Liberal Treasurer Josh Frydenberg said he was not restrained by ideology when framing his 2021, Josh thinks another $100 odd billion will be added to debt this year, but it seems to be of little concern to the government, with any thought of a surplus or balanced budget a distant memory, where are those coffee mugs of a couple of years back? The free spending government has certainly splashed the cash to support the economy. An estimation of a near trillion dollar debt looms as early as 2024. Lots of winners, and few losers this time around, Morrison could be eyeing an early election later this year.

Hi Paul,

There's always winners and losers in every government
budget but Josh Frydenberg has delivered a federal
budget that "could have been brought down by a
Labor Treasurer," according to 9News political
Editor - Chris Uhlmann.

Of course - we can always find things to criticise.
But we need to maintain a balance and say that this
budget does target big welfare programs and plugs some
problems - including jobs, aged care, and women's
issues.

The government is in a $53 billion better position than
it thought it would be. It's investing in massive rail
and road projects that will require hundreds of labourers,
engineers, and skilled tradies.

It's providing for low and middle-income earners
by extending its low and middle income tax effect for
another year. Apprenticeships and tradies - the government will
fund new apprenticeships and traineeships as well as new
training places to help employed people upskill.

There will be child-care subsidies for working families.
First home buyers are provided for as are senior Australians
in the government spending more on aged care - and the
list goes on.

Of course international borders won't re-open this time
next year and the travel industry must be worried - but
what is important - there is enough in this budget to make
quite a few people happy.

cont'd ...

Of course the PM must eyeing an early election.
He's be silly not to.

It's a Socialist budget alright. The Liberals really should start writing their moniker with a small 'l', because they are socialists. They have spent more money than Labor ever did; and they have incurred more debt than Labor ever did. They have arsed out the few conservatives left after Tony Abbott, and Comrade Morrison and his puppy dog treasurer will spend whatever it takes to bring us a one-party state, seemingly with the approval - or disinterest- of the Australian electorate. We need not look to China for an enemy; our biggest enemy is within.

This post shows how easy it is for governments to fool their subject population.

Economic illiterates show themselves by confusing “money” - as in, currency, with “money” - as in, physical wealth.

Now a moment’s reflection will show that, if the government increased the amount of currency overnight, they would not thereby double the amount of physical wealth, would they?

But most people can’t really understand this, because they never think in those terms.

So how do they think of it?

When the government says they’re injecting money - as in, physical wealth - into the economy, the sheeple never turn their brains on, to actually *think* where is the government getting the money - as in, physical wealth - from?

Paul1405’s post shows where he thinks they’re getting it from. The government is just showering the benefits of physical wealth onto society. It’s all benefits, with no corresponding cost anywhere in sight or cognition. Presumably the state gets the physical wealth from a secret pocket hidden in the universe somewhere and which only the government can access. Physical wealth is a mysterious genie that has no obvious connection with productive activity, and only government knows how to rub the lamp. Don’t laugh. This kind of magical superstitious thinking is very common in the popular cult of government-as-god which the state can cultivate among the ignorant, who think of the government the way an infant thinks of the breast.

If there's "lots of winners and few losers", then what is the obvious question that a rational approach would want an answer to, Paul?

The old paradigm of Australian politics was that Labor spent like drunken sailors and the Libs cleaned up afterwards.

Whitlam throws money around and leaves the country in a mess. Howard cleans it up.

Keating pisses the country's wealth up against the wall. Howard, again, fixes it.

Rudd spends like there's no tomorrow. Abbott, sort of, fixes it.

But now...
But now we have a Liberal government that wants to spend like a drunken sailor or more precisely, like a Labor Government. Throw the bucks around and leave someone else to fix it. But who? There ain't no one left.

Now this of course angers people like poor old Paul. How will Labor ever win government if we already have a government that is prepared to screw up just as bad as Labor.
So here we are, left with two utterly irresponsible major parties, each competing to give away as much of the future wealth as quickly as possible.

There's an old saying along the lines of "If something can’t go on forever, it won’t."

Unfortunately, its our kids that will suffer when it stops.
Unfortunately many (most?) Australians are just fine with that.

