A donut here. A missed gym session there. We’ve all done it.

Breatttthhhhheee innnnnn, Australia

Too many calories in and not enough out. Over time, the weight starts to creep up and boom: you’re overweight.

It’s the same with the federal budget.

A decade of excessive spending and not enough tax reform has finally caught up with us, leading to an unsightly blowout in Wayne Swan’s budget bottom line. It’s our very own battle with the budget bulge.

The United States has the “fiscal cliff”. In Australia, we need to fight the “fiscal flab”.

Two veteran budget forecasting groups, Deloitte Access Economics and Macroeconomics, have now delivered their verdict on Swan’s mid-year budget update: It’s codswallop.

The federal budget is not in surplus by $1.1 billion this year but in deficit by $4.2 billion according to Deloitte and $7 billion according to Macroeconomics.

Both forecasters think Treasury has overestimated the revenue that will flow in the door from the China boom.

Of course, there’s no guarantee they’re right, either. All budget forecasts make assumptions about the future that may not come to pass.

But slim surplus or slim deficit, its clear Australia is suffering the same fiscal flab most governments around the world are struggling with.

Left to their own devices, politicians will blow out the bottom line just as we as a society have blown our waist lines.

Just as we prefer to stay on the couch and eat burgers and chips, politicians would prefer to spend lots of money and cut taxes. It’s the easy way. But it catches up with you in the end.

And just as old age makes us less mobile and more inclined to pack on the pounds, the ageing of the population will add to the strain on the budget body. Lower tax revenue from a smaller working aged population and higher spending on the elderly is about to throw our budget house into disorder.

As Deloitte’s Chris Richardson says, even if we do get into surplus this year “It’s a temporary respite. An ageing population and relatively rapid health cost growth threaten the longer term health of the Budget. The Budget – Australia’s national compact – remains in trouble.”

Of course, Americans do everything bigger.

In the US, excessive spending on national defence and generous tax cuts have helped blown out combined government debt to $US16 trillion.

Earlier this year, US Congress approved massive spending cuts and tax hikes in an attempt to trim the fat.

But as this “fiscal cliff” looms on December 31, its clear this approach to budget debt management is like a bulimic trying to purge their way to good health. It’s too much, too soon, and it’s too much of a shock to the body.

What all governments need to do is start making small, incremental but permanent lifestyle changes to reduce spending and reform the tax base.

It’s like weight loss – cut your calorie intake and increase your exercise and, over time, you’re sure to cut the fat.

In Australia, Swan must stick to his determination to get the budget into surplus. If the economy looks like its cooling too much, the Reserve Bank has ample room to respond with lower interest rates. This would help take some of the pressure off the Australian dollar.

But our politicians on both sides of the political fence are addicted to the sugary sweet effect on voters of budget spending and tax cuts.

According to Macroeconomics’ Stephen Anthony, a former Treasury official, the Rudd and Gillard governments have announced $120 billion of net discretionary spending, including $70 billion during the global financial crisis.

The Gillard government has gone some way to trim the fat by means testing the private health insurance rebate and cutting the baby bonus for second and subsequent children.

But it also has massive unfunded promises on the books, like funding Gonski education reforms and establishing a National Disability Insurance Scheme.

But it’s not just Labor.

The Howard government must bear responsibility for blowing much of the proceeds of the mining boom on tax cuts and wasteful spending on non-means tested handouts.

Abbott and Hockey have their own battle with the budget bulge, promising to axe the carbon and mining taxes while keeping tax cuts linked to them.

As any successful dieter knows, you can afford to eat big one day only if you are prepared to go extra hard in the gym the next.

But neither side of politics is working up the momentum for proper tax reform to abolish inefficient taxes and increase the big muscles of the GST or mining tax.

Higher taxes or lower spending: hard choices must be made.

We too must stop expecting things of government that it can’t afford to provide. When surveyed, Australians say we want both lower taxes and more spending on health, education and roads.

The fight against fiscal flab must start with us too.

Email: jessica.irvine@news.com.au Twitter: @Jess_Irvine

Comments on this post will close at 8pm AEST.

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    • Craig Mc says:

      05:21am | 14/11/12

      “The Howard government must bear responsibility for blowing much of the proceeds of the mining boom on tax cuts and wasteful spending on non-means tested handouts.”

      As if tax cuts are “blowing” proceeds.  Tax cuts let money stay with the producers that earn it, otherwise known as “not stealing as much”.

    • Big Jay says:

      07:45am | 14/11/12

      How is taking profits produced by the mining industry and giving it to everybody else (including the idle) letting the “money stay with the producers that earn it”???

    • Rosie says:

      07:48am | 14/11/12

      The Howard Govt has been gone for nearly 6 years so can we please move forward to the future of this nation and its people. First of all if the handouts were so bad why is this Gillard Labor Govt, taxing, collecting the revenue only to compensate????

      The problem with this Gillard Labor Govt is they are spending the assumptions made in their forecast before they receive the amount of money calculated. In the case of the mining tax didn’t receive any revenue at all.

      Common knowledge tells us if the Gillard Labor Govt is spending more than it is bringing in, the nation is losing money. Sadly it is how we are surviving and would like to hear some austerity measures instead of more promises and more spending of borrowed money. It’s simple: debt+debt+austerity does not = GROWTH. Sadly for us it is something Julia Gillard, Wayne Swan and Penny Wong refuse to take into account because they are too busy trying to sweeten the public with promises to remain in power.

      As for battle of the bulge, it takes honesty and will power for honest sustainable results and before this Gillard Labor Govt can take us down that path of sustainable economic growth they need to be honest with themselves.

    • GROBP says:

      08:37am | 14/11/12

      @Rosie

      There is no honesty, and we’re all in on it. We know what we’re doing is spending Australia’s entire wealth over ours and the past two generations. It’s pretendies. Don’t go spoiling the game and let our kids know what we’ve done to them.

    • PJ says:

      08:57am | 14/11/12

      ha ha spin spin spin till Labor’s sins wash away.

      Howard left the Treasury $50 Billion in the black.

      Labor also inherited a China run, self sustaining Mining boom that brought billions into Australia and was the envy of the world.

      We do not want to hear any complaints about Labors inheritance thank you.

      Here’s my take:

      By the time Labors finished Australians will be $300 Billion in debt

      Our debt is currently 30% of declining GDP.(State and Federal)

      We face a $120 Billion dollar black hole in the Budget.

      The Gillard Government gets away with not answering direct questions as to where the money will come from to pay for the following promises:

      Asst Child Care $1.3 Billion per year
      NDIS $10.5 Billion per year
      Gronski $6.5 Billion per year
      Submarines $35 Billion
      Nauru repairs after they let it rot $2.1 Billion
      More Illegals $1.7 Billion per year
      Dental scheme $4 Billion

      Why will they not tell us where they are going to get the money from? And why do you think it’s acceptable to keep this information from us?

      Swan has spent big on Lower to middle income bracket entitlements. Up to 70% of households are ‘compensated’ and the taxes collected are largely given back to these demographics through Family Tax Benefits.

      Swan was hoping to pay for all this ‘vote buying activity’ through the Mining boom, specifically the MRRT and carbon taxes.

      But the MRRT collect nothing in the first quarter. Mining project capex payments must be met first and Swan faces the loss of the Mining boom, meaning less income in future. In a recent Press conference Swan kept saying $9 billion will be collected by MRRT in 2012, when his own paperwork suggested $1.2 Billion? Paterson ABS report suggests $1.3 Billion end 2013. So Swan’s planned income from MRRT is grossly short of his predictions.

      As for Carbon tax incomes, the Carbon pricing model has “some households compensated” but that ended up being 70%. Also Billions were paid to Industry Sectors to protect them from the effects of the Carbon Tax.  Coal miners got $1.33 billion in compensation, we now pay $36,000 a year on every steel worker in Australia in carbon tax compensation. The free trading carbon credits. All unplanned costs that depleted Swans incomes.

      Swan has blown 4 Budgets. The guy has never got anything right.

      Now we’ve joined the UN to satisfy Gillard Government ego that will mean we join the Foreign Aid money laundering scheme. Billions getting pumped offshore.

      You just cannot afford the Gillard Government.

    • andye says:

      08:59am | 14/11/12

      @Rosie - “As if tax cuts are “blowing” proceeds.  Tax cuts let money stay with the producers that earn it, otherwise known as “not stealing as much”.”

