TAFKAS’ budget 10c

Today, Australia’s Reagan and Thatcher inspired Treasurer will deliver Australia’s FY21 budget.  This notwithstanding that the financial year is already 4 months old.

There will be tax cuts but there will also be tonnes and tonnes of money thrown all over the place with questionable purpose and target.  There will be silly allocations for magic infrastructure which will require not only future debt servicing but also future maintenance costs.  From unnecessary school halls to unnecessary car parks to unnecessary light rails to unnecessary sporting facilities.

What there won’t be is serious supply side reform to allow the Australian economy to produce.  There won’t be regulatory reform or general economic reform or a withdrawal of government from areas it does not belong.  There will be plenty of sugar hits and not much more.

And all this spending will be paid for …. by our children and grand children.  And this in a nation with an ageing population demanding insatiable levels of ‘free’ health care and government benefits to be paid for by an emerging workforce saddled with record levels of public and private debt (including HECS/HELP burdens), a tax, RBA and supply constraint policy induced lockout from the property market, high marginal tax rates and a compulsory extraction of (currently) 9.25% of the income to pay for the lifestyles of the superannuation industrial complex.

There may be a case for fiscal stimulus but just because the political zeitgeist does not require discipline does not mean that spending should be ill disciplined.

Somehow, and we all know how, there has crept into our economic discourse this nonsense that economies grow from spending and this requires the government to splash out.  The economic luddites from the ABC to Nine Media to SkyNews will yabber on with advice to forget about savings and forget about your debt levels and go out and spend in the national interest.  This demonstrates a complete lack of understanding of what drives an economy and prosperity, and well explains the economic sewer we are swimming in.

A happy society, a prosperous economy and low unemployment are not the objectives of good government.  They are the byproduct of good government.  But a focus group, a private poll and a lobbyist will never tell you this.

To suggest, as will likely be suggested in today’s budget, that the solution to our national economic ills will be found in having a spend-a-thon is as wrong as suggesting that we can solve our debt burden by getting into more debt.

When Peter Costello suggested that parents have that third child for the nation, hopefully it was not for a policy of breeding a generation of indentured workers who can’t leave the country.

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19 Responses to TAFKAS’ budget 10c

  1. H B Bear

    There has never been a better time to be a Keynesian.

  2. Derp

    mmmm breaded workers.
    Delicious

  3. Neil

    And in 2007 the Commonwealth was debt free. The way to reduce govt debt is to start running surplus budgets but i suspect we will not see a surplus budget for a long long time.

  4. H B Bear

    Expect to hear a lot of nonsense about the government creating jobs. If this is a problem for you, tonight might be a good night to go and support your local public house, assuming you are able to.

  5. John Bayley

    Relax, TAFKAS old mate.

    The debts will never be paid off. That is by now well outside any mathematical possibility and nobody even pretends any more.
    Instead, as you say, they will spend, spend, and spend some more. All of them; whether Laboral, Repocrat or whatever.

    Did you notice at the Trump/Biden ‘debate’ that neither of them actually mentioned the debt/deficit once?

    Somehow I doubt that Trump is going to campaign on ‘eliminating the national debt in my first term’ this time around…

    Australia is no different, plus the Pacific peso is not the world’s reserve currency.

    Instead they will try to inflate it all away. Because ‘the government cannot default on debts issued in its own currency.’ Or something.

    Hence the constant BS about how we supposedly ‘need’ more inflation.
    Amazingly enough, I am yet to meet a person who wants higher prices on life’s necessities.

    The fact that the endlessly massaged ‘CPI’ continues to ‘prove’ that there is no inflation means that there will be more and more MMT-style ‘solutions’ – i.e. more money creation – wheeled out, until the ‘fiatsco’ system meets its well deserved catastrophic end.

    At that junction, an optimist would assert that the governing classes would wake up and go back to some sort of hard money.

    Being a realist myself, I think they’ll just reboot another incarnation of the same sh*tshow, this time without cash though, so the West’s conversion to our very own version of ‘1984’ will finally be complete; if with a few decades’ delay.

    The one positive to the above, if it can be called that, is that today’s young people may, on the whole, be less hurt than the old, whose lifetime savings are going to disappear, first in asset deflation, when the central banks finally lose control of the neo-fascist ‘managed’ markets they have created, and then in inflation, as the public finally realises that the dollars/euros/pesos etc have no actual value whatsoever and rush to get rid of them at any cost, for any tangible asset at all.

