It’s not Rocket Science
The shortly to be released Mid-Year Economic and
Fiscal Outlook (MYEFO) for 2014/15 is expected to tell us what we
already knew. There is a blowout in the current budgeted deficit from
$29 billion to $34 billion. By any measure one could have seen that
coming as far back as June 2014.
Furthermore, budget deficits projected in the forward estimates
through to 2017/18 will be exceeded as well. Again, no surprise there.
Reduced revenues, largely in the mining sector, and a host of other
miscalculations have led us to this point which means the much sought
after surpluses that the present government so desperately yearns for,
will not be happening.
Is anyone surprised? If they are, they shouldn’t be.
What it means in very simple terms is that the government is spending
more money than it is taking in. Well so what? With the private sector
not spending what they were expected to, the government should be
spending more. That’s how our economy should work. But don’t tell Joe
Hockey or Mathias Cormann that. They think government should spend less
and tax less all the time.
In a perfect world they might be right but the economies of the world
haven’t been perfect for 100 years. And they are not going to start
now. Joe Hockey is a captive of neo-liberal economic philosophy
proffered by conservative think tanks and business lobby groups that
thrive on surpluses.
Why?Because continued surpluses mean continued unemployment at a level
sufficiently high enough to control wages growth. Joe Hockey’s austerity
budget will only serve to redirect national income away from working
families and increase the income of the already wealthy in our society
through company profits, higher share prices, imputation dividends and
so on.
Surpluses undermine economic growth when they are achieved by
austerity measures which is what Hockey et al, are trying to impose.
That is the backward, twisted nature of neo liberal economics. All they
are going to achieve is a reduction in domestic spending power.
When people don’t spend, business slows and unemployment and
underemployment grows. It’s not rocket science. MYEFO will likely show
that the combined unemployment and underemployment rate is now at 15%
and rising. That is not a signal to try and achieve a surplus.
If our most important trading partner, China, continues to slow down
its growth rate, Hockey will continue his austerity policy which will
mean even slower growth, or no growth for us, leading to recession,
increased unemployment and underemployment. How stupid is that?
TheAustralian public have been deceived. They have continually been led
down the garden path by politicians and media economists giving the
wrong advice. The metaphors of doom have been allowed to overshadow
responsible reporting with crisis headlines like: ‘budget emergency’,
‘alarm bells are ringing’, ‘budget black hole’, ‘burdening our
grandchildren’, ‘mushrooming budget deficit’, ‘unsustainable spending’,
‘spending like drunken sailors’ and a dozen others I could mention.
But no one seems willing to give the credit where it is due.
In 2008 the world faced the mother of all economic meltdowns all of
which was due to the excessive greed and the most irresponsible actions
piloted by sections the wealth sector. What did our government do under
Kevin Rudd’s leadership? It ‘spent like drunken sailors’.
And what was the result? We were the only OECD country not to fall
into recession. Our GDP increased, employment held steady and we were
the envy of a world that is still struggling with the aftermath of that
meltdown today.
And who opposed Kevin Rudd’s stimulus measures? The present government. And what is their solution today? Austerity. What fools!
What should we be doing?
In the words of Bill Mitchell,
Professor in Economics and Director of the Centre of Full Employment
and Equity (CofFEE), at the University of Newcastle, NSW, Australia, we
should, “Get back to doing what governments are elected to
do and that is advance public welfare and stand against the vested
interests that seek to unfairly gain income and advantage at the expense
of the masses.
Contrastthese words with what you are going to hear from Joe Hockey, Mathias
Cormann other government members over the next week or so when MYEFO is
released. Then go and bang your head against a brick wall.
It’s not rocket science.
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