Aidan, I'm interested in your version of just where this growth in the economy will come from. With mining heading south and our car industries fast approaching D-day, I dont share your optisim, but I'm willing to hear your thoughts.

Just on government spending V cuts, the QLD gov is about to receive a huge financial boost by way of CSG royalties. What they choose to do with that could well seal our fait. Spend it wisely and create growth and investment, or pay down debt.

I'm for option one, but only because they will have money, unlike Feds.

Shadow,
I never said the coalition actually supported it, I said they subsequently claimed to have supported it. And far from being almost completely ineffective, those $900 payments (in combination with the interest rate cut) kept Australia out of recession.

On what basis do you decide what's part of the "welfare budget"? Most people would equate it with social security spending (just over a third of the total) and I could see why you'd want to include health as well (another sixth) but I can't think of any sensible grounds for including "schooling". Is it just because the figures have grown?

"and are growing at a rate far outstripping revenue growth. In a decade or so there will be no money for anything else"
I'm a bit puzzled as to how someone with those three degrees can make a statement so idiotic! It makes me wonder whether you've been inhaling Hasbeen's pixie dust (which it rivals for absurdity)?

Just because something grows doesn't mean it's going to keep growing (let alone sustain the same rate of growth) if nothing is done about it.

"As for ideology, why if when the greatest mining boom in history started in late 2009, growth grew to 3% and unemployment dropped, did labor continue spending the majority of the stimulus?"
To keep growth up and unemployment low. Considering how small a proportion of the economy mining is, it was the most sensible course of action...or at least it would've been if the RBA hadn't literally tried to keep unemployment high. The failure to stop the interest rate hikes was an enormous Labor stuffup, but the Liberals weren't proposing any better alternative.

"Last year the International Monetary Fund produced a report stating that
Of the 17 top surveyed IMF countries, Australia has the fastest growth in spending of anyone in the world and the third highest growth in debt of anyone in the top 17."
I'd rather have a government committed to investing in our future than one that lets an irrational fear of debt wreck our future.

rehctub, I'm not presuming any one area will dominate. Australia has the potential to be competitive in any high value activity. Mining does have a bright future despite the current price slump, and thanks to our abundant solar energy I think there's going to be increasing potential for refining metals here rather than just shipping the ore overseas. Though we're losing car manufacturing, that was rapidly becoming a low value activity anyway. There's still great potential in manufacturing, but its value has shifted away from the fabrication stage. Agriculture and food are also likely to grow faster than average, but are very sensitive to the dollar's value. And with sustained low interest rates and strong domestic demand, we can create conditions where nearly every industry can thrive.

I'm not sufficiently familiar with Queensland's requirements to give you a meaningful answer on what they should do with their gas royalties, but I will say that when something's a good investment it's usually a good investment regardless of how much debt you have. So unless there's a danger of not being able to service the debt, government investment should not depend on how much money's coming in.

I should also add that there is absolutely no danger whatsoever of the Federal government not being able to service its debt. The government only borrows in Australian dollars, which are ultimately sourced from the RBA, which it owns. So while it sometimes makes sense to reduce the deficit, the debt itself is never a problem.

Where on earth do you get this stuff Aidan?

High government debt forces up the price of everything, including wages, & house prices.

High wages are the reason why we can no longer compete with imports, & the reason our manufacturing is dying, if not already dead.

It, along with high government ta, to try to service its debt, is also one of the main drivers of housing prices, keeping first home buyers out of the market.

You wouldn't actually be our last treasurer would you, he had some stupid ideas too.

Hasbeen,

Where on earth do you get the idea that high government debt forces up the price of everything, including wages, & house prices? There's neither any empirical evidence of such a phenomonon nor any credible mechanism for how it can occur (though if you think you can explain it, go ahead)!

High wages are PART OF the reason why many of our manufacturers can no longer compete with imports, but there's a lot more to it than that. Another problem is our overvalued dollar, which is the result of too much money being sourced from overseas rather than from the RBA. Part of the reason for that is that our interest rates are too high. Lower interest rates would also make our manufacturers more competitive by enabling more investment in automation (which goes a long way to explaining how Japan's manufacturers managed to remain competitive despite the yen's phenomenal rise over most of the last two decades). A fourth problem for our manufacturers is high energy costs, which is moslty the result of our ripoff network charges, but is exacerbated by the way we fund renewable energy infrastructure, which pushes up the costs before we see the benefits.

"It, along with high government ta, to try to service its debt, is also one of the main drivers of housing prices, keeping first home buyers out of the market."
That makes no sense at all — tax has very little to do with debt servicing, and nor does it increase house prices. If anything, it reduces them, though land value taxation would reduce them far more.

"You wouldn't actually be our last treasurer would you, he had some stupid ideas too."
I agree he had some stupid ideas too... such as that rushing back to surplus would be good for the economy!

A,

http://www.theaustralian.com.au/national-affairs/the-stimulus-we-didnt-really-need/story-fn59niix-1226698740758

"What sets the stimulus apart is its sheer scale. The five phases of fiscal stimulus added up to about $95bn, reckoned from the government's own announcements and Treasury papers.

These comprise the $10.4bn in cash payments that were announced in October 2008; $15bn in extra funding for the states (November 2008); a $4.8bn infrastructure plan (December 2008); the $42.5bn package (February 2009); and another $22bn in infrastructure spending (in the May 2009 budget).

Under former leader Malcolm Turnbull, the Coalition voted in favour of the first cash payments but rejected the February 2009 package, including the second round of cash payments, school building program, pink batts scheme and small-business tax break.

Turnbull's argument was that the $42.5bn package should have been about $15bn and should have spent only $3bn on school buildings, rather than $14.7bn or more."

To sum it up, the coalition gave tacit support in the early stages so as not to obstruct the required stimulus, but when Labor started to use the GFC as an excuse to abandon all fiscal discipline, it started to vote against the wildly inappropriate measures.

"But what if the assumptions about the stimulus are wrong? What if the wave of public money flowed into the real economy too slowly? What if the tap kept gushing for too long?

More dangerous for Rudd is a bigger question: what if the stimulus was a small part of the story compared with the other factors at work, not least the revival of China, the fall in the Australian dollar and the Reserve Bank's rapid action to cut interest rates?

Nobody questions the old assumptions as vigorously as Tony Makin, the Griffith University economics professor who has written three academic papers on the subject across the past few years. "I believe it was unsuccessful and shouldn't be repeated," says Makin. "It sets a precedent that I think is a dangerous one.""