  6. MACK

    The reluctance of people to return to CBD jobs in Sydney and Adelaide shows it’s difficult to unfrighten people when you’ve scared the bejesus out of them. There’s a whole lot of psychology to happen over the next year and it’s not treatable with handouts.

  7. nb

    ‘A happy society, a prosperous economy and low unemployment are … the byproduct of good government.’
    Great line.

  8. H B Bear

    John Bayley – I fear you might be right. Maybe time to buy a wheelbarrow to do the weekly shop and weed the vege garden,

  9. Pyrmonter

    @ John B

    The debts will never be paid, but their real burden will fall. Governments will resort to inflation. Anyone who complains will be branded ‘unpatriotic’ or ‘selfish’ by those, of all quarters, who consider all legitimacy flows from majorities. Welcome to left populism folks … it would be easier to oppose if so many of its opponents hadn’t embraced Right-Peronism.

  10. mareeS

    Not gloating here, but Australia is in a pretty good place. Our kids are on 6 figure wages plus bonuses in private work,we are comfortably retired, through private business, most of our wider family are similar.

    We didn’t get here by happenstance, but it crept up on us as business and employing people through our working lives.

    We have done well by staff, doing it still in retirement via contacts to keep people employed. That is why private business works for people who are willing to work through hard times.

  11. liliana

    mareeS
    #3608911, posted on October 6, 2020 at 11:42 am
    The problem is finding people who are willing to work full stop. People with your attitude are increasingly rare. I have acquaintances whose tertiary qualified children refuse to work and prefer to sit on the dole – the reason – “job does not pay enough – I’m worth more”. I primarily blame our socialist education system which has indoctrinated a generation with an inflated sense of self-worth. But parents are also to blame, particularly those employed by the Government. Sick to death of hearing about “my rights and entitlements”.

  12. Inflation and financial repression. You can’t let the capital leave to avoid the silent inflation tax.

  13. jupes

    Both times Labor was elected and trashed the budget.

    I don’t think Labor is in government at the minute.

  14. jupes

    Am I living in a time-warp? How did that happen?

  15. Neil

    In 1972 and in 2007 the Commonwealth was debt free. Both times Labor was elected and trashed the budget. Howard is the only govt since 1972 to reduce govt debt. But Howard did have one advantage, he had some govt assets to sell. I find it hard to see anything other than increasing govt debt for years.

    Inflation may be the only way to make debt smaller

  16. Squirrel

    This is the phoney war/dark and hurrying days effort – the real ball-tearers will be a few years down the track, when the debt bomb can no longer be ignored and we come to terms with the new normal.

  17. mundi

    We all know how this will play out: There will be a decade of near zero growth while all regulated products will go through the roof in CPI terms. Just look at the price of: water, land, rates, power, health, child care, etc. etc.

    The winners will be those in the industeries getting the free hand outs (such as the infrastructure cash splash that is seeing unions bid up entry level worker wages to nearly $200k/pa.)

    The main purchaser of government debt bonds continues to be the super annuation industry. How they justify this is beyond me: I just left my super fund after the idiots decided to increase the holdings in gvoernment debt bonds, and move away from private companies because… its a recision. So they are basically saying the returns will be <2%?

    My mum has $150k in the bank, there was a time when this would generate 5%, now good luck finding 1%. No one believes money is worth anything – yet the same time no one has money.

    We are VERY close to a velocity money trigger and hyper inflation. It will happen when the interest rates drop so low that people won't have to make payments in any meaningful way, and the money instead of being hidden in government bonds to come due, will flood the economy, and cause asset buying panic.

  18. John Bayley

    The main purchaser of government debt bonds continues to be the super annuation industry. How they justify this is beyond me:..

    They are just getting ahead of the curve – before the government passes an obligation for them to hold a certain minimum of their funds under management in .gov.au debt.

    That this is on the cards is not even a secret. Numerous politicians have mentioned the ‘need’ for it, including that self-proclaimed contender for Wayne Swan’s “World’s Greatest Treasurer’ title, Paul Keating.

    Mind you, I don’t believe that with the wave of spending that’s about to hit us, even the super industry can corral the government bond market for too long.

    That distinction will inevitably fall to the RBA, who will, just like the Bank of Japan, effectively nationalise – and thus abolish – the government bond market, by buying almost all of it up using ‘money’ from thin air.

    You know, because ‘curve control’ et cetera. Apparently yet more free money is just what we need.

    And if that still does not work, there are always negative rates, like the ECB is using in Europe. They now pay banks 1% to borrow from them, so they would lend the money out. Because if you’re getting paid to borrow, any zombie can stagger along for ever.

    Extend and pretend, comrades!

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