      They could afford to give tax cuts because it was a boom. Booms do not last forever. This leads to a structural deficit when the boom does end and we have tax cuts that can no longer be afforded.

      This was clearly a populist move that borrowed from the future and set up post-boom government to be the bad guy. The Howard government set us up to be fine and dandy… as long as the boom held.

    • Rose says:

      09:38am | 14/11/12

      Rosie, we haven’t moved past Howard’s economic sins for two main reasons. Firstly, his tax cuts and increased middle class welfare while apparently (I don’t agree) affordable at the time, they were permanent and unsustainable. It is incredibly difficult for an incoming government to remove those tax breaks and handouts when the economic situation changed. Secondly, he changed the Australian psyche. He took a nation of mostly hard-working and fair-minded people and turned them into insular and selfish people with an ever increasing entitlement complex. Howard was the master of ‘wedge politics’ and used it to maintain power without any concern for the long term damage he did to the nation.

    • PJ says:

      09:44am | 14/11/12

      Andye

      Booms can be ‘sustained’ and ‘nurtured’ to last and create wealth in other sectors.

      But clearly MRRT and carbon tax does neither of these.

      Also why did the Labor Government wait nearly 6 years before bringing in the MRRT to share the boom with the second tier economy?

      And why did the Gillard Government bring in a tax that would not realise revenue for 2 years after it’s inception?

      It couldn’t be because they are twats could it?

    • Tubesteak says:

      10:03am | 14/11/12

      The tax cuts aren’t necessarily blowing proceeds and do allow the productive people to keep what they earned and spend it appropriately.

      However, blowing money on cash hand-outs (eg baby bonus, FHOG etc) are blowing the proceeds.

      This was something both Labor and Liberal have wasted.

    • GROBP says:

      10:10am | 14/11/12

      “As if tax cuts are “blowing” proceeds. “

      They certainly are when the recipient then bids up the same house to double what it’s worth.

      The beneficiary is not Australia but the banks, most of which are foreign owned.

    • Tim says:

      10:11am | 14/11/12

      PJ,
      “Booms can be ‘sustained’ and ‘nurtured’ to last and create wealth in other sectors.”

      Yes and that’s exactly what the resource rent tax and MRRT are designed to achieve. Why are you so against them then?

    • Expat Ozzie says:

      10:15am | 14/11/12

      @PJ: “self sustaining Mining boom”

      Do you know what oxymoron means PJ. The very fact that you believe a boom can be sustained shows your distinct lack of understanding of basic economics.

    • Rosie says:

      10:30am | 14/11/12

      I have been given excuses after excuses in reply to my factual comments and frankly I am not interest in them. All I am interest in is some honest plan to how we as a nation can begin the process of austerity+budget surplus+budget surplus which will = sustainable economic growth and NOT debt+debt+austerity which doesn’t = any kind of GROWTH but our net debt. This be known is what this incompetent Gillard Labor Govt is doing for our survival, theirs to remain in power.

    • PJ says:

      10:49am | 14/11/12

      the Australian Mining boom, may it rest in peace, was self sustaining from the perspective of not requiring interference from the Gillard Government.

      Did I have to spell it out for you?

    • JB says:

      10:51am | 14/11/12

      @Rose, And the spending by Labor was responsible?
      Oh please, Labor have MASSIVLY OVER SPENT, driven us deep into debt and left a whole pile of money in the bank!!!
      Labor spent all the money in the bank in the first 12 months of office (to pay back tiehr union backers) and spent money we didn’t have! Oh yes it’s the fault of the GFC, blame that when times are bad and take credit when times are good.
      @Craig Mc, please check your Labor / Union Card at the door mate!

    • lk says:

      11:10am | 14/11/12

      PJ
      You can babble-on all you want about the mining boom and spam every thread with your nonsense.

      simple fact for the simple mind.

      Claims about the death of the mining boom may be premature, with a new report showing a further increase in resource investment in WA and across the nation.
      The Deloitte Access Economics quarterly investment monitor, released today, shows total planned or existing investment grew $6 billion in the September quarter to a record $926 billion.

    • PJ says:

      11:28am | 14/11/12

      The GFC mainly effected the US and Europe.

      The Australian Mining boom was Asian driven, where Australia lives and competes for business.

      So Australia was relatively un-effected by the GFC like other Asian countries, because we live in the area of the world of unprecedented growth and emerging markets.

      It wasn’t too hard to overcome the GFC from here.

      The problem for us is Labors reckless spending against the fall out of the GFC:

      The past four years Labor has lifted the debt ceiling four times,
      from $75 billion,
      to $200 billion,
      to $250 billion
      and now $300 billion.

      Each time he does it, Swan says its his last., but he always exceeds the total debt limit.

      Labor has also produced the four biggest Budget deficits on record.

      We have a course chartered for poo land.

    • Expat Ozzie says:

      11:41am | 14/11/12

      @PJ: “the Australian Mining boom, may it rest in peace, was self sustaining from the perspective of not requiring interference from the Gillard Government.”

      PJ it is a myth that the Australian mining boom is self sustaining. It is not self sustaining. It never was regardless of the government. Period.  It is entirely dependent on economic factors, although you don’t seem to understand economic principles at all.

      The price of ore dropped due a softening of the Chinese growth rate and economic uncertainty world wide. Pretty simple really.

      As for your other little pet rant regarding mining going overseas, it’s been doing that for years, even during the big boom times. A shocking relational I know!

      Quite a few of the overseas operations are Australian or have Australian partners. One of the major impediments to mining growth, particularly in Africa, is political stability. Australia’s mining boom can be to a large part attributed to that instability and the consequent underdevelopment of mining within Africa in general. One thing you can guarantee is if it was politically easier for China to access iron from Africa Australia would not have had the boom anywhere near the extent that it saw.

      Could you in future try to come up with some logical arguments? You come across as one of those Dooms Day nutters from that “Doom’s Day Preppers” show.

    • GROBP says:

      12:00pm | 14/11/12

      @Tubesteak

      .............“The tax cuts aren’t necessarily blowing proceeds and do allow the productive people to keep what they earned and spend it appropriately.”...............

      On what? Bidding up housing, therefore transferring wealth to banks. Or consuming…..How is that productive? What it’s done is moved Australia’s wealth overseas.

    • JamesP says:

      12:13pm | 14/11/12

      PJ

      I find it hilarious when I read the unsubstantiated replies you are receiving from those in denial about how economical illiterate this government is. When they can’t defend Wayne Swan’s record they turn to sarcasm and crap hoping like hell they get away with it. PM Gillard has taught them well.

    • Bruce says:

      12:34pm | 14/11/12

      I have to tighten my belt even further. Just got my electricity bill which states the impact of the carbon tax (which we were not going to have) on my bill per year is $316 per year, approx. $79.00 per quarter. My average daily usage is 26 kwh. We monitor every light bulb, generally only one light in the house is used, no air conditioning, no spare fridge, etc etc. So where is all the revenue going JULIAR !

    • Tubesteak says:

      12:59pm | 14/11/12

      GROBP
      “On what? Bidding up housing, therefore transferring wealth to banks. Or consuming…..How is that productive? What it’s done is moved Australia’s wealth overseas”

      However a person decides to maximize their utility as part of their consumption pattern is an efficient allocation of resources

      I’ve said before that house prices are high because all governments have failed to build adequate infrastructure which means people are squeezed into small pockets near the CBD. This is partly because governments have blown their money on handouts

      Didn’t you say you we’re an engineer? You clearly have no understanding of business or economics. You’re the type of Luddite that thinks wealth can only be created by selling finite physical things. Stick to fluid dynamics and transformers. Let people with an understanding of economics discuss the economy. Spamming every thread with your drivel does not help. You don’t know what you’re talking about. Most of the things you say are completely illogical

    • Levi says:

      01:15pm | 14/11/12

      Tim, how exactly does taxing an industry help to nurture it? That is one of the stupidest things I have heard.

    • GROBP says:

      01:30pm | 14/11/12

      ...........“Let people with an understanding of economics discuss the economy. Spamming every thread with your drivel does not help. You don’t know what you’re talking about. Most of the things you say are completely illogical “...........

