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Australian governments face a decade of budget deficits

Structural changes in the economy are likely to leave Governments across Australia facing budget deficits of around 4% of GDP for at least the next decade, according to research released today. The Grattan…

Without considerable changes to Australia’s fiscal policies, both state and federal governments are likely to face significant budget deficits for the next ten years. AAP

Structural changes in the economy are likely to leave Governments across Australia facing budget deficits of around 4% of GDP for at least the next decade, according to research released today.

The Grattan Institute paper, Budget Pressures on Australian Governments, suggests it could be a long time before Australian governments post a collective surplus.

While the budgets of the Commonwealth and the states are forecast to be close to balanced within the next few years, our research shows flagging revenues and continued spending pressures have put them on track to post annual deficits of around 4% of GDP within a decade.

The greatest pressure comes from sustained increases in health spending. Over the past decade, in real terms, governments spent an additional $43 billion on health. At this rate, government spending on health will rise by 2% of GDP over the next decade. Contrary to popular belief, this is not primarily because of the ageing population but is driven by changes to the practice of medicine. Australians of all ages are seeing doctors more often, having more tests and operations, and taking more prescription drugs. They are living longer, better lives, but someone has to pay for it.

Spending on school education also rose substantially in real terms, although to date it has done little to improve student performance. Welfare expenditure grew more slowly, but only because of low unemployment and slow growth in benefits for Newstart, Youth Allowance and parenting payments. The other three large categories of welfare spending – aged and disability pensions and family support – all grew by around 50% in real terms over the last decade.

As with health, demography is not the major driver of increased aged pension spending. Most of the growth above GDP resulted from government policy choices to increase pension benefits.

Real increases in government spending 2003 to 2013 (2013 $ billions)

Grattan Institute

If these trends continue, they will increase welfare expenditures by another 0.5% of GDP. Welfare spending could also grow if the end of the mining boom brings an increase in inequality and an end to rising real incomes. Overseas these have led to increased pressure for welfare payments.

Increases in costs are not the only pressures on government budgets. Underlying revenues are weaker than they seem. Company and mining taxes, and carbon price revenues are likely to be 1% of GDP – or $15 billion a year – less than current forecasts. Current revenues are also inflated by the mining boom and Australia’s high terms of trade. If, as many predict, minerals prices fall, revenues will fall by another 1% of GDP.

Finally, the federal government and opposition have both raised expectations of substantial new expenditures on the National Disability Insurance Scheme, schools, additional paid parental leave, and carbon Direct Action, among other policies. Even a subset of these could well cost 0.5% of GDP.

Over the economic cycle of boom and bust, balanced budgets are much better than the alternative. Persistent government deficits incur interest payments, limit future borrowings and, as many European countries are learning, drastically reduce the capacity to fund services and programs. Deficits can make it hard for governments to spend to overcome an economic crisis, and can load a debt burden onto future generations. Given all the problems persistent deficits cause, why do they exist? Very often, the answer is politics.

Governments invariably find it hard to run a surplus, even in good times. The temptation to please voters and spend money is just too great. In Australia, voters have come to expect policies that leave no losers.

With these pressures, responsible leaders will need to find 4% of GDP in savings and tax increases to balance their books by 2023, That will require governments to make savings and increase taxes to the tune of $60 billion a year in today’s terms. How can they do this and is it likely?

The signs aren’t good. At a forum organised by the Australian Financial Review late last week, shadow treasurer Joe Hockey — who pledged in January that a Coalition government would deliver a first-term surplus — acknowledged that such an outcome would be unlikely. Instead Hockey emphasised the importance of being prudent. “We’re not going to go down the path of austerity simply to bring the budget back to surplus because it would end up being a temporary surplus depending on how big the deficit is that we inherit,“ he said.

Potential deficit of Australian governments (percent of GDP)

Grattan Institute

Smaller government is not necessarily the answer. Australian government spending as a proportion of GDP – 34% – is low by OECD standards. Globally, there are big governments that run surpluses and small ones that are persistently in deficit. While increasing productivity and participation are good ideas, they are also unlikely to solve the problem.

We will have to leave more options on the table. Health, education, welfare, defence and transport account for more than two thirds of government revenue.

