The Turnbull Government announced that they have a spare $5 billion to give to Victoria to build an airport link.
The only problem is that there already exists an airport link.
Unlike our politicians when I fly into Melbourne I have to pay for transport out of my own pocket.
At Melbourne airport I step out of the arrivals hall and across the road and get onto the "Smart Bus" No 901 which is waiting to take me to Melbourne.
This service is used by passengers from Frankston, Ringwood and then to and from the airport.
I take the bus to Broadmeadows Station that links to all of Melbourne.
You might ask the cost for pensioners .It is $3:50 from the airport to any suburb of Melbourne .
How long does it take to get into the centre of Melbourne. Much quicker than the privately subsided Skybus.

Dear BROCK,

Thanks for sharing that with us - it sounds great.

However, the intention of a rail link is to minimise
the number of transfers from various modes of
transport by providing a rail link to Southern Cross
Station connecting to all other rail systems in
Melbourne. Of course that won't please everybody but
the greater majority would benefit.

For international tourists, a rail link into the city
where most would stay in prominent hotels would be
great for the tourist industry.

I have used that so called Smartbus - although when I did the stop was hard to find and far from the terminal. I've heard that problem's been fixed, but a single bus route is still woefully inadequate. Even so, this plan is poor value for money. A high speed railway, running nonstop from Melbourne Airport to Southern Cross (mostly in tunnel) would be much better, and could eventually be the basis of high speed lines to Sydney, Adelaide and country Victoria. Extending the Airport West tramway to the airport would also be worthwhile, and the two are completely compatible.

Forgive my lack of understanding but how can you have "a spare $5 billion" when Australia is many times that in debt?

It's very simple, Philip S:
We own the Reserve Bank.
As long as we stick to the present policy of borrowing only in Australian dollars, our credit is unlimited. It is literally impossible for Australia to run out of money.

Okay but the more money you print without anything to back it up the more worthless it becomes.

Interesting turn of phrase there, Philip S. If you'd said "...the less it becomes worth" then you'd arguably have been correct. But what you actually said shows you don't realise the significance of the changes that have taken place since the collapse of Bretton Woods.

Right now the Aussie dollar is not at all worthless. So unless and until it becomes worthless, it is impossible for it to become more worthless.

Printing more Aussie dollars will NOT make them worthless. Back in the era of fixed exchange rates, there was a risk it could. Indeed in the 21st century we're still seeing fixed exchange rate currencies collapse when governments lose the means to back them up.

But since Paul Keating floated our dollar in the '80s, we don't even need to back it up! The market determines the value, and it's self correcting: it its value falls, imports become more expensive and exports cheaper, so we import less and export more, increasing the value. Conversely if the value rises, imports become cheaper and exports become more expensive, so we export less and import more, decreasing the value.

When money that would otherwise be saved (or not borrowed) is spent, regardless of whether by the public or private sector, it decreases our dollar's value very slightly. Even the effects of big things like a new airport railway are lost in the noise of the constant speculation. And if the people who ultimately get the money use it to pay off debt or increase savings, that negates the lowering effect. But the long term effect on the currency value depends on whether or not the thing the money is spent on will increase production. I think it's fair to say that the airport railway link - even this inefficient version - will ultimately have a production boosting effect.

"Printing more Aussie dollars will NOT make them worthless."

But it will make them worth less.

Let's assume Aidan is correct. The government should print enough to allow every citizen family to buy a nice flat on the Riviera and first class tickets to visit it each year. After all, we've got unlimited credit.

//The government should print enough to allow every citizen family to buy a nice flat on the Riviera//

Which Riviera?

I assume we have an Australian Riviera somewhere, seeing as the literal translation of 'riviera' is 'coastline', and that the Europeans who settled our land brought their old names with them - which is why I live in a state that bears almost no resemblance to South Wales.

But if you're talking about Cote d'Azur or the Ligurian Riviera, wouldn't we have to print euros, francs, the highly pixelated coins preferred by the Italian Plumbing Union, and whatever other Italians use for currency (we'll call them 'wogdollars' for the sake of argument)? And might that not upset the Frogs, Wogs, and EU bureaucrats (read: Belgians)?