      I’m not an engineer. Understanding of economics? You’re joking. Are they the ones that have sent the entire western world broke? You haven’t even once shown how what I’ve said is illogical. You carry on about this service rubbish. If servicing each other is a wealth creating strategy why isn’t Fiji, Bali and Vanuatu filthy rich? It is economists that are entirely illogical. Wealth is created by producing and trading with other countries. First it was sheep, then it was mining and you’re telling me it’s going to be servicing? Who’s illogical? What services can we possibly do better, smarter or cheaper than tens of other countries? You’re dreaming.

      It is completely logical to say, to know, spending more than you earn, while selling producing assets will end in tears. I never said anything like “created by selling finite physical things”.

      I think your comprehension could use some work Tubesteak.

    • Tim says:

      02:14pm | 14/11/12

      Levi,
      It was sustain and nurture booms to last and create wealth in other sectors of the economy.

      Yes what you claim does sound stupid because it’s not what I said.

    • PJ says:

      04:43pm | 14/11/12

      Mate C’mon

      Ferguson has admitted the Mining boom is over.

      Swan says its over because of lack of investment due to commodity prices.

      Herald Sun
      “THE Reserve Bank has cut its economic growth forecasts, warning the resources boom is losing steam faster than expected.

      Australia’s economy is now likely to grow 2.75 per cent next year, the RBA’s economists say. Three months ago, they were forecasting growth of about 3 per cent.”

      The Governments killed Mining.

      Just admit it and lets move on.

    • Dash says:

      05:57am | 14/11/12

      13m not to delver grocery choice
      21m not to deliver cheaper fuel
      4billion on the insulation fiasco
      Record levels of government consultancy costs
      10 million to set up the Climate Institute propaganda unit
      13million for the carbon tax propaganda mail out
      40billion to roll out the NBN which would be better provided by private sector
      $900 handouts to dead people and people overseas
      A second stimulus waste that over heated the economy and drove up rates
      The cost of the backflip over Nauru
      The carbon tax compensation wealth redistribution scheme
      ALP nominated builders with there noses in the taxpayer trough under the BER
      148 billion in four record budget deficits

      Carbon tax, mining tax, flood tax. The lie not to touch the private health tax rebate. Removal of superannuation tax concessions to help people pay for thieir own retirement. The erosion of the tax base by increasing the tax free threshold putting more and more of the tax burden on to the people already paying all the tax.

      The NDIS announcement un-budgeted not costed
      The dental scheme for ALP demographics un-budgeted and not costed
      The Gonski wealth redistribution announcement not costed

      The ALP cannot handle the nations finances. They never have been able too. If you are 25 you’ve never lived a day when the ALP has balanced the nations books!

      Stop the carbon tax bullshit hand outs! increase the GST closer to the rates applying in NZ and the UK. Reduce the size of the public service. Scrap the dental scheme plan. Scrap the NDIS scheme as its a taxpayer funded black hole! Put in place a flat rate of tax for all income earning individuals no greater than the corporate rate. Give politicians the same super scheme as the rest of us! There are a few ideas to consider.

    • Steve says:

      06:32am | 14/11/12

      “40billion to roll out the NBN which would be better provided by private sector”

      fail.

      It is an off budget item as Malcolm Turnbull now concedes, and there is no chance the private sector would provide a better solution - they have had 10 years to fix the communications situation and nothing happened. THey may be able to provide services to some areas, but then you just end up with a patchwork network.

      Stop listening to Alan Jones, you lose credibility when you talk about stuff you have no idea about. It’s easy to tell what people have done any critical research on a topic, and you sir have clearly done none.

    • I hate pies says:

      08:16am | 14/11/12

      Steve, the private sector would provide the service to areas where it’s economically viable. Other than construction costs, that’s the real difference; we will have a network with inflated prices across the board to pay for the unviable areas.

    • BobC says:

      08:34am | 14/11/12

      Luv ya Dash! Dash for PM!!!!

    • Stephen T says:

      08:48am | 14/11/12

      @Steve:  Looking at the NBN Co annual report what they are implementing in many instances looks a lot like what Malcolm Turnbull has been advocating from the beginning, just at a higher cost.  Private enterprise seems to be undertaking the majority of the work, with government consultants and hangers on pocketing sizable remuneration packages.

      Also wasn’t it Tony Windsor who reportedly made the decision to support the Government based on the NBN fibre roll out in his area, he must be a most disappointed man now.

      “NBN Co conducted field tests in Armidale and Tamworth that confirmed the fixed wireless technology that it planned to use would meet its technical and operational requirements.”

      Or maybe he just doesn’t read the reports, or realise that a major fibre link already ran through his electorate.

      http://www.nbnco.com.au/assets/documents/nbnco-annual-report-2012.pdf

    • L. says:

      09:00am | 14/11/12

      “It is an off budget item as Malcolm Turnbull now concedes”

      Really..??

      And what of the massive NBN project blow outs? Aee they ‘off the budget’ as well Steve?

      If so, who’s ‘budget’ are those blow out costs coming from?

      I would be inclined to think those billions in NBN project cost blow outs are coming from out of the tax payers pockets.

    • Craig Mc says:

      09:26am | 14/11/12

      Steve: “It is an off budget item”

      Oh, like Enron used to do!

    • Tim says:

      09:30am | 14/11/12

      I hate pies,
      The government could have gone down that route as well but do you think all those National and Lib voters would have been happy when their regional area wasn’t provided with the NBN?

      Nah, they would have just copped it sweet because it was fiscally sensible right?

    • Economist says:

      09:36am | 14/11/12

      Yawn.

      Half your list is BS. $900 payments to dead people would be recovered. Besides you expect government to monitor everyone’s lives to such an extent that they know where they are?

      The overheating of the economy from the 2nd stimulus is BS and was at best a short-term rise on interest rates. Public spending did fill the void from the drop in private spending.

      BER was not a waste.

      How was your $4000 income tax cut? Delivered over 3 years?

      Why don’t you focus on just the genuine screw ups then trying to create a list that look impressively long. A quantitative list is no substitute for a quality analysis of Labor’s failings.

    • PJ says:

      09:48am | 14/11/12

      You realise that with the China run, self sustaining Mining boom pumping in monies to Australia, all the Gillard Government had to do was look after the Second tier economy outside of the Resources Sector.

      And for the past year, with all the closures, job losses and failed MRRT, I think we can safely say they’ve totally mis managed the economics of that part of the Australia economy for which they had responsibility.

      We’ve let them take credit for that top tier run by China and the Miners for too long. Time to look at the facts.

    • Stephen T says:

      11:08am | 14/11/12

      @ Economist: “BER was not a waste.”
      I may stand corrected on this but I think that you would be hard pressed to actually present unbiased objective evidence to support that premise, incidentally government funded reports or reports on government funded reports absolving them from blame and spruiking the benefits achieved do not count as unbiased.

    • I hate pies says:

      11:16am | 14/11/12

      Tim, you’ve hit the nail on the head there. It’s uneconomical, yet our government is willing to spend billions of taxpayer dollars to buy votes…it’s absurd. I for one would like to see one politician make a decision based on what’s the best thing to do and nothing else.

    • Dash says:

      11:21am | 14/11/12

      @Economist - You are kidding!!

      The RBA lifted interest rates on the back of an over heating economy (thats exactly what they said) as a direct result of the ALPs second stimulus. Economists and the LNP warned the ALP about the size of the package (theats on the public record). They are the facts. How you can say otherwise as an educated person is beyond me!

      The $900 to dead people and to people living overseas was not recovered at all. Where the hell did you get that from? I know for a fact that it was not recovered but kept by the families! Why make apologies for that waste. The money could have been much better spent.

      The income tax cuts were LNP tax cuts! They were the “me too” cuts from the 2007 election campaign. And you know that! The ALP have not delivered a single tax cut of their own since being in office. Please tell me you are not trying to claim them for the ALP?

      You are not impartial at all. So stop trying to make out that you are. You are so blindly supportive of failed government at any cost, and you as an educated person, that astounds me!

    • Economist says:

      12:38pm | 14/11/12

      Dash I stand corrected. The stimulus payments were not recovered. but the total to dead peoples estates and to overseas pensioners was 0.5% of the total $8B in cash handed out. Clearly the Government made an exception because I can guarantee you if your normally overpaid a tax refund or overpaid social security the government will raise and debt and look to get the money back off you.

      BER here you go, an analysis by the Centre for Policy Development http://www.smh.com.au/national/public-service/public-service-cuts-may-cost-more-than-they-save-20120923-26esb.html

      I already said that there was a short term increase in interest rates, as a result of the second stimulus, but this stabalised very quickly once the spending program was over. Are you trying to claim that private investment didn’t fall post GFC?