Cumberland,
What you imagine to be a case of the population being fooled is more likely to be a case of them having a better understanding than you do of the relationship between one and wealth.
Physical wealth comes from working.
Under capitalism, money is a prerequisite for that - people need to be paid to do the work, and businesses won't employ people unless it's profitable to do so.
So although money isn't sufficient to create wealth, lack of enough money is sufficient to inhibit the creation of wealth.

_________________________________________________________________________________

mhaze,
I doubt the claim that "Labor spent like drunken sailors and the Libs cleaned up afterwards" was ever anything more than a Liberal party slogan that ignored reality. The Libs tended to do far more wrecking than clearing up. And both parties have cut spending at times, sometimes in ways that turned out to be false economies. But Labor seem to have a better understanding of efficiency than the Libs do.

"But Labor seem to have a better understanding of efficiency than the Libs do."

Well it probably depends on what you mean by the word and what thing you're saying they're more efficient at.

But I was talking about history and you can only claim Labor had a better understanding of efficiency in the past if you are determined to ignore historic economic data. As to the present - Tweedledum and Tweedledee

Aidan

The original problem remains and is not solved by anything you just said. Merely increasing the supply of currency, or merely taking from A and giving to B - and paying freight to Canberra both ways - does not increase the creation of net physical wealth. The lack of understanding is your own.

"This is a Big Government budget. A Cradle to Grave Budget. A Put it on the Visa Budget." (Terry Barnes). Good summing-up. He also reckons that it is not a true Coalition budget; but I think that it is - it's from the new-look, Morrison socialist Coalition. The old Coalition, which at least tried to be an alternative to Labor, is gone, probably for good.

John Howard used to fantasise about the Liberal party being a 'broad Church'. What we have now is more like a Sunday school.

ALP Lefty and Deputy Mayor of Melbourne, Nick Reece, was happy to dub Morrison's budget as Labor-lite. The ALP will soon be a thing of the past, and lazy Australians, scared Australians will have just the one party to look after them. No opposition, no democracy. It works in China. Why not here.

Cumberland,
Where the creation of physical wealth is being hampered by a lack of money, increasing the supply of money DOES result in an increase in the creation of net physical wealth.

I'm having trouble comprehending why you're reluctant to accept that. So if you still don't accept it, could you start by answering the following question:
If the government creates money and uses it to directly employ people to do something useful, would that create net physical wealth? If not, why not?

I can't quite understand why all the fuss over
government spending. We need jobs. We need to plug
the many problems that have arisen as a result of
the pandemic. The government is doing what it needs to do.
This should not be about politics - and blame. It's the
outcomes that matter - this is not a football game -
and choosing sides, and which team you support. To do
nothing is not an option. And whinging about it and
finger-pointing doesn't help.

Having a surplus while the country goes down the gurgler
would not be the right thing to do.

The Coalition's socialist budget confirms that gross federal government debt will exceed $1 trillion for the first time in Australia’s history. Gross federal government debt is now equal to 45% of GDP, which is more than double what it was during the Whitlam-era.

Foxy the reason why people are concerned about government spending (in general- not just now with the pandemic) is because there is a essential difference between government spending and private for creating general business activity.

In the case of private investment if someone wants to start a profitable enterprise they need to read the signals the market is sending to discover a business opportunity. If they don't interpret the signals correctly they will be sent broke. For example, someone selling snow-ski gear at Marble Bar in WA will almost certainly go bust. Or if instead they find an opening but fail to produce the good/service at a competitive price - they will go bust. Or yet further if in addition to a good business prospect, a competitive production cost but they try to sell their wares way above what the market signals that it will pay - they will go bust. It should be noted that in these situations the business failing is a very good thing. Here the economy acting properly and penalising bad investment/poor pricing. Basically the economy is pruning itself and removing its dead wood. If you ever had an economy where no-one is ever bankrupted then there is something fundamentally wrong with it.