Commonwealth, state and territory governments expenditure by policy area, 2012-13

Grattan Institute

To retrieve a budget deficit equivalent to 12% of government spending, cuts to some (or all) of these areas are inevitable. We cannot afford – as the Gonski reforms are suggesting – to guarantee continued growth in education spending without searching for efficiencies. Similarly, we will need to look harder at how health services can be delivered at lower cost.

History suggests that the only way to improve budgets is through tough policy choices. That does not mean politicians have to slash and burn. But they do have to change political culture.

Over the last decade, governments have tended to “buy” reform, accompanying any budget pain with a budget gain. The GST, the carbon pricing reforms, and school funding all came with promises that all but the wealthiest would be “no worse off”. In a decade of rising government revenue, exceptional economic growth, and rising prices for Australian minerals, governments could afford this approach.

The future will be more difficult. Clawing back a budget deficit of 4% of GDP requires that everyone bears some budget pain. Governments will have to sell this message. This will be politically difficult, but the alternative is unsustainable: budget deficits that will be even more painful to reverse in the future.

Australia’s strong economy gives our governments more options than many of their overseas counterparts. But they need to explain to the public why balanced budgets matter, for our current prosperity and that of future generations. Everyone will need to give up something. Which brave leaders will step forward?

Join the conversation

199 Comments sorted by

  1. Jerry Cornelius

    logged in via email @hotmail.com

    The author bases his analysis on the premise that the Federal Govt. must either tax or borrow Australian dollars (A$) in order to fund its expenditure. This is false.

    The Australian Federal Govt. is the monopoly issuer of a fiat currency that is floated on the international money market. The Australian government creates the A$ money supply by spending A$. They do not tax in order to get revenue. The Aust. Fed. Govt. is not revenue constrained because it creates the money supply. There is no situation…

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    1. Greg North

      Retired Engineer

      In reply to Jerry Cornelius

      Your belief in the government being the creator of the money supply Jerry would seem to be on the premis that it just keeps printing more and more money to fund deficits.

      That may be fine if you do not want to be concerned about the continual falling in currency value and likely hyper inflation it could cause.

      Tax revenue may not be in a store or a bank but it is used to balance borrowing needs and in the case of where debt has already been created, any excess can go towards repaying of debt.

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    2. Mike Stasse

      retired energy consultant

      In reply to Greg North

      Yeah....... I've notied the dollar fallin in value...!

      What you have to remember is that currency values are RELATIVE. The AU$ is up on the US$ because IT is falling in value from all that quantitative easing....

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    3. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Greg North

      In relation to hyper inflation, 1920s Weimar is the poster child for that and it's worth understanding how that happened and what's different about our situation.

      Firstly, the Weimar govt was trying to pay off a debt: the reparations from WWI.

      Secondly, the debt in question was denominated in foreign currencies: the US $, Sterling, etc.

      The third fact, stemming from second, is that in order to redeem the debt the Weimar govt. had to buy stocks of these foreign currencies.

      The fourth fact is that they did this by buying them, using Weimar-issued Reichsmarks.

      So the problem for the German government was that they were trying to pay a debt denominated in foreign currencies. Unless our government starts issuing debt denominated in a foreign currency we will not run into this problem.

      For more on the cause of demand pull inflation, see my reply to Ian Cheong below.

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    4. Ted Stead

      Consultant

      In reply to Jerry Cornelius

      "A surplus is a symptom of a contractionary fiscal policy."

      Not necessarily. In Australia's case we run a permanent current account deficit, and also save a proportion of our income, so other things equal, then yes, a budget surplus would be contractionary.

      However, if the private sector was loading itself up on debt, then the increase in aggregate demand and associated tax receipts would allow the government to run a surplus whilst still taking a expansionary position. Indeed, it was this situation that allowed the Howard government to run budget surpluses.

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    5. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Ted Stead

      Yes, you are correct about the Howard govt's surpluses. But note that the massive expansion of household debt is what drove the GFC.

      You actually touch on one of the key issues here with private sector debt, and more specifically household debt. Between 1945 and the mid 1970s, productivity growth and wages growth in this country basically kept pace with each other. This allowed for a constant increase in living standards without inflation. This cycle wasn't broken until the cost shocks imposed…

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    6. Garry Claridge

      Systems Analyst

      In reply to Jerry Cornelius

      Re: "...Between 1945 and the mid 1970s, productivity growth and wages growth in this country basically kept pace with each other."

