilities you're taking a short-run approach to long-run problems.
Posted by peff, Saturday, 14 October 2006 8:57:09 PM
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peff

you too make some good points bit I remain sceptical of the claim of record low unemployment.

It cannot be denied that there is a skills shortage which creates a tight labour market and increases these workers bargaining power - but only in these particular areas. Australia has suffered a constant drain of skilled, semi-skilled and service industry jobs going abroad, so real job creation in the face of this must be difficult at best. Perhaps years of off-shoring skilled labour has collided with a more recent booming demand for it, creating a shortage of the very workers that the free market has spent so much time eliminating from this country because they were cheaper in India and China.

I can honestly say I do not know anyone who has experienced upward pressure on their pay packet alhtough I have met several who have had their take home pay reduced, courtesy of workchoices.

AS for Des Moore, perhaps he has so much spare cash tucked away in socks and undies that he has no need for affordable public services-but most people do. After having lived through the attempt to "economically rationalise" my areas water supply by the private company that runs the area water board, I never want vital public utitiies like water, electricity, hospitals etc owned by a handfull of fat cats sitting in an office in New York who have no interest in what happens to people here unless it affects their bottom line.
Posted by Fozz, Sunday, 15 October 2006 6:13:33 PM
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