But when it comes to the government, it is a very different kettle of fish. They can produce any product indefinitely without any regard to the market signals because they can offset the production cost to prevent from going bust. They can also indefinitely produce many singly different products successively but each a failure because they can offset the production cost. So how do they offset the production cost to cover the losses and thus sustain the uneconomic investments? They have two options:

1) get income for themselves via tax
2) print money (which they do via going into debt)

-- continued below --

-- from above --

However, in the case of money printing it will eventually cause general inflation after the money finds its way into the wider economy and is evenly spread out. So in the end, money-printing inflation acts just as another tax; an iniquitous tax that mainly affects the poor. Inflation has hardly any effect any wealthy people like me because typically the vast majority of our wealth is not money but rather assets like land, shares, gold, artwork, etc., that's value rises with inflation. Whereas the poor, if they have any non-cash assets at all, will have a higher proportion of their wealth in cash and thus will suffer worse from inflation.

Now what I've said so far is especially true in the case of bad government investment for things the economy doesn't want/need. However, if the government spending injection was to satisfy a true market need/want then it is possible that the overall increase in economic activity will be greater than the effect of increased taxation or inflation used to pay for it. The problem here is though, how is the government to decide what is a good investment?

HI Thinkabit,

The government is in a $53 billion better position then
it thought it would be.

It's budget targets big welfare programs and plugs some
problems - including aged care and women's issues.

It is investing in massive rail and road upgrades.
Projects that require hundreds of labourers, engineers,
and skilled tradies. It is investing in working families,
child-care subsidies, first home buyers, senior
Australians. Low and middle-income earners will be helped
with government extending its low and middle income tax
offsets for another year.

There will be apprentices and traineeships as well as new
training places to help employed people upskill -
and the list goes on.

Being a wife, mother, and grandmother, I approve of what
the government is doing. Investing in people during a
pandemic - will help the country to recover.

Albanese's reply to a budget that could have been brought down by Labor will be interesting.

Perhaps he can tell us how the gigantic debt caused by this budget, which includes $12 million for a bunch of girls playing netball, will be paid off. The Treasurer didn't tell us, being intent on buying votes.

Judith Sloan, who certainly knows more about economics than Joshy and Scotty, can't find any evidence that many of the so-called economically beneficial stimulus measures such as increased childcare subsidies actually deliver what it says on the pack.

There was nothing said about cutting some spending in areas that could be cut. But, if you can hand out $12 million to the Matildas, there is nothing that you would consider unnecessary. Taxpayers have been treated with utter contempt.

Laura Tingle writes:

"Last year's massive economic recuse packages have
been wildly successful in keeping the economy afloat.
That funding is continuing to prop up the economy into
2021 even before any spending measures in this year's
budget come into effect."

The economy staying afloat has re-assured households that
they can go out and spend without fear of losing their
jobs hanging over them.

The job market has surged back to life creating almost a
million extra jobs since the bleakest times last year.
Income tax flowing to the government has also surged and
government spending on things like unemployment benefits
has been slashed.

Along with a soaring iron ore price the bounce back has
drastically reduced the size of the forecast budget
deficit in 2020-2021 and 2021-22 by almost $60 billion
over those 2 years alone.

There's more at the following link:

http://www.abc.net.au/news/2021-05-12/budget-2021-laura-tingle-analysis-/100132468

thinkabit,
There are indeed essential differences between government and private spending for creating general business activity. But not the one you mentioned- governments have long maintained a consensus that propping up failing businesses is bad policy.

The biggest real difference is that the private sector has no interest in doing what's not directly profitable. But the government does: it has an interest in providing the things that make private sector businesses more productive (as this ultimately results in increased tax revenue). It also has a democratic mandate to provide things that improve the population's quality of life.

Government borrowing is no more inflationary than private sector borrowing.

ALP veteran "Richo" referring to the Big Budget/Big Debt nightmare says, "Josh is welcome in our party now. He is a great Labor treasurer.

The debt forecast is a follows:

2020-21 $617 billion
2021-22 $729 billion
2022-23 $830 billion
2023-24 $920 billion
2024-25 $980 billion

Josh Freydenberg says that Australia's "effective" management of the Chinese 'flu makes it more attractive for immigrants. He hasn't given thought to the fact that the larger the population, the greater the chance our luck will run out. And it is luck, not 'effective management'; lucky we are an island, lucky we have a small population, and lucky we have the climate we do. Minimal domestic infection, with the cases we do have among people allowed to cross our international border because the government is too weak to stop them.