      I note that this is the period of the Bretton Woods system. Is this coincidental or a significant factor?

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    7. Mike Stasse

      retired energy consultant

      In reply to Garry Claridge

      It all went pear shaped when the gold standard was abandoned. If gold was valued according to the US debt, it would be priced at about $300,000 an ounce!

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    8. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Garry Claridge

      It's coincidental.

      That period of growth was underpinned by governments in the West recognizing that govt. has a major role to play in maintaining full employment. They managed demand - via fiscal policy - to achieve that.

      You can see this understanding clearly enunciated in the charter of the Reserve Bank of Australia from 1959. It says its main objective is to support full employment. That charter is still in force, although today the RBA actually targets price stability in the mistaken belief that there is some 'non-accelerating inflationary rate of unemployment', or NAIRU. In other words, our main economic institutions maintain a buffer stock of 5% unemployment in order to aim for an inflation target.

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    9. Bob Down

      logged in via email @bigpond.com

      In reply to Jerry Cornelius

      Nailed it. Now get to Canberra and educate them.

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    10. Gary Murphy

      Independent Thinker

      In reply to Jerry Cornelius

      It is true that a government that is in charge of its own currency can create money and hence has no chance of actually going bankrupt (financially).

      The trouble arises when politicians start to see it as the easy way out and start doing it on a large scale which leads to inflationary spirals and associated instability.

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    11. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Gary Murphy

      'The trouble arises when politicians start to see it as the easy way out and start doing it on a large scale which leads to inflationary spirals and associated instability.'

      There is no reason that government spending should automatically cause inflation. Demand pull inflation will occur when the economy is near its capacity constraints and the government keeps adding to aggregate demand by spending. We are not near that point with 12% labour under utilization.

      The other kind of price instability comes from cost shocks like the oil crisis of the 1970s, or the oil price rise in 2000-2001. No national government can control those kinds of external shocks, but what's important is to distinguish between those and the sort of 'demand pull' inflation about which the mainstream economists incessantly witter.

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    12. Ted Stead

      Consultant

      In reply to Gary Murphy

      "The trouble arises when politicians start to see it as the easy way out and start doing it on a large scale which leads to inflationary spirals and associated instability."

      This is very true, but it's a better conversation to be having than whether we can "afford" to have everyone in employment or not, as of course we can.

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    13. David Arthur

      resistance gnome

      In reply to Jerry Cornelius

      Jerry, my problem with your discussion is that ongoing deficits can only be sustained by interminable growth. On a finite planet, all growth other than technological development will ultimately come up against capacity constraints - either resource depletion, or no room left into which expansion is possible.

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    14. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to David Arthur

      Not all economic growth is bad David.

      Just suppose for example Australia gets an attack of common sense and entrepreneurial gumption and gets itself into solar thermal power plants, or builds a better wind farm, or even solar PV (but I reckon the Chinese have got a mortgage on that) ... lots of jobs, lots of potential growth and exports - all the hallmarks of economic growth - but in a sensible direction. And over time leading to a lighter footprint and a decoupling of economic growth from finite fossil fuels.

      It's not economioc growth we need to be afraid of - it's keeping on doing the same old stuff the same old way.

      We actually need economic growth in a hurry - but growth towards the light rather than the darkness, No?

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    15. David Arthur

      resistance gnome

      In reply to Peter Ormonde

      Thanks Peter - I classify a shift to renewable energy as technological progress.

      Here's another bit of technological progress with which we could do:
      build the processing plants so as to export aluminium, iron and steel rather than alumina and iron ore. My estimate is that we'd be between $150 and $160 billion better off per annum - and we'd have less Australians twiddling their thumbs on disability pensions.

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    16. Mike Stasse

      retired energy consultant

      In reply to Peter Ormonde

      There's only one problem with that Utopian renewable future... it's only doable with fossil fuels. Renewable energy is utterly 100% reliant on oil gas and coal. Not one of the materials, be it glass, silicon, stainless steel, aluminium, copper (let alone plastic insulation) can be mined, manufactured or purified without fossil energy.

      Switching to renewables merely depletes fossil fuel sources even faster, and worse, once they've run out, then it becomes impossible to repair/replace them!

