Catallaxy Files

There were two interesting articles today, one by Michael Stutchbury and one by Terry McCrann.

Both despair over the lack of reformist zeal by the Government, and its fiscal profligacy.

The Rudd Government is more profligate than Whitlam, and less reformist than Fraser. That qualifies it as perhaps the worst government in Australia’s history.

Where is the courage exhibited by Whitlam, Hawke, Keating and Howard?

When Treasury Secretary Ken Henry bemoaned the lack of influence of Treasury in a famously leaked speech of March 2007, did he consider that Treasury would in fact be weakened under the Rudd Labor Government? That it would be used as an excuse for fiscal profligacy and economic luddism?  That it would not rise to the defence of 25 years of economic reform?

To be sure, Treasury appears to be more influential with the present Government, with Ken Henry being wheeled out as a de facto Cabinet minister. The weak Treasurer Swan clearly leans on Henry to a considerably greater extent than the competent Peter Costello ever did.

But has Treasury sold itself out for three pieces of silver? Because previous generations of  Treasury officials would not be actively supporting an incompetent government frivolously frittering away the national treasure. For a place in the sun, has it compromised its principles?

Surely senior Treasury officials must be privately disappointed in the present government. While the previous government may have sought advice elsewhere, at least it soundly ran the economy and undertook some useful reforms.

By contrast this Government has deficit financed wasteful spending that hasn’t even had a pretense of rigorous analytical work. It is full of spin and lack reformist zeal.

Bring back the old fashioned Treasury officials who eschewed public attention while being highly focused on the national balance sheet and sound economic reform. The present cohort of Treasury officials once could claim this mantle; unfortunately they did not follow Odysseus by tying themselves to the mast to escape the Sirens. Instead they were attracted by the thrill of public acclamation and attention. This is a great shame to the body politic. It is a great shame to our national interest.

Only the people of Australia can solve this problem.

We are often very critical of David Gruen here at Catallaxy, so I thought I’d link to a comment he made that I totally agree with.

Dr Gruen—What the net foreign debt and net foreign liabilities demonstrate is that for a very long time Australia has tapped foreign savings to boost our domestic investment. Australia as a country saves about the average of the OECD. We are not a low-saving country. We have higher savings than many of the countries that you mentioned, like the US and the UK. But we have an extremely high level of investment. That has been true for 25 years. Australia’s level of investment has exceeded our level of savings by about 4½ per cent of GDP since the mid-1980s and, as consequence of that, our stock of net foreign liabilities has been rising as a share GDP over that time.
This borrowing, which is almost completely done by the private sector, has enabled Australia to invest more than it would have otherwise been able to. Recently, a large part of that has been funding a big mining boom. To the extent that it is funding profitable investment, particularly in the traded sector, I think it is something that will expand Australia’s productive capacity over time and I do not think it is a worry. It certainly means that it is imperative for Australia to keep the confidence of international capital markets—that is absolutely true. And it is certainly the case that the global financial crisis was a stress test for the global financial system and it is also very clear that Australia retained the confidence of the global financial markets at a time when other countries were coming under severe strain. I think it is something that we need to keep our eye on, but I also think that it is to a considerable extent a sign of the rest of the world’s confidence in investing in Australia.

Barnaby Joyce’s next question is also exactly correct, but it’s not Gruen’s place to answer such questions and he side-stepped it.

Senator JOYCE—What I am saying is: shouldn’t the government now do the prudent thing and address some of those pressures by reducing the Australian government’s requirements on borrowing, otherwise we will have the government also putting further pressure on it?

Wayne Swan and Kevin Rudd should answer that question.

Update: Federal net debt and the underlying budget position.

The media like to portray Barnaby Joyce as a loose cannon – I don’t agree with all his views – but I think he’s been asking some good questions at Senate Estimates.

Look at the pictures, we’ve seen them before, and then read the transcript.

Senator JOYCE—The large hole that you say was there in revenue—what was the predominant cause of that? What sector of the economy did that revenue stream—
Dr Henry—There were two principal contributors. We were thinking that a third would also turn out to be quite significant, but it did not turn out to be. The first two contributors were capital gains tax receipts—that is, a very big reduction in capital gains tax receipts—and company tax receipts. We were not so long ago forecasting that the unemployment rate would rise a good deal higher and that would have consequences for withholding tax receipts from individuals, but that effect has not been as large as we had at one time thought it would be. So the two largest components would be capital gains tax and company tax.
Senator JOYCE—Have you factored into your budget the current blow-outs that are becoming apparent in the stimulus programs?
Dr Henry—The most recent publicly available figures, as I said earlier, published in MYEFO. They take full account of all known information as of the date of publication of MYEFO—back in December, obviously enough—and, as I indicated earlier, we and the department of finance are monitoring outlays in revenue collections continuously and, on a very frequent basis, providing updated forecasts, estimates, to the government.
Senator JOYCE—For instance, the $850 million blow-out in the ceiling insulation and solar panels appropriation—has that been factored in?
Dr Henry—As I said, whatever is happening on the outlay side of the budget is being factored in terms of our frequent updating of the government on the fiscal position.
Senator JOYCE—Has the $1.5 billion blow-out in school halls been factored in?
Dr Henry—I have nothing to add. I have said the same thing three times, now, I think.

As I keep saying, the government has a spending problem.

Senator Scott Ryan (Lib, Vic) asked some tough questions about internet filtering at Senate estimates the other day. It turns out our glorious leaders have internet filtering up and running in Parliament House.

Senator RYAN—I have noticed over the last few months—I hasten to add, by looking at entirely appropriate websites—that it seems to pick up some particularly odd things. For example, it was blocking the Punch website at one point. You may know that for those of us who live in Melbourne it is relatively common that our trains do not seem to work in late January, once it gets over 32 degrees. At that time the filter was blocking the train timetable website, Metro trains. One of my colleagues told me it blocked a travel website, which it increasingly seems to be doing, when someone was trying to make travel bookings. How do you oversee what this thing is picking up? An article about the new Apple iPad was blocked as a game, and it blocked what was on a particular day a commonly used website across Melbourne. How do you oversee this? Getting individual sites unblocked is a particularly laborious process. If you need to use a website, you often do not have time to do that.
Mr Kenny—We replaced the web filter product last year. It works essentially on a list of known sites.
Senator RYAN—Like punch.com.au?
Mr Kenny—For example. I am not suggesting that Punch should or should not be there. What I am saying is that it works on a series. I have not heard, prior to your comments just now, anybody having had concerns. We will look at it and talk—
Senator RYAN—I understand, Mr Kenny. That is because I know a number of people will then jump on their personal phone or personal computer, because going through 2020 to get a website unblocked—and I have had new sites blocked; I am now compiling a folder of these particular printouts when sites get blocked—does not particularly fill us with a great deal of faith in a proposed national internet filter. But can you have a look at this as soon as you can?

Perfectly understandable of course. The federal government doesn’t want anyone reading News Ltd publications or the Melbourne train timetable. Each, in their own way, undermine the longevity of an ALP government.

Internationally acclaimed historian and Harvard professor Niall Ferguson will deliver this year’s John Bonython Lecture for The Centre for Independent Studies. Author of bestselling The Ascent of Money: A Financial History of the World and presenter of the same documentary series, Ferguson is famed for his ability to make the baffling accessible, exploring the origins of money, globalisation, power and financial crises with clarity and expansiveness. Ferguson will make his address at the Annual CIS Dinner in Sydney on Wednesday, 28 July 2010.