Let's hope our lousy treasure never gets to be immigration minister.

Aidan wrote: "Where the creation of physical wealth is being hampered by a lack of money, increasing the supply of money DOES result in an increase in the creation of net physical wealth."

That is certainly true. But how that applies in the current situation is baffling. In a situation where the government has been running two record level deficits and plans on running many more, all of it based on borrowed/printed money, it ought to be clear to even the dullest that we don't have a 'lack of money'. Indeed we have a tidal wave of money.

There is this belief that the government had to do all this to save the economy. But what is forgotten is that the economy only needs to be saved from the government. The myriad lockdowns have created this mess and now the government is spending the nation's future to paper over the disaster.

We are currently surviving only on higher than expected resource prices. If they fall or if the Chinese decide to really put the boot in by buying elsewhere, we have nowhere to turn.

All of this would be barely tolerable if the international situation were rosy and we could rely on being saved by a growing international economy. But a quick look across the Pacific sees a US economy with a significant risk of high inflation and low growth (following the April jobs outcome). Anyone with a memory of the late 1970s and the Carter economy will know that a sick US bodes ill for Australia. It used to be said that when the US sneezes the world catches cold. But in our current state, thanks to this and previous administration's profligacy, we cannot afford to even catch a sniffle, let alone a cold.

Buckle down folks. Its gunna be a rocky next few years.

mhaze,
> it ought to be clear to even the dullest that we don't have a 'lack of money'. Indeed we have a tidal wave of money.

It may appear that way if you look at government spending in isolation. But the extra government spending is there to make up for the huge fall in private spending (compared to pre pandemic levels). It's the combination of the two that matters, and there'd be a severe lack of money had not the government stepped up to mitigate the private sector shortfall.

> But what is forgotten is that the economy only needs to be saved from the government.

That's rubbish. The economy needs to be saved from a demand shortage, and the pandemic itself did far more to cause that shortage than the lockdowns did.

> We are currently surviving only on higher than expected resource prices.

No, we're thriving on higher than expected resource prices. Were they not so high, our dollar would be lower and the government would have to run even bigger deficits, but survival would not be a problem.

Our mineral resources are fungible, so the damage the Chinese can do is limited. Their actions are a nuisance, but they're hurting themselves more than us.

The USA's growth looks set to recover quickly now that Biden's passed a huge stimulus bill and huge numbers of Americans are being vaccinated. It's certainly not like the 1970s when OPEC's curtailment of oil production wrecked the economies of a world overly dependent on oil.

Aidan: "Government borrowing is no more inflationary than private sector borrowing."

That's certainly not the case for private sector borrowing for business. Because the reason why a business borrows money is make more money from the loan than its cost- ie., it wants to make a positive return on on the borrowed money. If it doesn't make a profit on the loan then the business's owner(s) will be usually personally suffer- in the worst case if the business fails completely commonly they lose years of effort and savings. The threat of you suffering personal loss due to your business failing is a fantastic incentive to produce a profit. In fact the business won't even be approved for the loan unless the bank/finance company thinks that the likelihood of business success and thus its ability to pay back the loan + interest has a positive expected return when accounting for the likelihood of losses to the bank if the business fails.

Now the most import consequence, for this discussion, of a business making a profit on borrowed money is that it directly produces more value in the economy than the effects of the inflation caused by the loan's money creation.

However, the government doesn't have the same motivators to try and make an overall positive return to the economy when it borrows money- because they don't personally suffer any detrimental consequences of a bad investment decision. Indeed, they can just keep borrowing more money regardless of how the last investment panned out. So they spend money on any damn folly that takes their fancy regardless of its effects on the economy.

-- continued below --

-- from above --

A perfect example of wasted government spending is the Olympic games. For its 2032 bid the Queensland government is talking about on opening up the cheque book and spending big. eg. it recently announced the Gabba stadium upgrade which is some billion+ dollars for what amounts to just an extra 8000 seats for the Olympics. There is no-way on earth those extra seats at will ever generate enough money in the future to cover the overall cost of the upgrade (the gabba is hardly ever full to its current capacity when it holds events, like the AFL and cricket, so those extra seats will rarely be producing any any extra return in the future but will add to the overall ongoing maintensnce costs of the stadium).