      Yes claiming they are the ALPs because they delivered them. They didn’t have to.

      No I am not a Labor sychophant. Happily criticise the Batts spending and immigration spending.

    • Stephen T says:

      01:38pm | 14/11/12

      @Economist:  As that link is basically only an opinion piece commenting on the findings and does not provide any objective evidence or testimonials to the effectiveness I’d still be inclined to be sceptical, it doesn’t really present a convincing argument. 

      Reviewing the actual analysis, I believe that you will find that that the Centre for Policy Development analysis was conducted on partial data, the third and final report by Brad Orgill found that BER projects in NSW, QLD and VIC overpaid for buildings by more than 25% on average compared to Catholic schools and more than 55% compared to Independent schools.  And while there are numerous testimonials to ineptitude, graft and general incompetence directed at the BER I have not as yet seen that many that commend the program and usually where they do there is a caveat.  As an aside, conservative estimates held by the department indicate at least $2 billion of the $16 billion BER program represents over charging and waste.

    • JT says:

      01:42pm | 14/11/12

      @Economist
      ‘‘BER here you go, an analysis by the Centre for Policy Development’‘

      A Left wing think tank founded in 2007 is your unbiased source?

      ‘‘No I am not a Labor sycophant.’‘

      You deserve an Oscar for your portrayal of one.

    • Dash says:

      02:29pm | 14/11/12

      Economist -

      The point of my post is to outline some of the waste. The $900 handouts I see as a shame because the money could have been better spent for a longer term economic benefit.

      The second stimulus was excessive. It should have been half the size. To overheat the economy when we did not even go into recession was silly and a waste. One could argue that the global economic situation now is hardly better. Yet we now have a government that wants a surplus at all costs. The difference in fiscal approach when you consider the economic conditions back then and now, baffles me!

      I did not claim there was no investment fall and never have. I complain about the size of the package and how the money was used.

      Also I never said the BER was a complete waste. But it is true that the ALP nominated builders that then went on to rort taxpayers money from the government. The ALP in NSW had to pre approve builders. And it was in NSW that the (biased) investigation found the most rorting.

      As I said, the ALP me too’d the LNP tax cuts to win an election. At least they kept that promise I guess. However, they have then implemented a raft of tax changes all aimed at clawing those cuts back from top taxpayers.

    • Economist says:

      03:19pm | 14/11/12

      I’m not going to condemn BER because it wasn’t delivered on budget. Nor am I going to dismiss the Orgill review as some biased analysis. There’s a lot of data to sift through.

      You rightly condemn VIC, NSW which accounted for about a third of all projects. I’m not going to justify their mismanagement because you simply can’t. They f***ed it for everybody else who achieved reasonable value for money or exceeded expectations.

      The issue is did it prop up the construction sector that was waning. Yes. it did. Were there are large number of projects that did improve school facilities. Yes.

      You estimate $2B a 12.5% blow out and it may well have been higher. Well here’s my strawman how many large mining projects have been delivered on budget? How many had cost blow outs on of more than 10%? I link to an article shortly.

    • Stephen T says:

      04:16pm | 14/11/12

      @Economist:  Just found this one:

      “I’m not going to condemn BER because it wasn’t delivered on budget. Nor am I going to dismiss the Orgill review as some biased analysis.”

      I took a look at the Link as well, thank you, though I would argue that there is a significant difference between a large scale engineering project and the BER.  If you compare apples with apples however you will find numerous similar projects ie. Affordable Housing Developments that have been delivered on time and at a reduced cost, these are multi unit apartment blocks of considerably more complex design than anything initiated under the BER.  I’ll concede that their success may in part be as a result of the positive lessons learnt from the BER experience, there is definitely better oversight of the projects, if such is the case then the learning curve has had a good outcome.  You mentioned hindsight in a previous post, while not agreeing with the methodology taken with the BER I can appreciate why it was done.  I’m not sure if it was directed at me,  I don’t believe I intimated that the Orgill review was biased, from what I can access I believe that the Centre for Policy Development analysis was conducted on partial data,  Orgill’s final review was entirely accurate within the terms of reference he was given.

      Be well

    • Esteban says:

      04:21pm | 14/11/12

      Economist. In my opinion the stimulas fell down in 3 key areas:
      .amount
      . Use
      .Timing.

      The total amount of debt has to be repaid within the next economic cycle. In other words we have 15 - 20 years to repay the debt or there will be residual debt when the economy next goes into a downturn and further stimulas and hence debt be required.

      It is a bit like having a car that might last 10 years but you pay it off over 20 years. You will still have residual debt when the working life of the car is finished.

      Piling new debt on top of residual debt is so tres Euro chic but I hope you can see why crusty conservatives think it is a slippery slope.

      So to pay off the debt in 15 - 20 years it will take 15 consequetive years of record surpluses (as a percentage of GDP). What is the chance of any government let alone the ALP recording 15 record budget surpluses without strangling the economy?

      The use of the stimulas and the timing are connected. The actual money just thrown at the economy has an impact but it fizzes out pretty quickly especially if business is suspicious that the bottom of the economic cycle has not been found.

      That is what has occured with the 2008 stimulas which tried to prevent the economy curing itself by finding the bottom.

      Addittionaly the $900 payments were so unprecedented in Australia that it frightened consumers and was largely responsible for altering the consumers habits which retail still feels to this day.

      In other words after the initial rush of the $900 spent in some shops we ended up with cautious consumers.

      Contrast that with a Government who has the nerve to hold off on stimulas after the economy has bottomed out. if you are an investor or in business the bottom represents the point that you think assett prices won’t go any lower. This is very important to understand.

      Assett prices are cheap, You don’t think they will fall further, interest rates are at their cyclical low, the government is going into debt to build infastructure that is needed and will help the economy accelerate away from the bottom.

      What we have is a failed attempt to prevent the bottom of the cycle. Assett prices were not allowed to collapse . There is deep suspicion withinn the business community that the crash is yet to come and that assett prices might fall.

      The government instead of going into debt to build infastructure is doing the opposite and pulling money out of the economy to repay the mistimed debt.

      Be honest economist. Which scenario would you rather be borrowing money and investing into a business?

      Business is the only engine we have the rest is carriages so it is business investment that will grow the economy and produce the tax dollars that are required to pay off the national debt.

    • Esteban says:

      04:33pm | 14/11/12

      Economist. What Government project has ever come in within budget?

      You don’t think it would be a sensible conservative approach to assume there will be blowouts and budget for them in contingencies?

      In WA where it is considered the BER operated as good as possible there where serious effects of distorting the market.

      For instance the Federal Government imposed a time restraint on the projects but there was not sufficient proven contractors to undertake the work within the stipulated timeframe.

      The state Government had no option but to give contracts to less than ideal contractors. You can see where this is going. The projects are finished the shonky contractors paid out but the sub contractors are still waiting and will be taking massive hits.

      The macro picture might look OK as far as the BER is concerned but the micro picture of market distortion is shit.

    • Economist says:

      06:38pm | 14/11/12

      Estaban always a pleasure. Running short on time to make a well researched point. Some great points by yourself, but tell me when do we know the bottom of the cycle? When would a government know to invest in infrastructure?

      There is no doubt that the government intervened to prevent the bottom of the cycle because they have a society to run not a company. They didn’t know how deep it would goat the time. Having citizens out of work is bad for society but why would a your benevolent capitalist give a rats. Having businesses go under in unrelated sectors to the problem is not in societies interest, but benevolent capitalist don;t give a rats.

      The Rudd Government reacted to data when it was presenting. Retail sector falling cash pump the economy. Construction sector falling rush out a program to stimulate. The problem with all of this is politics. You couldn’t implement a BER scheme for the public schools only the papers would scream discrimination.

      You couldn’t be seen to do nothing. So you claim they got the timing was wrong when the data was pointing out a downturn and you want it to bottom out because its efficient to let the market do its thing, to let the Bain capitals of the world swoop in to pick up bargains, while families wear the brunt of it.

      Now to add to the problem you’ve made the mistake of assuming that some how we wouldn’t have the debt. That they’re cutting back to surplus too soon to start tackling a debt that was of their making. You might want to reassess that based on the discussion below. Particularly if you’re suggesting that governments should have cut the budget by over 10% instead of implementing a stimulus package on top of the already contracting private sector to maintain some sort of surplus.