//After all, we've got unlimited credit.//

Ah, I see what you did there.

I dropped out of economics after year 11 because it was too dull and it was taking up room in the attic which could be better utilised for Science! :)

But I learnt enough to learn that everybody has unlimited wants, and that resources are finite, so not everybody can live on the Riviera of their choice. You have to work out some sort of system for who gets to live on the Riviera, and we call that economics. Am I doing OK so far, mhaze?

And basically the system we've come up with is that if you're lucky enough to have very wealthy parents and lucky enough to have inherited (biologically and environmentally) the brains to not squander that money, you too can have you very own flat on a Riviera.

Worse systems exist: we could be living in planned economy, where nowt is left to chance and your only prospect of a flat on a Riviera is being sufficiently sycophantic to the Great Leader.

Still, I'm not convinced that putting a bunch of Knaves into a hat and then picking out the one with the weakest chin as the winner is the best way to do things either. I might have to start a new thread on this.

mhaze,
"But it will make them worth less."
A slight oversimplification, but basically correct - indeed I acknowledged it in the second sentence of my first paragraph and the first sentence of my last paragraph.

Yet it appears that's not enough for you - you feel so threatened by what I've written that you stupidly attempt to discredit me by reductio ad absurdism - and make some predictable logical errors.

Are you capable of spotting the flaws in your own arguments? Have a go - you may learn something! And if you can't, I'll explain them to you.

__________________________________________________________________________

Toni Lavis, I'll respond to your post in a couple of days, but I'd like to see mhaze having a go at thinking first!

I got a quote from Redcliffe to Bris airport via air train... $103 return for two people. Thats after travelling to a nearby station, then making a connection train. What a joke.

I parked at an off site parking facility, paid $67 and received free shuttle bus drop off/pick up.

Meanwhile the privately owned airtrain remains a disaster.

It's actually not much more for a cab from door to door. But then again these are the same governments that allow the likes of Ubar to force many cab owners to the wall.

Without doubt the most out of touch government I have ever seen

That puzzles me, rehctub - I've used Brisbane's Airtrain, and it was nowhere near that expensive.

Reply to Aidan.
I agree we need an integrated rail link from Melbourne to the Airport then on to Sydney or Canberra then up to Brisbane.
The Chinese have just built a 725 kilometre rail link from Ethiopia to Djibouti for $4 billion.
I propose that it would be easy for the Australian Government to ask the Chinese to build a Melbourne to Sydney link for a little more cost.
Problem in Australia is that our politicians are more demanding and corrupt than African leaders.
When Andrews in Victoria paid contractors over $1billion in cash to
contractors for not building anything.You have to wonder what he got "under the counter."
In Australia infrastructure spending is going through the roof, just as it did when the Mafia got the Italian government to spend billions on projects.
The connection between overseas mafia and the Victorian Government goes back years even before the "privatisation" of roads, trains and buses.
The so called fund managers are getting cheap credit from Mafia connected Merchant Banks and therefore win contracts and then do a cheap job and get further pay from repairs.
Melbourne Toll network is a case in point.

"Which Riviera?"

Why limit ourselves to one Riviera. We've got unlimited credit so how about a couple each. One in the Southern Hemisphere, one in the North. The Tsars had a summer and winter palace and we're better off than them - they had limited credit.

But you're right, Toni, that there are limited spots on the various Rivieri and cash rich Aussie buying up big would push up prices. But then we can just print more money since, have you heard(?), we've got unlimited credit. Of coarse, that same price increase occurs in beautiful downtown Parramatta and St Kilda which is one of the many consequences of merrily running ever more deficits.

"reductio ad absurdism"

I didn't have to do any reductio-ing to get to the absurd.

Basically you're asserting that printing money is consequence-free and that's logically, economically and historically wrong.

In the past, when I bounced you on this, you acknowledged that it'd be inflationary and that eventually governments would need to run surpluses to balance the over-spend. But you never actually advised how such a surplus would be achieved given our propensity to spend like we've got unlimited credit.