      I appreciate that for anyone who hasn't yet come across the "energy cliff" concept it is hard to get around the idea that collapse is impossible to stop, but do yourself a favour and read this......

      http://damnthematrix.wordpress.com/2013/01/18/more-on-the-energy-cliff/

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    17. David Arthur

      resistance gnome

      In reply to Mike Stasse

      Mike, mineral resource extraction may need fossil fuels at present, but it need not always be that way. I suggest you have a look at Julian Cribb's article in the April 2013 edition of Australasian Science, which mentions progress in developing algae for fuel.

      I also recommend keeping up with developments in alternative fuels: http://www.sciencedaily.com/news/matter_energy/alternative_fuels/

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    18. Mike Stasse

      retired energy consultant

      In reply to David Arthur

      "I also recommend keeping up with developments in alternative fuels"

      Mate...... I do almost nothing else now I have the easy life.... Energy and especially alternative energy is my obsession. Once you understand what a PRIMARY source of energy is, and once you understand just how many gazillion megajoules the world consumes (and the third world wants too!), you realise all those schemes will NEVER EVER cut it.... but if you're an economist, I don't expect you to understand.

      Business as usual is DONE. Maybe not next week or next year, but we've cooked our goose. EVERYTHING's about to change.

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    19. Peter Lang

      Retired geologist and engineer

      In reply to Mike Stasse

      Mike,

      "More on the Energy Cliff" is all good. But the original "Energy Cliff" is not. It is based on a flawed assumption. It relies on the concept of "Energy Return on Energy Invested' (ERoEI) to make its argument. But ERoEI is not relevant for nuclear energy. We have effectively unlimited nuclear energy available on Planet Earth.

      ERoEI is a concept that renewable energy advocates and academics love to talk about, but it is irrelevant in the real world.

      Nuclear power can provide the…

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    20. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      Puhlease.............

      Hall estimates that the United States is currently running on an EROI of just under 40 to 1.

      But what about nuclear? Hall and his students once again attempted to calculate the EROI. Others have made claims of 1.86 to 1 to 93 to 1. The very high estimates appear to leave out many steps in the nuclear fuel and construction cycle. Some contend that the EROI of nuclear is favorable enough--perhaps 11 to 1--to argue for expansion of nuclear power. But, if one takes into account…

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    21. Peter Lang

      Retired geologist and engineer

      In reply to Mike Stasse

      "Puhlease"

      ERoEI is irrelevant when energy is effectively unlimited, as it is with nuclear.

      And the fact there is such an enormous range in the estimates, shows it is near useless as an input for decision analysis.

      Get over it. Or you will give the impression you are a ...

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    22. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      Get over it. Or you will give the impression you are a ... Realist?

      If nuclear was so good, WHY are they not building thousands of them? WHY will it cost 76 billion pounds to decommission sellafield?

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    23. David Arthur

      resistance gnome

      In reply to Mike Stasse

      I took a quick look at the Energy Cliff link, but didn't take it further than that - the linked article seems to be concerned with overall requirements and aggregate targets. I am generally sceptical of such top-down prognostications, and prefer to concentrate on bottom-up steps that can be taken now or in the near future.

      This is because our journey, however long it may be, is composed of a series of individual steps; teleportation remains a matter of imagination.

      The same approach informs my preference for revenue-neutral fossil fuel consumption taxation rather than the magical thinking that engenders emission trading schemes.

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    24. Robert McDougall

      Small Business Owner

      In reply to Peter Lang

      I would suggest that the only unlimited source of energy is the sun. All others rely on a diminishing resource and with Nuclear, an increasing level of waste that brings about its own problems.

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  2. Jerry Cornelius

    logged in via email @hotmail.com

    Correction to my first post. I wrote:

    ‘Over the economic cycle of boom and bust, balanced budgets are much better than the alternative.’

    This is not false. A surplus means that the government is pulling more demand out of the economy (via taxation) than they are generating (by expenditure). A surplus is a symptom of a contractionary fiscal policy.

    I meant to write: 'This is false.' Typo. Sorry.

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    1. ian cheong

      logged in via email @acm.org

      In reply to Jerry Cornelius

      Jerry, where is the body of professionals correcting the apparently widespread misconception.

      Doesn't money printing increase inflation?

