“Cheap money is not the sustainable path to prosperity”

How fortunate this country is to have Glenn Stevens running the RBA. From todays Australian:

THE government should focus on productivity-boosting reforms rather than rushing to bring the budget to surplus, Reserve Bank governor Glenn Stevens said yesterday.

At the second of his twice-yearly appearances before the House of Representatives economics committee, Mr Stevens suggested further interest rate cuts were unlikely to help lift economic growth.

Mr Stevens said monetary policy was stimulating activity outside the mining industry but weak confidence, the lacklustre pace of reform and a high currency were retarding the growth rate.

‘There are few serious claims that the cost of borrowing per se is holding back growth … monetary policy can’t force spending to occur,” he said in Canberra.

‘Cheap money is not the sustainable path to prosperity.’

Not only is it not the path to prosperity, it is the road to ruin. But like so much else with economic policy, unless one understands how and why these policies work, others won’t be able to repeat them. Just the same with Peter Costello and his near-immaculate management of the Australian economy, 1996-2007, years that coincide with sustained prosperity, rising real incomes and an almost continuous fall in unemployment.

And funny enough, this self same Peter Costello was in the news today as he is about to take on the Chairmanship of the Future Fund, at the moment on a temporary basis. Of course, a great appointment, but this in particular caught my eye:

But Mr Costello . . . said the fund should only pursue investments that deliver a return, playing down suggestions it could be used for nation-building projects.

“Nation-building” projects apparently mean “loss-making” projects, and that’s by definition! You know, the kinds of things Labor specialises in. That is, projects that lose money, make us poorer but give themselves a warm inner glow as they spend our money even faster than we can earn it.

It’s a great pleasure to see a return to sanity, and if it really turns out that both the Paid Parental Scheme and renewable energy targets are to be wound back, things might really start to look up.

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13 Responses to “Cheap money is not the sustainable path to prosperity”

  1. Ant

    Show me a Labor initiated nation building project didn’t line the pockets of Labor cronies in unions and business – and, by extension, themselves.

    And they’re so brazen about it now that they don’t even care if they slap us in the face with it and rub our noses in it.

    The various desal projects are a good example – surely one of the most mind-numbling idiotic infrastructure initiatives imagineable. All justified with lies. All geared to enrich Labor mates for decades. All paid for by society’s suckers – us.

  2. blogstrop

    Peter Costello and his near-immaculate management of the Australian economy, 1996-2007

    But, but, according to the lefty scribes those were years of horror. They couldn’t wait to see the back of a perfectly competent government. And they still have their jobs despite assisting the degeneration we’ve just been through, and must now suffer the correction of.

  3. Rabz

    Peter Costello and his near-immaculate management of the Australian economy, 1996-2007

    But, but, Structeal Deficets!

  4. H B Bear

    The damage done to the national balance sheet since Costello was thrown out in 2007 is nothing short of criminal. There really cannot be any debate that KRudd-Gillard-KRudd and their slow learner Treasurer Swan were orders of magnitude worse than Whitlam.

    I hope I never see the likes of it again.

  5. Andrew

    You’ll recall in the question “why doesn’t Abbott666 wind back PPL?” I said he will -but why take in a broken promise when he can get the Lemonsucker to do it for him? He’s pretty much confirmed that now and everyone is happy.

    As for the structural deficit!! TM, good point Rabz. I can’t understand why MYEFO didn’t tell us what the Goose’s real exit number was.

  6. Token
    Peter Costello and his near-immaculate management of the Australian economy, 1996-2007

    But, but, according to the lefty scribes those were years of horror.

    If I understand the emoting (I will not insult the concept of logic by associating the thoughts with that fine institution) reducing the tax base the squander-monkeys could access is a bad thing*

    * PS: These people count on people forgeting that revenue (i.e. Tax Collections) grew by $200B pa after 2007 and expenditure (i.e. Squandermonkeys giving money to their clients & cronies) grew by $250B pa

  7. the sting

    But in yesterdays Herald Sun,National Economics Editor, Jessica Irvine still blames Howard and Costello for some of the budget problems we have today.

  8. .

    I wonder what Homer Paxton can tell us about how he is a middle of the raod voter but the ALP never has a structeal defecit, but can’t deliver an actual surplus, but vice versa for the LNP.

  9. Louis Hissink

    Cheap money is like playing the game of monopoly and someone has the bright idea of grabbing the money in the other, unused game of monopoly in the attic, thereby making making everyone richer. Cheap money, no?
    Except that the housing stock etc, those tokens used in the game to buy and sell, haven’t increased in quantity, so while being numerically richer in money, the purchasing power of the now doubled volume of money, still only buys the same stuff.

    I wonder if the UI’s actually played the game of parlour game of monopoly during the childhood? Probably not as it would be PIC in the first place to actually admit owning such a game.

  10. HK_Brother

    “Nation-building projects”.

    The Left’s favourite words. Translated, its: “Woohoo! We get to blow taxpayer’s money! Let the good times roll! Quick! What’s the AWU, etc number? We need to get all our union masters involved.”

    In reality? Spend money as most inefficiently as possible while using the “buddy system” to help fill the big union coffers. As a general rule, whatever they promise in terms of completion date; double it.

    After going through MYEFO, I can safely conclude that Former Treasurer Wayne “The Silly Goose” Swan is indeed the “World’s Best Incompetent Treasurer”.

  11. Jock

    Steve and Sinc, I notice in the UK Tele that Ambrose Evans – Pritchard is claiming that QE has been a great success as opposed to EU austerity. Would love yr comments. Personally I dont think there was real austerity in the EU, and he forgets that the UK did practice “some” fiscal restraint itself (mild though it was). To say the US is a success is a long shot.

    Over to you guys.

    Jock

  12. You save nation-building programs for when you actually have a nation to build. Australia is largely built – what remains to be done is mostly either upkeep (still important) or tinkering around the edges, in regard to which government money needs to be spent very wisely and very carefully, and strictly in accordance with the needs and wishes of the people for whom the building is being done.

    Cf. the Catholic/Private vs. public arms of the BER. Whether or not you thought the money needed spending in the first place, there’s no doubt who got the better deal and why.

  13. Andrew

    Cf. the Catholic/Private vs. public arms of the BER. Whether or not you thought the money needed spending in the first place, there’s no doubt who got the better deal and why.

    But, but – the extra 8 weeks THINKING about school needs would have seen AUS plunge into a Great Depression! We had to get the money into The Economy (defined as “teh building unions)! We copied Spain, and they were going great!

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