      Sure the recession was similar to 1991 in that we had in the 80s an expansion of debt and relatively high interest rates, and sure we bounced back from that recession a lot stronger, but governments are accountable to their citizens and I’d rather people keep their businesses and jobs running then some economic theoretical concept of not intervening.

    • acotrel says:

      06:23am | 14/11/12

      The most basic rule of business is about investment - ‘spend a dollar to make a dollar’.  If we are to continue borrowing there must be a planned return with common organisational goals and ambitions.  Our politicians must declare their vision for our future, and the policies they see as necessary to pursue it. At this time we need clear and decisive leadership, not negativity or an obstructive luddite approach to development.

    • Dash says:

      07:52am | 14/11/12

      acotrel - I agree with you up to a point. I know…..shock horror!

      Rather than the handouts for the carbon tax wealth redistribution exercise, we should have put that money into generating economic growth. Rather than the $900 handaouts and the wasteful second stimulus, we should have spent the money on generating economic growth. But of course that’s not the ALP way. They only protect thier own short term interest.

      What do we have to show for the second stimulus package apart from the RBA rate increases that occurred to stop the economy overheating?

      The productivity growth rate in Australia is disturbing and a huge fail for this government. The manufacturing labour cost is also a significant fail.

      We need to stop the hand out mentality. We need to stop punishing people for their success. We should be encouraging people to get off their arses and do something for the nation and themselves. But if you work hard and become successful, the ALP has a massive target on your back. It’s policy by the Tall Poppy Syndrome. They punish success and reward mediocrity! It’s stupidity!

      Unfortunately we have a government that has increased the tax free threshhold, and handed out billions to people already on welfare. Meanwhile, the people paying the way for the nations future are becomeing an ever decreasing tax base. It’s madness.

      Everyone who earns income should pay tax. The more you earn the more you pay. But to be in a situation where the top 10% of taxpayers contribute over 50% of the PAYG tax revenue is a disgrace! And the top 30% contribute over 70%. The system is screwed and the ALP has just made it worse.

      It’s hard not to be negative about a government that seems to lurch from one policy disaster to another! How can you not be negative about the waste, the fraud and the rorts that has infested the Australian Labor Party? And more to the point, why should we sit back and be positive about this governments failure?

      If the ALP did something positive, then people wouldn’t be so negative about them. When you hear of the Obeid scandal, the Tompson fiasco, the HSU rorting, the AWU scandal and the PMs involvement, the CFMEU thuggery. It’s no suprise people are negative towards this government.

      The ALP has the numbers in both houses. No point in that situation, blaming the opposition! Your lot are the government. Unfourtunately they are also a failure. Yet they sit their and play the victim every time they are asked to answer a difficult question. Play the gender card.

      How the hell is that constructive government for this country?

    • L. says:

      09:04am | 14/11/12

      ” ‘spend a dollar to make a dollar’. “

      Nope.

      The fundamental rule is ’ ‘spend someone elses dollar to make a dollar’. 

      That’s why companies raise captial on the stockmarket by selling shares…ie, other peoples money.

    • wakeuppls says:

      12:05pm | 14/11/12

      L.

      And whose money are the investors spending?

    • L. says:

      03:10pm | 14/11/12

      “And whose money are the investors spending?”

      Their own.. But they are employingthe second rule.

      ‘If you can’t spend someone elses, spend your own’.

      Hope that helps.

    • Mahhrat says:

      06:38am | 14/11/12

      Could the budget be run by a secondary set of elected officials, whose only role is to put out a balanced budget?

      They could be a fourth arm under the constitution, and would effectively control the budget and give the Parliament $X to spend, no more.

      They would be public officers, but would have election and would preferably be accountants and senior business people.

      I realise that’s a huge thing and would need a lot of law and transparency insurance, but as an idea, does it have any merit?  The problem with Pollies is they’re more interested in votes than the budget.  If we reduce Parliament by some seats and move those resources to Treasury, who gains the responsibility of nothing more than BALANCING the budget - ins and outs.

    • GROBP says:

      08:25am | 14/11/12

      It’s a great idea Mahhrat just get rid of the senior business people.

      In addition have a department in charge of the future that looks at saving, retaining assets, not populating. You’re 100% correct, politicians cannot do both look at the long term future and feather a dumb electorate. Look at the debacle of the next Sydney airport. It’s been going on for thirty years. In that time, governments have let development occur at potential sites. That should result in jail in my opinion.

    • You know says:

      08:51am | 14/11/12

      Moderator
       
      WTF?!!!
      How was that inappropriate?

    • GROBP says:

      10:10am | 14/11/12

      .........“senior business people”.............

      I was with you up until there. We’d trust senior business people to look after our money?

      Senior business people have encouraged the biggest housing bubble on the planet, senior business people have encouraged the government to raise super as a benefit to big business, I could add twenty more that results in a transfer of our wealth to big business.

      Senior business people are not to be trusted. Vested interest always wins.

    • Don says:

      06:39am | 14/11/12

      The mining boom under Labor has far outstripped anything that we have seen before. But don’t take my word for it, let’s have a squiz at figures from DFAT - total mining exports:

      Year     Total (Billions)

      96         14                  
      97         16                  
      98         18
      99         16
      00         18
      01         23
      02         23
      03         21
      04         25
      05         41   (here starteth the boom proper)
      06         49
      07         49 (the demise of JH and the begging of Kev)
      08           89!
      09         79!
      10         106! (no comment)
      11         126!

      Who’s boom is bigger? Labor’s or JH’s? Can we end this Labor parrot line of “John Howard wasted the boom” and put it in some kind of context. How about - “Labor’s overseeing a mining boom that is generating almost 3 times the export revenue that the Coalition oversaw and they still can’t balance the books.” Has a much nicer ring to it methinks.

    • Big Jay says:

      07:50am | 14/11/12

      @Don - way to ignore the rest of the factors in the economy, like falling private demand, virtually nil credit growth etc.

    • Dash says:

      08:02am | 14/11/12

      Well done Don.

      Here’s another thing to consider. Whilst the ALP are crying poor, Government revenue has increased under the ALP from 292billion to a budgetted 402billion!

      The LNP (John Howard and Peter Costello) in the 2000 budget, generated a surplus of $13.5billion off the back of just $167Billion in revenue.

      Compare that to the last ALP budget where Swan managed to generate a defecit of $46.2 billion off a revenue base of $310billion!!!!

      So the ALP had $143billion more revenue, yet generated a $60billion worse result! WTF?

      These numbers are all from the government budget web site.

      Hello? Wake up people and stop believeing the ALPs bullshit . The fact is, the ALP are unable to handle money!

    • Thor says:

      08:13am | 14/11/12

      ignore reduced tax receipts. GFC. Aussie bonds maturing at the 10% rate set by Costello when interest rates were seen to be falling world wide costing the Govt billions in interest payments to investors

    • you know says:

      08:53am | 14/11/12

      And this one too!???
       
      What’s doing?

    • PJ says:

      09:03am | 14/11/12

      The Mining boom is over now. so long term forecasts will get bleak.

      Swan will tell you it’s commodity prices.

      But Africa will tell you the true story.

      African Mining growth in 2012: from -16.8 to +32 percent!
      (Reported by Bloomberg)

      The fact is thanks to Gillard Government taxes, Australia is the most expensive country to mine and there are alternatives, like Africa.

      China, India and Asia are all over the new African Mining boom.

      MRRT at 30%, Carbon tax at 15%, it’s just not worth the investment.

      From THE AGE:

      “BHP Billiton head Marius Kloppers has told European investors that Australia’s carbon and mining taxes have helped to render the nation’s coal industry unworthy of further investment at this time.
      Despite reassuring Australians that the taxes were not to blame for BHP’s mothballing of the $US30 billion Olympic Dam expansion, Mr Kloppers referred to both when telling British media that new investments in Australia’s coal sector would not be profitable.”

      For this alone people should want an election.

    • Economist says:

      09:28am | 14/11/12

      Well Done? Spare me.

      Your interpretation is nonsense.

      Focusing on export earnings of one sector completely misses the point of the difference between a debt boom and a mining boom and the impacts of each of these being different.

      Dash Your distortion of budget figures is even more manipulative and you’ve been taken to task previously on this. i.e. the difference between relative figures and real growth figures.