BROCK,
The Ethiopia to Djibouti railway is a conventional line, not a high speed line. It would be more comparable to the Alice Springs to Darwin railway (about twice as long and costing $1.2 billion), though I think that was built to sightly higher standards.

Construction projects in Australia are always likely t cost more than their overseas counterparts because of the need to pay Australian wages.

________________________________________________________________________________

mhaze,
Not even close. Try again!
Here's a few hints for you:
1) Carefully reread what I wrote.
2) STOP LYING!
3) Learn the difference between what is implied and what is inferred.

Aidan.

"Not even close. "

Close to what?

"2) STOP LYING!"

Yes I utterly apologise. After all, I accused you of saying we have unlimited credit when in fact you said "our credit is unlimited".

Can you forgive my wanton deception?

Aidan, your 'analysis' of fiscal policy is correct only on the most simplistic terms. We can borrow/print as many $A as we want...that's true in the short to medium term. But there are consequences to that which mean that the costs of continuing to do so indefinitely, will lead to cost burdens that out-weigh whatever perceived benefits never-ending spending may bring.

You seem to either not understand the consequences or want to ignore them in the name of short-term gratification

mhaze,
You weren't even close to the truth.

What you should be apologising for is your absurd and libellous allegation that I have ever asserted (or even implied) that "printing money is consequence-free"

I have always maintained that there are consequences. Get it? Always maintained, not merely conceded!

As for your reductio ad absurdium, it's akin to your hearing there were roads in the NT without speed limits, and accusing the person who told you that of claiming that there were roads in the NT where you could drive at 1000km/h.

Do you understand yet? Just because something is not the limiting factor doesn't mean there are no limits!

Although vehicle speeds on some NT roads weren't capped until recently, aerodynamic factors, engine power, engine speed and the need to control the vehicle meant it couldn't go anywhere near 1000km/h.
Similarly, although the Federal government has unlimited credit, it's limited to what it can do by the availability of resources (workers, materials, land etc.)

It's getting a bit late now, so I'll explain a bit more about the consequences when I reply to Toni's post (in the morning, probably).

Toni Lavis,
Many places, in all our states, aspire to be Australia's Riviera. I think Eastern Sydney and the Gold Coast are the leading contenders.

It's good to see you understand that economics is about resource allocation rather than just money. That puts you ahead not only of most of the general public, but also ahead of a lot of economists!

Not everybody does have unlimited wants, and of those who do, not all want to live on the Riviera. But so many do that property there is very expensive. Indeed the best way to make it cheaper is to tax the unimproved value of land, but of course that's unpopular with those who already own land there.

_________________________________________________________________________________

mhaze,
Regarding the consequences of government borrowing, first let me make it clear three things that they're NOT:

• There's not any danger of running out of money. Hence my original answer to Philip S.

• There's not any danger of hyperinflation. That only occurs when the government sets the currency's official value above its market value, or when it needs to make foreign currency repayments.

• There's not any need to run surpluses in the future. We could run continuous deficits if we wanted to. I've made it clear that I don't think we should, but that doesn't alter the fact that we could.

Importantly it's not the borrowing that has the consequences; it's the spending. Public spending is no more inflationary than private spending, but not all spending has the same inflationary effect. Utilising otherwise idle resources is far less inflationary than competing with others for those resources. And that's particularly true for humans - it's far less inflationary to employ someone who would otherwise be unemployed than it is to compete for workers.

Too much spending leads to inflation; too little spending leads to unemployment. Right now we have too little spending.

Any questions so far?

"Any questions so far?"

Yes. Why did you feel the need to take hyperinflation off the table? No one had mentioned it. Perhaps you see it as more of a problem than you'd care to admit?

Its probably true that hyperinflation for Australia in the medium term isn't a threat, because, as you imply, devaluations will keep the threat under control. But avoiding hyperinflation by acquiescing to ongoing devaluations is hardly a palatable situation. Devaluations are inherently inflationary, make the country poorer and are really an admission and an acceptance that things are worsening. All else being equally, nations ought to seek to strengthen, not weaken their currency.