      In the long run, doesn't the budget have to be balanced? Presumably then, if one prints money to cover an economic downturn then one has to generate surpluses when the economy is good.

      A surplus does not equal government pulling demand out of the economy if the money is not being spent in the economy - imports and tourism with the high dollar are removing money from our economy.

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    2. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to ian cheong

      There are many schools of economics outside the dominant neo-classical school that demonstrate an understanding of the nature of our modern fiat currency economies.

      You could try the Modern Monetary Theory (MMT) school for a start. There are others, and there are many other schools of economic thought beyond this.

      And 'printing money' does not necessarily cause inflation. inflation is caused when the demand for goods and services exceeds the economy's output of real goods and services. That…

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    3. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      Sorry, but you are wrong about the economy being near capacity. Resources can no longer be extracted fast enough to meet demand. ALL the low hanging fruit have been picked, whether it is oil or coal or Uranium or Lead, or Copper.... the list is very long. It takes more and more effort (energy and money) to extract resources today. And as a result, demand cannot be met, and now we have a global recession about to become a depression.

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    4. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      With 12% of our workforce under employed or unemployed our economy is not near capacity.

      For a well known discussion of this, look up the American economist Okun.

      Okun devised a rule of thumb (today known as 'Okun's Law') that for every point of unemployment an economy carries, it loses two points of GDP. So 12% labour under utilization represents a huge gap in lost output and wealth.

      Regarding the ecological limits, the first thing to note is that this is a different question. The second thing is to ask oneself what that under utilized labour might be used for in developing and commercializing alternative energy resources or building other capacities.

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    5. Toby Paltridge

      logged in via Facebook

      In reply to Jerry Cornelius

      Jerry, you say that "printing money" (aka the monetisation of government debt) doesn't necessarily cause inflation and then go on to talk about inflation being caused by the difference between demand and 'real' supply of good and services. However, this does not mesh with what I learnt in economics.

      My understanding is that "printing money" leads to inflation because more money is being injected into the system, which means there is more money to go around per person, which means that prices are…

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    6. Ted Stead

      Consultant

      In reply to Toby Paltridge

      Toby, it's interesting you mention the first home buyers grant, and that it's therefore the government "printing money" (actually, crediting an account electronically) that causes inflation.

      Think about what happens to that grant; let's say it's $14k (which I think it was at its peak), the first home buyer will take that $14k to the bank and then use that as a deposit. Assuming a 95% LVR, that means the bank would give an additional $266k onto the mortgage. So who's really causing inflation…

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    7. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Toby Paltridge

      Yes, I know that's what they teach in economics. It's the quantity theory of money and it's wrong. It belongs to an older system where we used convertible currencies.

      Regarding the first home buyers grant, it's really just an example of a government handout to a particular industry, in this case the building industry. The grant is announced and the next thing that happens is that the builders / developers and their agents add the $14 k to their prices.

      But if you think back to the first stimulus…

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    8. Gary Murphy

      Independent Thinker

      In reply to Toby Paltridge

      Another effect of printing money is that it devalues the currency; making imports more expensive. This is clearly inflationary.

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    9. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Gary Murphy

      Not necessarily. Increasing the amount of A$ does not necessarily devalue the currency. Have you noticed the bond markets abandoning Japan or America or Britain or Australia the way they've cut loose all the nations of the EZ? No, because they haven't. The bond markets still can't buy enough govt. debt from us or the US, or Japan etc. That's because the bond markets understand how the current monetary system works, and it doesn't work on the Quantity Theory of Money.

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    10. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      The current monetary system only works for as long as cheap and abundant fssil fuels are available to power it......

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    11. David Arthur

      resistance gnome

      In reply to Jerry Cornelius

      "In fact, we are in our current downturn because the mainstream economists world wide spooked governments with stories of inflation in early 2010."

      Sorry, but that is utter balderdash. We are in our current downturn because of an over-accumulation of private sector debt (aka casino capitalism) over the last several decades.

      This has been accompanied by creation of a class of hyper-rich tax avoiders: offshore tax havens are thought to harbour ~$32 trillion dollars, ~20 times Australia's GDP.

      The answer isn't to print more money. The answer is to treat the world's tax systems with some parasiticides.

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    12. David Arthur

      resistance gnome

      In reply to Jerry Cornelius

      Excellent points about unemployment.