      Context is everything and your analysis lacks context.

    • Tim says:

      09:41am | 14/11/12

      How about Labor’s spending is now lower as a percentage of GDP than it was under Howard Don?

      Howard sycophants just love to ignore the fact that he wasted around $200B in useless middle class welfare and handouts that did nothing but leave us with a structural deficit.

      Dash,
      you must be the worst CFO on the planet if you honestly think your comparison is fair. Please.
      In 1977 treasurer John Howards revenue was $24B and he produced a $2B dollar deficit.
      Costello was obviously a horrible treasurer because he had $143B dollars in extra revenue but only produced a $13B dollar surplus. By Dash’s logic he wasted $130B dollars.

      Oh the humanity.

    • PJ says:

      10:44am | 14/11/12

      The Labor government has lifted the debt ceiling four times over 4 years, from $75 billion,
      to $200 billion,
      to $250 billion
      and now $300 billion.

      Aaaaaahhhhh!

      On each occasion Swan has VOWED not to exceed the total debt limit.

      But over 4 years Labor has also produced the four biggest Budget deficits on record!!!

      you see, this is because the Gillard Government is spending around $100 billion a year more than in the last Howard-Costello budget.

    • Stephen T says:

      10:51am | 14/11/12

      @ Economist: I can see the truth in the statement that empirical falsification never discouraged theoretical economists; show me your figures to validate your argument?  As I understand it the Governments public sector gross and net foreign debt has markedly increased and the component credited to it in private debt has also increased even while the private sector has reduced its component, , ref Budget Paper No 1 2012–13.
      As @10:15 hrs AEDT
      Government Debt: $ 230,634,165,905
      Government Debt with AFIs: $ 85,284,185,757

      Aside from the figures the issue should not be government debt, but the use to which the debt is put. If the debt were used to build or restore infrastructure, it would be a sound investment and people would not have cause to complain, I haven’t seen that happening.  I’ve discounted the NBN as it was never subjected to due diligence or a cost benefit analyses, can anyone provide me with another example of infrastructure or significant reform that is actually funded and not scheduled to be realised in several generations that this government has initiated.

      I would make the point that the Hawke-Keating and Howard-Costello governments collectively spent 23 years reforming the economy, a bipartisan project of opening it to the world, making it more competitive, improving its systems and institutions.  I see nothing of their foresight in the current incumbents.

    • Tim says:

      11:17am | 14/11/12

      PJ,
      are you forgetting the $130B in reduced revenue from what was predicted when Howard was in office? Or did that not happen in your mind?

      Oh and Howard’s last budget spent about $140B more than Keating - Willis’ last budget.
      Those horrible wasteful spenders hey?

    • Economist says:

      01:02pm | 14/11/12

      Why is this analysis deceitful?

      Stephen T. I’m not arguing there is a debt, but how we arrived at the debt is the issue. Take a look at the summary budget tables because it tell two stories that are pretty obvious. http://www.budget.gov.au/2012-13/content/overview/html/overview_44.htm

      The first story is that as a percentage of GDP revenues have fallen over the last 4 FY. Spending increased dramatically over these years. But it is the former that is driving the majority of debt.

      The second story is where Dash is being deceitful. Comparing today with 2000 for example. A simple way to look at it is the percentage differences in revenue and expenditure each financial year, for example in 1998-99 the percentage difference with 1997-98 was 8% on the revenue side and 5.3% on the expenditure side. If you average these differences for the Howard government you get 7.65% each year. On the expenditure side you get 6.8%. Both these figures outstrip inflation. We still had massive growth in revenues despite tax cuts and expenditure increased due to massive increases in welfare spending.

      If you look at these averages under Labor you get on the revenue side, to 2011-12, 3% and on the expenditure side 8.2%. So Labor on average increased expenditure at a faster rate but they also had a significant average revenue drop.

      Now the issue is how much on the expenditure is attributable to discretionary spending? Estimates are $50-60B mainly in 2008-09 when expenditure grew 16.3%. The fact is revenue and expenditure grow because of population growth and inflation as we have structural spending like welfare locked into legislation.

      Recall from above that the Howard governments cash splash of middle class welfare increased structural spending. Labor would have to amend legislation to rectify the problem and it’s quite obvious the Liberals wouldn’t allow this when they can’t even agree on a Baby Bonus cut.

      No one, despite continually requesting it, has indicated to me how the Liberals would have stripped 10% out of the budget spending from 2008-09 to keep the budget close to surplus or a smaller deficit. Because they wouldn’t. they wouldn’t have made such a dramatic cut that would strip about 2% out of GDP putting us into a technical recession. 

      Surely you guys are getting bored of repeating the same old nonsense because I’m getting bored of providing the counterfactual.

    • Stephen T says:

      02:28pm | 14/11/12

      @Economist:  Thank you for taking the time to logically explain your argument, I do concur on many of your points however my concern is that government is misrepresenting information supplied by treasury to satisfy the purely political objective of fabricating a surplus.  My case in point being that treasury presented the following deficit projections in 2009, based on a projected fall of 200 billion in government revenue resulting from the GFC:
      A 2009-10 deficit of $57.6 billion - 4.9% of GDP;
      A 2010-11 deficit of $57.1 billion - 4.7% of GDP;
      A 2011-12 deficit of $44.5 billion - 3.4% of GDP;
      A 2012-13 deficit of $28.2 billion - 2% of GDP and;
      A return to surplus in 2015-16
      Now admittedly I’m more conversant with Federal to State budgetary conventions but I do understand the dynamics involved and I’d consider that these figures may be far more realistic than the ones currently being presented by Wayne Swan.
      I previously posted figures relating to the Governments Public and Private debt, there has been a significant increase in one and a moderate increase in the other.  I would argue that this is the result of the Governments desire to make good on Wayne Swan’s and Julia Gillard’s misguided desire to present a surplus prior to the 2013 election.  This situation is somewhat compounded by the government’s reliance on the MRT tax, which as expected has failed to produce the desired result, this is understandable as reports from company CFO’s when it was negotiated indicated that several miners expected that they wouldn’t be paying any tax at all.
      I can not comment on what measures the Coalition would have implemented, considering that Australia was well placed to weather the GFC without Labor’s Cash Splash, I would consider that they would have done everything that Labor did up until that point.  I must ask you though, which scenario is the most repugnant, a technical recession or ending up in the same situation as Greece and Spain?
      I found this analysis to be of interest
      http://kevindavis.com.au/secondpages/acadpubs/2009/Brown-Davis_GFC_Kolb_chapter_final2.pdf

      Cheers, have a good day

    • Economist says:

      03:06pm | 14/11/12

      Stephen T I concur with your analysis of the current budget situation and the likelihood of a surplus. The MRRT is as basket case and I’ve continually stated so.

      Hindsight is a difficult thing. A technical recession may have worsened confidence, may have resulted in more layoffs resulting in even greater fall in tax revenue from income tax and you’d still have a debt.

      Thanks for your thoughtful comments I’ve enjoyed the exchange.

    • Rosie says:

      04:19pm | 14/11/12

      Wow how impressive are the numbers? It spells LNP good, Labor bad! What a pity Wayne Swan’s maths ends up with 1 + 1 = 3 and Labor apologists will defend him to the hilt so that we have Swan for another term.

    • PJ says:

      04:56pm | 14/11/12

      in debating their current Government performance with Socialist Lefties, my mind switches off when, against my last point I hear vilifications language directed at my person. Then when I tune in again I always find they’ve transported the discussion back 100 years to an irrelevant Government action ?

      Well I might use a bit of history too:

      In just the last 12 months, Labor’s net debt projection for this current financial year has blown out from $106.6 billion to $142.5billion, a deterioration of one third.

      Net debt continues to rise next year and the year after to a new peak of $145 billion, the highest on record. This continues the record of Labor governments that have increased net debt every year since 1990.

      The Gillard Government, we just cannot afford them…..

    • Richard says:

      07:42am | 14/11/12

      All political parties are guilty of the handout mentality but which one will have the will to change it. I fear neither are up to the task as it would Piss of too many groups and cost any party the chance of election.  How much are we really in deficit taking into account off budget items. I would like to see a surplus , however a proper surplus not one created by trickery and if we can’t have that we may as well remain in deficit.  The GST will need to be raised and that increase will need to be used to reduce the deficit. The states will miss out again. We also need to reduce the levels of Govt we have. Can we get rid of a level and if so , which one.