"There's not any danger of running out of money."

Strictly speaking, in theory, that's true. But to use you speed limit analogy, just because there's no chance of being fined for doing 300kmh doesn't mean anyone would do it. There are other considerations.
Equally with printing money. Theoretically it can go on forever, but it won't because there are other considerations eg inflation, devaluation, middle-class impoverishment.

Those seeking to satisfy their own desires to see bigger government by having open ended spending, need to look beyond the here and now and examine the ramifications many steps ahead. You need to consider many steps ahead.

At the moment, governments can get away with showing no fiscal rectitude because interest rates are historically low. But there's no reason to think that will remain the case, especially if the USA economy starts to boom. When/if rates start to move to historic norms, the profligacy of the past decade will be apparent. At that time, there will be either massive spending cut-backs or a downward spiral of higher deficits, weakening currency and growing inflation.

At that time, those of a certain leaning will blame the problems on capitalism-multinationals-banks-not us.

mhaze,
"Why did you feel the need to take hyperinflation off the table?"
Because it's the main reason why people are scared of printing money. Even with nobody

"No one had mentioned it."
Although nobody on this tread had used that word, Philip S had referred to the phenomenon of a currency becoming worthless as money is printed. That's hyperinflation.

"Perhaps you see it as more of a problem than you'd care to admit?"
No, it's something we're totally immune from. However fear of it is a big problem because it leads to us printing too little money.

"Devaluations are inherently inflationary, make the country poorer and are really an admission and an acceptance that things are worsening."
Largely true, though they're less inflationary than people think.

"All else being equally, nations ought to seek to strengthen, not weaken their currency."
In the long term, I agree with you totally. Nations should be investing in things that improve their productivity, as increasing production is the main thing that boosts the currency's long term value. The two things most likely to result in an increase in production are education and infrastructure - including rail links to airports!

But keeping fiscal policy tight when there's significant unemployment is a very bad idea. It adversely affects production, so it may not boost the currency's short term value - but if it does, those gains will soon be forgotten because the value is self correcting (see my April 14 post).

I'll deal with the rest of your points tomorrow.

mhaze,
Firstly I apologise for the lack of clarity due to the obvious trivial errors in my first two paragraphs. Let me know if you require further clarification.

Now, addressing the rest of your points:

"At the moment, governments can get away with showing no fiscal rectitude because interest rates are historically low."
Just remember Hoovernomics does NOT amount to "fiscal rectitude". Fiscal policy should be directed to serve the needs of the economy, not any particular budgetary outcome.

"But there's no reason to think that will remain the case, especially if the USA economy starts to boom."
If the USA economy starts to boom, it will be the result of the USA abandoning its attempts to balance the budget in the short term, and instead investing in tax cuts for the rich.That's not a good investment, but better than not investing at all.

"When/if rates start to move to historic norms, the profligacy of the past decade will be apparent."
On the contrary, the stupidity of the lack of spending this past decade will become more apparent. We could have invested far more in the things that grow the economy and still avoided short term inflationary pressures. But instead we chose not to; we held the economy back, and when the infrastructure's needed it won't be there.
(tbc)

mhaze (continued)
"At that time, there will be either massive spending cut-backs or a downward spiral of higher deficits, weakening currency and growing inflation."
How do you imagine the government will be running higher deficits in those circumstances? If our dollar is lower, it's far more likely we'll be running an external surplus - which means it's impossible for the government to run a deficit unless the private sector's deleveraging.

The kind of spiral you're referring to is illogical. It seems to be based on a misunderstanding of what happened in the 1970s. What do you imagine will be driving all this inflation?

And in the very unlikely event that we do get high inflation, all we have to do is put up taxes and the problem will go away.

"At that time, those of a certain leaning will blame the problems on capitalism-multinationals-banks-not us."
While the government seems to be running the economy for the benefit of multinationals and banks rather than Australians, it's hardly surprising that multinationals and banks will be scapegoated.