      The biggest cause of unemployment in Australia is the retrenchment of older, more skilled Australian workers and their replacement with 457 visa holders; with no hope of getting back to work, most of them wind up on disability support pension.

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    13. David Arthur

      resistance gnome

      In reply to Jerry Cornelius

      The bond markets buy Australian dollars because they've got nothing else in which to invest.

      Higher taxes worldwide would leave less surplus cash looking for havens, and allow for investment in useful stuff - like schools, water treatment, power generation (ideally renewable, such as off-grid solar PV).

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    14. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to David Arthur

      No, you misunderstand me. When I refer to our current downturn, I'm referring to the one induced by our governments since 2010. That downturn is the result of fiscal austerity.

      If you read my other comments on this article you will see that I regard the accumulation of private sector debt - and household debt in particular - as one of the key problems.

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    15. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to David Arthur

      Nonsense. They buy as much Japanese debt as they can, too. They also stock up on Brit and US debt when they can. The common theme there is that these countries, like Australia, have retained their currency sovereignty and the market knows that these governments can and will always pay out on debts denominated in their own currency.

      It's a freebie for them. It's gimmee money.

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    16. David Arthur

      resistance gnome

      In reply to Jerry Cornelius

      Thanks Jerry - I stand corrected.

      How much of the situation would be sorted out if there were no offshore tax havens (one estimate of globally sequestered wealth is ~$32 trillion, ~20 times Australia's GDP)?

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    17. David Arthur

      resistance gnome

      In reply to Jerry Cornelius

      "Nonsense. They buy as much Japanese debt as they can, too. They also stock up on Brit and US debt when they can. The common theme there is that these countries, like Australia, have retained their currency sovereignty and the market knows that these governments can and will always pay out on debts denominated in their own currency."

      Whaddayamean, nonsense? Just because I neglected to mention other currencies in which investments are also made does NOT refute the veracity of my remarks.

      Trouble…

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    18. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      A different question? Am I the only one here capable of critical thinking that involves THE BIG PICTURE?

      Resources don't come from money..... economists have a real problem with that. Which is why they shouldn't rule the world! It's economists that got us in this currenmt mess....

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    19. Mike Stasse

      retired energy consultant

      In reply to David Arthur

      What makes you think we WANT to work?

      Besides..... most jobs are unsustainable, depleting precious resources and causing greenhouse emissions....

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    20. David Arthur

      resistance gnome

      In reply to Mike Stasse

      In my town, Mike, I know of about a dozen middle-aged men, qualified and experienced, who were just laid off over the last few years at Christmas-time.

      Every year at Christmas-time, tens of thousands of man-years of experience and competence is thrown out every year at Christmas.

      YOU may not want to work, YOU may not define your raison d'etre through your skills, judgement and diligent creativity. That makes you relatively rare, or at least someone who is sitting on a ginormous super account. This is not the case for most men outside the major cities.

      The throwaway line about most jobs involving fossil fuel use is the topic for another page. It is not the job that is unsustainable - we all need to get our sewer lines cleared, for example - it's just that the plumber can only obtain fuel for his pump from petroleum because, as yet, algae-sourced biofuels are underdevelopment.

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    21. Mike Stasse

      retired energy consultant

      In reply to David Arthur

      You see David (in case you hadn't worked it out yet!) I see the world through a very different lens than you and 99% of other people (I have met and know other people like me...)

      I retired aged 41. That was 20 years ago I just realised! Once I discovered what a con the Matrix is, I decided to have nothing more to do with it. I haven't managed to achieve this yet, the Matrix has very very long claws.....

      At 41, having worked for 24 years, i came to the conclusion I already had EVERYTHING I…

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    22. David Collett

      Sales at https://aussiebuilder.com

      In reply to Jerry Cornelius

      Just pulling some data from the RBA at http://www.rba.gov.au/statistics/tables/index.html

      Total borrowings by Australians from the banks for owner-occupied houses and investor houses in Jan 2003 is $456 Billion (D2). By Jan 2013 that had increased to $1270 Billion for an average increase in our mortgage each year of $81.4 Billion.

      So in terms of Australians achieving the goal of home ownership we are going backwards by $80+ Billion per year.