Aidan,

"there'd be a severe lack of money had not the government stepped up to mitigate the private sector shortfall."

That's rubbish. Here is the chart of the M3 showing (1) no decline prior to the government profligacy and (2) a massive increase in money supply after said spending. The spending was about mitigating the economic disaster that the lockdown became. If there was a decline in private sector spending it was entirely due to the lockdown which should have been obvious to anyone with two economic brain cells to rub together.

"the pandemic itself did far more to cause that shortage than the lockdowns did."

I don't know where to start with that level of misunderstanding. Viruses don't cause economic collapse. The reaction to the virus was what caused that collapse. The authorities chose to close down much economic activity and then looked askance as economic activity declined.

"The USA's growth looks set to recover quickly..."

Well we'll see. But I think your claims are looking pretty sick already. Trust that I will remind you of them down the track.

Dear mhaze,

You opined:

"Viruses don't cause economic collapse. The reaction to the virus was what caused that collapse."

Are you really still banging on with that line? It is absolutely crap. An example is the Brazilian Iron ore production so dramatically impacted by Covid.

http://www.abc.net.au/news/2020-06-08/economy-miners-benefit-vale-coronavirus-iron-ore/12332164

Even just two months ago further closures were being called for.

“Really the situation here is one of collapse."

Give it a rest.

http://www.reuters.com/article/us-health-coronavirus-vale-sa-idUSKBN2BH2OA

Typical SR there....find one small corner of the world where things are happening that supports whatever cockamamie theory he has, and then pretend that that is the whole world. One mine in Brazil has zero relevance to the reaction to the virus in Australia.

Additionally, the story SR reprises involves a judge ordering the lockdown of the mine ie the virus didn't do it, the reaction to the virus did it. I'm guessing that logic will zoom over SR's head.

Dear mhaze,

You simper,

"find one small corner of the world where things are happening that supports whatever cockamamie theory he has"

I chose this one because Brazil's vastly incompetent handling of its Covid response by a far right leader has resulted in record iron ore prices which have directly impacted this country significantly. Why are you being so churlish about it?

"Why are you being so churlish about it?"

I think you've lost the logic of the issue. The question is whether the virus or the reaction to the virus caused the economic downturn in Australia. Finding an example from Brazil is irrelevant to that issue and since the reaction to virus was the cause of the economic problem in your example it simply continues to prove my point.

ie the virus wasn't the cause of the economic disaster, the reaction to the virus was cause of the economic disaster.

Childcare got a boost in this socialist budget: from $10.3 billion up to $12 billion, with a lot of the loot going to families earning up to $353,000 per annum (to be raised further), so more mothers can dump their children with strangers.

The women who have actually increased female participation in the workforce the most are 60 years and over. Child- bearing aged woman went back to work long before lavish child care. So, the benefits to the economy of providing child care are not what they are cracked up to be.

Disadvantaged families benefit the least from this lavish spending on childcare, and the Productivity Commission has found that the benefits to the economy are delusional.

Judith Sloan calls the childcare industry "middle class Mafia".

With encouragement from the new-socialist Liberal party, Australians are now totally addicted to big government and handouts. It's time for their coalition partner to give them the flick. The National Party would still have their rural support - none of their seats would be lost - and the Liberals would be happier punching it out with Green Labor for the inner city elites, who they are now pandering to.

Come on ttbn,

My Old Man always said there was no bigger socialist/capitalist than the "Cow Cocky", he changed with the weather. In a good season he was a capitalist, as soon as a drought or a flood hit he was a socialist wanting all the government assistance he could get. Not being a student of Australian political history you would not have known that in its informative years of the 1920's the Country Party was indeed a socialist party. Proportionately conservative governments led by National/UAP/Liberal parties as senior coalition partner were under more pressure to spend from the members of the junior party (Country/National party) than they were from their own members. The most noted Country Party leader John "Blackjack" McEwen put huge pressure on the Menzies and Holt governments to spend in areas of agriculture and manufacturing. McEwen was very much a social conservative (refused to have the privately gay William McMahon as PM) but economically he was closer to the ALP than the Liberals.