    • acotrel says:

      08:06am | 14/11/12

      I get the impression that every suggestion about how to fix the economy involves coercion.  Perhaps leadership and motivation combined with a constructive approach might work better ? Alternatively we could go the whole hog, and become a fascist dictatorship !

    • Stephen T says:

      08:57am | 14/11/12

      Nothing wrong with a benevolent dictatorship, except when the benevolent dictator dies or get s done in by a not so benevolent democracy. smile

    • marley says:

      09:08am | 14/11/12

      @acotrel - taxation involves coercion, you know.  Sometimes, it’s a necessary evil.

    • Achmed says:

      07:48am | 14/11/12

      Desperate Liberals/Abbott supporters always ignore the GFC.

      Labor got Australia through the GFC and despite all their attempts to undermine our economy with their constant negativity Aust is still one of the best performing economies in the world.

      Even Abbott has Australia’s economy is the eny of the world. (read his speech in London)  But in typical hypocritical fashion he says the opposite when in Aust.  It like he’s too dumb to understand that a speech made in London is reported in Aust.

    • Stephen T says:

      09:17am | 14/11/12

      @ Achmed:  I believe that you will find that Australia’s performance during the GFC owed very little to Government “fiscal package-monetary handouts” and a lot to pre-existing economic conditions and a range of other actions that by themselves would have seen Australia through the GFC.  The Government deserves commendation for the things that it did correctly during the GFC, just as it deserves condemnation for those areas that it has mismanaged.  The reality is that any competent government would have take taken the same measures, what a competent government would not have done is to resort to throwing away taxpayers funds on what amounts to an ill managed PR exercise.

      http://kevindavis.com.au/secondpages/acadpubs/2009/Brown-Davis_GFC_Kolb_chapter_final2.pdf

    • Achmed says:

      01:58pm | 14/11/12

      Stephen T - well its just as well we had Labor and not the Liberals.  They ran and hid under a rock making mutterings “we would do it cheaper” but never being able to articulate or explain how much cheaper - $0.20c?  And we would would do it better but never being able to tell what they could/would have done better.

      If the Liberals had any sort of plam they should have put aside political differnces and joined with the Govt in a bilateral approach.  But they were too scared to come out from under the rock because in reality, they had nothing!  Just like Abbott’s popularist one line rants….only the gullible and stupid put any credence in them

    • Stephen T says:

      02:48pm | 14/11/12

      @Achmed:  The reality was that in the main it was bipartisan, the Coalition supported three out of the four courses of action implemented by the Government, there was only one area of contention at the time.  While I can understand you partisan feelings ultimately such loyalty to a political ideology is detrimental to the nation,  I can agree that despite their rhetoric the Coalition could only have provided one significant point of difference to the approach Labor used.

    • Fed Up says:

      08:15am | 14/11/12

      The Liberals surplus got Aust thru the GFC….it had nothing to do with Labor.
      Labor just wasted billions and now we’re all going to have to pay.
      You can’t keep living on your credit cards forever.
      All the cut backs in NSW and QLD can be blamed on Labors abhorent rule.
      If you want a healthy surplus dump middles class welfare and dump universal health care.
      Why should people earning good money get free health care.
      Redirect money wasted on those who dont need it to those living on the poverty line who do need.

    • George says:

      02:23pm | 14/11/12

      What!! Dump the LIberals middle class welfare - the baby bonus health rebate etc….what a slander on the great Liberal PM Howard and his Treasurer Costello.
      The Libs left $23 billion surplus…..the biggest problem with what Labor did while trying to keep Australians working - they trusted businesses and those businesses stole and rorted taxpayer money to line their pockets at the expense of other Australians.

      Lesson learnt - never let business have access to taxpayer money!!

      And that’s exactly what Abbott plans in his Dirct Action Plan - give the big business polluters taxpayer money from the budget…$3.2 Billion

    • Joe says:

      04:28pm | 14/11/12

      Yeah, let’s dump universal health care and go to a private system that is so efficient and cost effective like the USA… oh, wait? Last time I look, even those on good money can’t afford to cough up half a million plus if they get cancer.

      Agree about middle class welfare though. Unfortunately voters only care about the short-term and will vote out the party that dared to do it.

    • PJ says:

      05:02pm | 14/11/12

      yep, $50 Billion surplus. what a Legacy.

      If LNP win in Nov 2013, they’ll get $300 Billion debt and a $120 Billion Budget deficit black hole.

      Easy to see which is the better government during global economic strife.

      Some 27 European States now have conservative centre right Governments. they see this as a better alternative to get hem out of the poo. There are only 5 remaining Socialist Governments.

      France seems to spend it’s time sending the riot police after illegal immigrant settlement camps.

    • Esteban says:

      05:48pm | 14/11/12

      Joe. The two biggest lines of expenditure in the US budget are medicare and medicaid (They make defence look like loose change)

      As the Govt pumps more money into the system it causes medical inflation which means more money needs to be pumped in.

      Similarly the genisis of medical inflation in Australia is medicare.

      medicine was cheaper and more accessable prior to medicare.

      The arrangements for the poor or those without private insurance were a bit ad hoc but it still worked better tahn what we have now.

      Look where Governments meddle and you will see high costs.

    • AdamC says:

      08:38am | 14/11/12

      The alternative, at least in Australia’s case, is to grow our way out of fiscal strife by implementing some much-needed economic reforms. Remember when governments did that stuff? Outgoing productivity Commission head, Gary Banks, made a speech a couple of weeks ago (available at http://www.pc.gov.au/speeches) that provides a list of reforms the government could implement to improve growth and productivity.

      No word from the government on actually doing any of them. They will probably just cut defence again.

    • PJ says:

      09:05am | 14/11/12

      Our new Mates, the US have already expressed concerns about of Defence cuts.

      They’ve obviously got big plans for us.

    • GROBP says:

      10:14am | 14/11/12

      You’re in gaga land AdamC. I think you should broaden your reading.

      The past twenty years are a blip of madness where we’ve spent all of yesterdays money and all of tomorrow’s as well.

      Nothing will stop where we are certainly heading as a result.

      I’m sick of the deluded positive views of the economy of people on both here and the wider community. We’re headed for economic Armageddon just like Greece, the UK, Europe and the US, there is nothing more certain.

      Everyone kept saying we are different because we have mining. Okay, so now we don’t have mining what will the new caveat be, how are we different now?

      The day I heard people telling me a 600k house is cheap, alarm bells have not stopped ringing. Everywhere I’ve looked since that day has made the bells louder.

      Can anyone tell me, particularly you AdamC, where the money is coming from that eclipses all that we’ve spent from the mining boom, the massive personal and government debt plus the revenue from selling assets? It’s not going to happen.

    • AdamC says:

      12:07pm | 14/11/12

      PJ, I wouldn’t characterise the Americans as our ‘new’ mates. How old were you in 1942?

      GROPB, yes, yes, we’ll all be rooooned. Again.

      Firstly, as I have patiently explained to you before, the mining boom that is coming to an end was a mining investment boom. That is, it involved increasing the capacity of existing mines and building new ones. These mines will be operating and creating wealth for the next several decades.

      Second, I just do not understand where you get this bizarre idea that we have spent all of our money and now have nothing left. In reality, we are continuing to produce income and wealth, and will do so in the decades, centuries and millennia to come. While you are right that there is a significant amount of private debt in Australia, default rates are low and have been low across the cycle.

      If we were about to have a catastrophic housing bust due to bad loans, why hasn’t that happened already? Why are you so insistent on fixating yourself upon highly unlikely future catastrophes?

    • GROBP says:

      12:58pm | 14/11/12

      ………….”These mines will be operating and creating wealth for the next several decades.”……….

      I don’t agree and neither does the share market. With all the demand has come a lot of less expensive supply, mainly from Africa, Mongolia and South America.

      ……”spent all of our money and now have nothing left”………..

      85% of mining is foreign owned, huge amounts of farm land (no details of how much are known by the government). Most manufacturing is now done overseas, that tells me these companies are mainly foreign owned and or pay wages to people that are not Australian.

      …………..”In reality, we are continuing to produce income and wealth, and will do so in the decades, centuries and millennia to come”……..
      Then why would everyone be in so much debt? Why not use the income generated?

      ……….”default rates are low and have been low across the cycle.”…….

