Debt

It is now beyond doubt that the 2012 US presidential election will be all about the US economy and which candidate can convince the majority of voters that he or she can do the best job of managing it. If you find this a depressing scenario you are not alone.

Virtually all international media coverage of America’s recent debt ceiling crisis carried with it a sense of disbelief as to how the United States could come so close to defaulting on its debt obligations when its capacity to pay them simply required a rubber stamp.

However the incredulity of so many of the world’s political commentators reveals more about their lack of basic knowledge of American history, and in particular how powerful the folklore of the “Founding Fathers” is to many citizens of the United States.

Continue reading "Why the US has a Tea Party and Australia really doesn’t" »

We shouldn’t lose sight of the fact that Australia is still in a “different” economic league to the rest of the world and there are five rocks underpinning those solid foundations.

The global financial turmoil is definitely a worry. Many are saying it’s based on fear… and they’d be right.

But it is also based on reality. Some of the economic numbers coming out of the US and Europe are seriously bad. So bad that the global market reaction has been justified.

Continue reading "Aussie economy kicking goals, a league above the rest" »

Note: Liberal MP Sophie Mirabella and Labor MP Richard Marles are among our favourite contributors to The Punch, and we have asked them to write a piece every Friday during this five-week election campaign giving their take on events.

The most talked-about aspect of the federal election campaign so far would have to be Labor’s vacuous and meaningless slogan “moving forward”. 

Ms Gillard is too scared of the mess she left behind as Deputy Prime Minister to look back.

She cannot ask the Australian people to vote for her as Prime Minister when she is unable to defend her credentials as Deputy Prime Minister. And while I may earn the ire of many by even mentioning it again - given the Prime Minister’s nauseating repetition of the slogan (dubbed “mo-fo” by the twitteratti) – I have a suggestion that would lend it some meaning and accuracy. A simple addendum: “Moving forward at a cost of $100 million every day”.

Continue reading "Liberal diary: Julia’s moving forward at $100m a day" »

Well, I hope you all feel comfortable that you now owe $140 billion. If you take our population as approximately 22 million, that means you owe in excess of $6300 for each man, woman and child in Australia.

I will keep talking about debt until people realise the dangerous position it puts us in. We are borrowing in excess of $1 billion each week. We see every night on the news the problems of other countries that have not dealt with their debt but have waited for the inevitable when the debt deals with you. How could we be so foolish as a nation to be mounting up debt the way we are?

Then, to all intents and purposes, nationalise half of the sector of our economy which has actually kept us from the jaws of recession – the mining sector. This is something that would be more appropriate for Hugo Chavez or Evo Morales or Castro in Cuba. Australia hasn’t experienced this sort of insanity since the failed approach by the Labor party when they decided to nationalise the banking industry in 1949.

Continue reading "‘Til debt do tear us apart" »

The old fashioned, but I think correct view, of spending public money is to approach it as no different from that of spending your own money. Amongst a myriad of quotes confirming this view, Franklin Roosevelt summed up the principle by saying “Any government, like any family, can, for a year, spend a little more than it earns. But you and I know that a continuation of that habit means the poorhouse.”

Government’s that do not manage costs end up costing the taxpayer. The pink batts disaster is the most prominent example. We are now paying to rip out or fix much of what has been installed.

The 19th century French economist, Frederic Bastiat, once suggested, in jest, that one way to stimulate the economy would be to break shop windows. At least the regulatory standards in the glazier industry may have been more up to scratch!

Continue reading "The debt elephant in the operating room" »

Watching Kevin Rudd exhort the nation to work harder to deliver greater national productivity reminded me of a university attack that humanities students used to level at graduating students in the engineering faculty.

Arts students used to mock engineering graduates for what they claimed was an inability to communicate beyond formulas and equations. 

They used to assert engineers would say on graduation: “Last year I couldn’t spell enganeer, this year I are one.”

Continue reading "Hard lessons Rudd is learning about the economy" »

More data today suggest the national economy is in a holding pattern. More than 21,000 people found themselves out of work in June, a rise of just 0.1 of a percentage point in the national unemployment figure.

The Reserve Bank cut interest rates to 3 per cent in April and hasn’t budged them since. And this week the Fair Pay Commission,  in defiance of the government and unions, effectively gave low-income earners a pay cut when it froze the minimum wage. The commission argued that it would cost jobs and, as Clive Mathieson pointed out this week, jobless people can’t help the economy as they have zero money to spend.

These consumer sentiment figures show that significantly more Australians are feeling upbeat rather than gloomy about the economy. This is despite a range of forecasts - from banks and the federal government - predicting significant job losses over the coming year.

The unemployment figure today was 5.8 per cent. The crystal ball-gazers say it’s heading for around 8 per cent. Clive also pointed out recently that economists’ predictions are often useless and change tack with the economic winds.

There may yet be some nasty surprises as cuts in business budgets for the new financial year, which started just eight days ago, start to bite. Today, though, I’d like to ask where you think the economy is heading over the next six months. Are we out of the woods yet?

The debate the government deficit reminds me of the slogan that The Sheep from Animal Farm chanted in support of The Pigs: “Four legs good, Two legs bad”. Anything The Pigs did was OK, because they were Animals, and therefore good. Anything Humans did was not, because they walked on two legs and were therefore bad.

Ditto the debate over the debt levels being accumulated by the Federal Government in response to the Global Financial Crisis: it seems that Government debt is “two legged”, while private debt incurred is “four legged”.

Continue reading "Private debt is the muddy pig in the farmyard" »

I often get asked what will be the lasting effects of the Global Financial Crisis and the Australian recession on Australian attitudes and behaviours. What will be the lesson to be learnt from all this?

In many ways, it is early days for Australian consumers. Sure the finance media has been full of bad news for over twelve months.

But up until the end of January we were still finding that consumers were taking a cautiously optimistic approach to the economy.

Continue reading "Paying off credit card better than $10,000 payrise" »

The battle lines in national politics have now been drawn along a fault line summed up by two four-letter words: debt and jobs.

In the one corner we have the Rudd Government, justifying an audacious program of pump-priming in order to protect jobs; in the other we have the Opposition, telling us it’s all about debt.

The key to understanding the jobs versus debt debate is that this is not an argument about economics – it is a battle to manage the national agenda.

Continue reading "Debt versus jobs: battle lines drawn for next election" »

Update: watch Rudd’s limp Lateline performance here

HERE’S a quick test. Read the following words out loud:

Three.
Hundred.
Billion.
Dollars.

Did you succeed? Congratulations! You could be in with a chance of doing a better job at levelling with the Australian people than the current Prime Minister.

Kevin Rudd was collared on Lateline when asked to name the peak level of debt that Australia would face according to the current plan as outlined in the federal Budget last week.

Continue reading "It might be a bad number, but surely the PM can say it" »