" Despite taking a conservative position socially, the National Party (formally the Australian Country Party) has long pursued agrarian socialist economic policies. Ensuring support for farmers, either through government grants and subsidies or through community appeals, is a major focus of National Party policy. According to Ian McAllister, the National Party is the only remaining agrarian socialist party from the "wave of agrarian socialist parties set up around the Western world in the 1920s".

The Liberal party has lost all fiscal responsibility.

The 'Australian Financial Review' opines that: "The age of entitlement, declared dead in Joe Hockey’s 2014 budget, is very much alive and well in this (budget). It is disappointing that Mr Frydenberg is taking such a casual approach to deficit reduction, leaving it to its own devices."

Australia is set for permanently higher spending, higher taxes, and higher debt, without offering any economic reform. Terry McCrann believes that we will never see again a federal budget surplus, nor any more tax cuts "after the last round from 2019 arrives.”

Debt might not be so bad if it was used to fund productive assets - e.g dams, coal-fired power, or nuclear power. But the government is borrowing money to subsidise such things as child care for high-income, professional couples.

The new-socialist Morrison Liberal Party has no strategy to pay off the trillion dollar debt it is intent on incurring, and it has surrendered to the Left not just the cultural ground, but with the budget, also the economic ground.

Australia is rooted, not by the obvious suspect, the Marxist Left, but by the disgraceful politicians who pretended to be right of centre until they gained power

ttbn, some of what you say is true. Conservatism is a luxury afforded us during good times. Friedbrain did say with spending he is not constrained by ideology, but is driven by necessity. Has all the spending over the past year been wise and targeted, no there has been waste and excess, but generally its been needed to avoid a deep recession with high unemployment and business failures.
The government realises it cannot control debt, and is relying on low interest rates and higher than expected revenue to keep some minimal control, and it is minimal. ScumO' and Friedbrain if nothing else are practical politicians who realise there is little they can do about debt, and the real problems it brings will be far in the future, and they wont be in office, so it will be someone else's headache.

Did anyone watch Josh Frydenberg's interview on
The Insiders this morning?

I thought he answered all the questions rather well.

Newspoll - 44% think well of the budget, 15% think it stinks.

What about the silent 41%?

So many people without real opinions! No wonder democracy is going down the toilet in Australia.

As for the effect of the budget on the government's popularity: none whatsoever. The primary vote is still stuck on 41%. How do you like 'them apples', Scotty Boy? As always, you are 'popular' with people who will never vote for you. Duh.

ttbn, the 41% just don't think!

Paul1405, you're failing to think!

ttbn, a nuanced opinion is no less real than an extreme one.
I consider it a mediocre budget, but not a stinker.

Aiden,

Do you know how 'Newspoll' works? They ask Rupert the same question a hundred times, and he give all these different answers.

Just recently I was sent a letter and a booklet from the Australian Bureau of Statistics, telling me I had been selected to do a survey on 'Disability, Ageing and Carers' for them. I ignored it, then a few days back I got another letter from the same mob informing me I MUST DO THEIR SURVEY under the pain of death. Seems they have a law, Census and Statistics Act 1905, which makes it obligatory to do their surveys. In the comments section I recommended they feed more cheese to old people.

Despite the fictious claims, Whitlam didn't leave a huge deficit or a mess. The largest deficit as a percentage of GDP came under Fraser when Howard was treasurer, as well as the highest interest rates.

Fraser also continued "selling off the rest of the farm", something that Whitlam was trying to reverse. Imagine the sovereign wealth we would have today if we shared in ALL the mining profits and not some meagre royalties. Even Rudd's super-profit tax would have pulled in over $17 billion last financial year but now it's gone overseas and stashed in tax-havens while we just keep subsiding that industry to the tune of billions every year.

The ALP's continuing problem is that they failed to correct the lies then and still do today. They probably rely on voters' common sense and judgement but that's never worked before.

Meanwhile the current government is riddled with incompetence, corruption, financial waste and scandal and now they've lost their "debt and deficit disaster" slogan weapon I wonder where they can go to from here?