      Default rates don’t matter, what matters is that what has recently run our economy, consumption, is now not occurring because of so much debt all tied up in housing. It’s the same housing; it just costs twice as much. As that deflates and it certainly will, are all losing money (the exact inverse of what everyone cheered for as it went up). Don’t say oh well it’s back to where it started because all the extra money people thought they had they spent on good steak, holidays, TV’s and wine etcetera.

      …………”If we were about to have a catastrophic housing bust due to bad loans, why hasn’t that happened already?”………

      Stimulus and really ill-informed buyers. There may not be a bust, but a slow steady decline in price. Is it 8% so far, no one ever adds inflation to that, so 11%. ……600k house and you’re over 60k in the red already. Far more to come. See a little unknown (never heard the banks say that in their adds) mathematical fact is gearing works the same way but in reverse when values go down…Wait till that dawns on people.

      ………..”Why are you so insistent on fixating yourself upon highly unlikely future catastrophes?”……..

      The trend we are on if not diverted, will without doubt end like Greece. You can’t indefinitely spend more than you earn. When you add extra inactive people and selling productive assets and expect good results. If Australians and the government don’t change their ways it cannot end any other way but broke. It might take 5 or 50 years who would know but it will happen in my kids’ life time and I don’t like the thought of that.

    • GROBP says:

      01:15pm | 14/11/12

      ............“These mines will be operating and creating wealth for the next several decades.”...........

      Even if that’s true, they’ll be creating wealth for the foreigners who own 85% of them. Wages payed will come down in line with other industry because the hype and desperation is over.

    • AdamC says:

      03:49pm | 14/11/12

      GROBP, all of your comments are built on fallacies.

      “Mines are majority foreign-owned.” Who cares? They still create economic activity, tax revenues, employment and exports. That is all good. Also, Australia has been a capital-importing nation since 1788, so that is nothing new or scary.

      “Everyone is in debt.” Welll, some people are. People with mortgages, for example. But, if most of these people are happily servicing these mortgages, which they are, what is the problem? You are not thinking through what you are arguing. You are unnecessarily terrorising yourself with imagined bogeymen.

      “Debt levels have strangled consumption.” To some extent, but it is more a case of people foregoing spending to pay down debt. That has slowed the economy, but has also reduced or slowed indebtedness. So, which is it - are we impecunious spendthrifts wallowing in debt or tigh-fisted savers? You seem to think we are both at once!

      “There is no housing bust, but a slow decline in prices.” So what is the problem? Real declines in house rpices in and of themselves do not imperil the finance system or the economy. It is only where people default and banks are forced to sell properties at a loss that the housing market affects the real economy. By your own reckoning, we have little to worry about.

      Come on, GROPB, join the glass half full team. You know you want to. It might even improve your chances with the ladies ...

      (Note, for some reason, I have assumed you are a man. My apologies if you are actually a sheila.)

    • Mic says:

      10:25am | 14/11/12

      Or we could cut the neo-liberalism out of the nation’s political dialogue, shift the fiscal goal posts back to the centre - or even further to the left - and prioritise people rather than budget surpluses.

    • GROBP says:

      11:08am | 14/11/12

      Further to the left? WTF. Who would pay the taxes?

    • Gordon says:

      11:42am | 14/11/12

      Worked for Greece!

    • Big Jay says:

      11:46am | 14/11/12

      @Mic - I’m a left-leaner, “people before profit” kinda guy but even I would disagree with you.

      I disagree with the Liberal Democrarty party platform but I stole this from their website.

      “the LDP believes government should fund recurrent activities entirely through taxation and balance liabilities and assets to achieve the equiivalent of zero net worth.

      This about right, if you’re going to into debt make sure it is to buy a valuable asset. If the govt had used the stimulus better they’d be selling some of the assets they built and repairing the govt debt and deficit picture. However, unlike the LDP I’m prepared to suffer some deficits (on recurrent expenditure) during the downturns with a view to repaying it on the upswing.

      Try going into more and more debt each year to keep your wife and family happy and see how that turns out for you.

    • Jaqui says:

      12:49pm | 14/11/12

      And that will balance the books? Are you Greek perhaps Mic?

    • Shane says:

      03:22pm | 14/11/12

      Mic, our fiscal goals are already left of centre. How far do you want to go? Greece and Spain good role models are they, or did they too not go far enough left?

      A welfare state cant survive in the long run. You eventually run out of other peoples money to spend.

    • Monty says:

      10:40am | 14/11/12

      To compare the debt situation in Australia with that of the US or Europe is wildly misleading and to imply that Australia is in any sort of debt trouble or approaching a “fiscal cliff” like the US is plain old scaremongering. Our debt to GDP ratio is tiny compared to these other regions and our economy is currently in a much stronger position.

      Australia does need to look at its spending and means testing government handouts was a good start. But to in any way suggest we’re in a dangerous or critical position is silly.

    • GROBP says:

      11:05am | 14/11/12

      @Monty

      If we still owned producing assets what’ you’ve said would be true. However we don’t. We put all our faith, and all our future in mining. It was never going to end well. We sold too many assets, we accumulated too much debt. We thought Asians were going to toil in factories while we sat on our arses on Ipods eating cake.

      People cannot borrow any more money. There is nothing left to sell. Therefor the entire generators of growth over the past decade are gone, dead, finished, over.

      We will never recover from the asset sales and transfer of wealth to big business and foreign countries ever seen in the history of the world.

      Our government has let us down in an horrendous way. Time will very soon prove this. Can you not see the glaring signs?

    • BruceS says:

      11:21am | 14/11/12

      Thank you Jessica, I agree, except for the common error about the US overspending on Defence.

    • Shane From Melbourne says:

      12:07pm | 14/11/12

      Not only did John Howard turn Australia into a middle class family welfare junkie country, but the breeder subsidies helped induce a population boom at the time when another population boom is retiring so that a narrowing taxpayer base will have to support two non productive generations for a period of 20 years.

    • Dash says:

      03:17pm | 14/11/12

      Time to broaden the tax base! And stop the carbon tax compensation bullshit!

    • willie says:

      01:58pm | 14/11/12

      Don’t you know it’s genetic.
      This is thin privilege.

    • Esteban says:

      02:07pm | 14/11/12

      The tone of this article is welcome compared to the article that Jessica wrote only a month or so ago where she stated that our debt was easily managed or something similar.

      It is good to see Jessica break out of the grip of the lazy cut and paste brigade that make up 99% of the economic journalists of this country and probably around the world.

      Finally some journalists are using their own brains instead of reguratating Wayne Swann’s spin. Yes our debt is relatively low to the basket cases but it will not be easily managed without strangling the economy.

      Now Jessica if you want to consolidate your position in the 1% how about some research on the deal between Russia and China signed in Sept whereby Russia have agreed to sell any amount of oil that China wants in Yuan. China will then on sell oil in yuan to anyone who is williong to buy.

      This treaty is a very big step in unhinging the USD$ as the reserve or trade currency.

      The global ramifications of this in relation to debt ceilings and fiscal cliffs are significant indeed.

      In addittion to the massive implications for the USD$ and the capacity of the USA to maintain budet deficits funded in part by foreign bought treasuries,
      there are very significany Geo Political ramifications.

      Just for starters Iran will probably sell oil to China in Yuan thus getting around any US sanctions.

      By the way was it just coincidence that the deal was announced during the heat of the US primaries while we were distracted by riots about Mohamed being insulted or was it orchestrated like that so it went unreported?

    • Dan Lawton says:

      02:58pm | 14/11/12

      It’s Labors waste of money from illegal centerlink clients to pink bats and Climate BS . It’s all SOcialist engineering crap that costs into the hundreds of billions when seen over a ten year period . Labor/Green economic ideology is destroying private enterprise that they regard as a temporary evil. When the word sustainability is used I know the subject being discussed has been
      compromised with socialist / communist bad dog ideology.

    • sunny says:

      05:50pm | 14/11/12

      so we should strive for ..unsustainability?

    • pete says:

      06:31pm | 14/11/12

      “The Howard government must bear responsibility for blowing much of the proceeds of the mining boom on tax cuts and wasteful spending on non-means tested handouts.”

      That will go down as the most treacherous thing any government could have ever done because it’s the equivalent of handing out heroin to junkies. Anyone who tries to cut those junkies off cold turkey will be voted straight out.

 

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