Yabby,

You misunderstand how technology interacts with costs, particularly with infrastructure. Occasionally there are big reductions in cost when it enables something to be constructed in a way that it could not be constructed before. By enabling more of the existing Telstra ducts to be used, skinny fibre has done that. But we're unlikely to see any other big reductions. We will see continuing improvements in existing processes, but the reduction in price for that is likely to be counteracted by increasing wages. Improving technology is likely to enable the fibre optic cables to carry much more data than they can at present, but it's unlikely to further reduce the build cost.

I'm not merely predicting interest rates, I'm pointing out the influence the Federal government has over them. If interest rates have to rise, it will be to counteract inflation. But increasing taxes has a similar disinflationary effect. As indeed does cutting government spending.

Those who speculate about Australia losing its AAA credit rating are ignorant of the fact that Australia does not borrow money other than in the currency it prints. So we will never under any circumstances be unable to meet our debt obligations.

The reason why Australia came through the GFC in good shape was because the Rudd government stimulated the economy, unlike other countries which weakened their economies by cutting government spending.

Greece could not do that because it was not financially sovereign; it had surrendered its money printing ability to the European Central Bank. Hence (unlike Australia) the credit available to Greece was limited, and it was forced to make cuts even though doing so was bad for its economy. Even if Australia had twice as much debt as Greece, we would still be able to afford another stimulus just as easily as if we had no debt at all.

I do not regard corporate welfare as investments!

I couldn't find your link on Switzer. Lowering workers' entitlements is one way to make Australia more business friendly, but a much better alternative is to invest in better infrastructure... including the NBN.

http://www.afr.com/news/economy/federal-debt-load-pushing-against-aaa-boundary-warns-nab-20160411-go3fey

Aidan, the above link, if you can access the AFR, explains why Australia's credit rating matters to overseas borrowers, like our banks. I would guess that their chief economists are better informed on the topic than you might be.

http://www.switzer.com.au/the-experts/david-bates/wage-fraud-just-the-tip-of-the-iceberg/

There is a link to a written version of the Switzer programme, covering the fundamentals of the problem.

You seemingly forget that many younger people are choosing to have no landline connection at all on the internet, saving themselves another expense. All they need is their mobile and free wifi everywhere, yet you want to insist on installing expensive FTTN in every home? As mobile speeds improve, so there will be even less reason for them to want your 30 billion rollout and the expense associated with that.

*Even if Australia had twice as much debt as Greece, we would still be able to afford another stimulus just as easily as if we had no debt at all.*

No we could not. Markets are not silly and a Govt printing money to get out of debt, would see the Value of the Australian Dollar devalued to the Australian Peso. As we import everything, imported inflation would see our standard of living crash and goods become unaffordable to consumers.

Yabby,

Yes I can access the AFR link, but the explanation is ill thought out.

If a country's credit rating is downgraded, it's for one of three reasons:
a) The country's ability to service its debt is questionable.
b) The country's willingness to service its debt is questionable.
c) The ratings agency is incompetent.

In Australia's case, reason (a) is impossible, reason (b) is highly illogical, and the suggestion that the RBA would do so is defamatory. Reason (c) is plausible, but we shouldn't kowtow to incompetent ratings agencies. If they dare to suggest we're not creditworthy then we should sue them for libel, to highlight their idiocy to the world.

Whether we should bail out banks is another matter, and there is a coordinated international effort to avoid doing so. But whether we do or not, three facts remain
• it is better to avoid reaching the stage where the banks need bailing out,
• the government's credit rating is for government debt not bank debt; banks have their own credit ratings.
• the government's willingness to bail out the banks will not be influenced by what incompetent credit ratings agencies claim the government's credit rating to be.

Thanks for the Switzer link. I'm surprised the 711 workers are covered under that award. But I'd be a lot more surprised if the employers had to read through the whole award just to see the relevant pay rates.

(TBC)

(continued)

Mobile internet is good where demand is low, but where demand is high the need to share it between lots of users slows it to a crawl. It is not a satisfactory alternative to FTTP.

"No we could not. Markets are not silly and a Govt printing money to get out of debt, would see the Value of the Australian Dollar devalued to the Australian Peso. As we import everything, imported inflation would see our standard of living crash and goods become unaffordable to consumers."
I'm not suggesting the government should print money to get out of debt. What I'm saying is that the government borrowing from its own central bank is functionally equal to the government borrowing on the bond market, as the RBA lends to banks and drains excess reserves by paying interest on them, so the amount of money in circulation would be the same.

When the government stimulates the economy, it tends to reduce the short term value of the currency (regardless of whether or not the government has debts). But it is quickly self correcting, as a falling dollar results in us exporting more and importing less, which increases its value.

*but the explanation is ill thought out.*

Aidan, given that the information comes from the economists of two of Australia's leading banks, much more likely that they know a hell of a lot more about this than you do. Our banks borrow huge amounts on overseas money markets and clearly the Govts ability and willingness to bail them out if they had a problem, matters to foreign lenders and the interest rates which they charge.

*But I'd be a lot more surprised if the employers had to read through the whole award just to see the relevant pay rates.*

So be surprised, for that in fact was the point of the story on Switzer. There are literally thousands of combinations, depending if people wear or don't wear gloves, or pack shelves or a host of other variables. This guy consults to businesses, but spends most of his time having to explain the various awards to them and how they are in fact breaking the law, because it is all so foolishly complicated.

* But it is quickly self correcting, as a falling dollar results in us exporting more and importing less, which increases its value.*

That is wonderful in theory, but in reality we have few manufacturing industries left, so import less because we cannot afford things. We still need cars, medicines, oil and a host of other products which we import as we don't make them anymore. Our current account is still running at very high negative rates and total debts of about a trillion will continue to cost us a fortune to service it.

Yabby,

Appeal to authority is at best a very weak argument, but in the field of economics it's never of any value at all. There's rarely any consensus – indeed Keynes himself is reputed to have remarked that if all the economists in the world were laid end to end, they'd still point in different directions! But worse still, there's a lot of misinformation that many economists regard as fact despite the lack of empirical evidence to support it, and despite its theoretical basis relying on assumptions that have been shown to be false.

The amount of Australian dollar denominated debt our government has does not affect its ability to bail out banks. But whether we should bail out banks is an important issue, and the G20 (that includes Australia) have resolved to adopt bailin policies instead – so although the depositors' money is still protected, the government would not waste its money on bailing out bondholders.

And there's also the issue of whether those banks should be sourcing their money from overseas anyway; doing so pushes up our dollar's short term value at the expense of its long term value. IMO the government should make it easier for banks to access funds on the domestic market.

"So be surprised, for that in fact was the point of the story on Switzer."
No, the whole point was that the awards are too long and complicated. But that doesn't mean nobody's published a summary. And I expect there's an index where you could quickly find out that pay rates for petrol station workers are shown on page 22 (for example).

(TBC)