      Total $A money supply (broad money D3) has gone from $626 Billion in Jan 2003 to $1536 Billion by Jan 2013 giving an average yearly increase of $91 billion. That's a lot of money creation over the last 10 years.

      My understanding is that the annual increase in the money supply occurs because home owners and businesses borrow more money year on year from the banks who create it, but that creation does have an initial stimulus from RBA..

      Jerry, what would you do differently if you could determine policies set by government/apra?

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    23. Robert McDougall

      Small Business Owner

      In reply to David Arthur

      I wondered when the multinational multi-rort con-job in terms of taxation and income diversion was going to be noticed. I suspect one of the major causes or falling taxation receipts.

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    24. David Arthur

      resistance gnome

      In reply to Mike Stasse

      Mike, like you, I have no children and am similarly free to pursue a low-impact lifestyle.

      However, this does not hold for the majority of Australians. My observation is that parenthood drives much of the destructive acquisitiveness around us - Gordon Nuttall made it part of his defence, and it seems to have played its part for Eddie Obeid.

      But guess what? Most Australians want to work, not because they get to screw heaps of stuff, but it is what they have done all their lives, they are engaged in their communities, they do charitable work through their service clubs, they live quietly and modestly, they want to contribute.

      You are, of course, free to sit in your treehouse with the rope ladder drawn up, and laugh at all of us out here in "The Matrix".

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    25. Mike Stasse

      retired energy consultant

      In reply to David Arthur

      David, I have children, 25 year old twins. Our children appreciate frugality. neither of them drive, nor even have drvers' licences!

      I don't laugh at people from the treehouse (We actually live in an Award winning house I designed myself... and it's not in a tree!). I spend much of time warning them of the looming catastrophe. Some listen, and most don't. Can't save them all..... that is actually part of the solution unfortunately...

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    26. Peter Lang

      Retired geologist and engineer

      In reply to Mike Stasse

      >"I spend much of time warning them of the looming catastrophe. "

      OMG! Have you built and Ark?

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    27. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to David Collett

      First of all, I wouldn't be concerning myself with monetary policy at all. What is required is demand. While the private sector is weak, the government sector must step in if we are to avoid more unemployment. As we've seen in the US, even though they've had growth for the last few years it hasn't been fast enough to make a dent in their unemployment. So they are still carrying that huge cost with them. Lower interest rates won't help while people are fixing their balance sheets.

      This is one of…

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    28. David Arthur

      resistance gnome

      In reply to Mike Stasse

      Mike, the knowledge you've developed is one of the great assets that is liberating humanity from fossil fuel dependency. Well done.

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    29. Toby Paltridge

      logged in via Facebook

      In reply to Jerry Cornelius

      So inflation doesn't increase when the government increases its expenditure during economic down turns because there is excess capacity in the economy?

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    30. Toby Paltridge

      logged in via Facebook

      In reply to David Arthur

      It doesn't really matter since the government does not need to finance its expenditure, either through taxation or borrowing. Tax is just what creates the demand for a particular currency, and it can also be used to drain purchasing power from the non-government sector.

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    31. David Collett

      Sales at https://aussiebuilder.com

      In reply to Jerry Cornelius

      Jerry, in a general sense I agree with your idea. Whether it's a success or a disaster would depend upon the details of implementation. The current welfare system needs tweaking too so that there is a real opportunity ladder from the bottom.

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    32. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      Toby, I try to not make claims for which there is no justification. I cannot address your request for evidence because I do not know to which of the many assertions I make in these pages you refer.

      err ... please explain?

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    33. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      "... since the government does not need to finance its expenditure, either through taxation or borrowing."

      I beg to differ. Well, no I don't beg, I just disagree with you on that point.

      I'm reading an interesting book* about the career of a Renaissance man, a Puritan alchemist by the name of Isaac Newton, who served for some years as Warden of the Royal Mint. Sir Isaac took great pains to protect and preserve the coinage of the land, by pursuing and prosecuting counterfeiters - taking them out of circulation, so to speak.

      I daresay Sir Isaac would share my horror at governments just creating currency out of nothing by supporting their expenditure with neither revenue nor borrowing.

      *"Newton and the Counterfeiter", by Thomas Levenson.

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    34. Toby Paltridge

      logged in via Facebook

      In reply to David Arthur

      G'day David,

      I was referring to your statement:

      "The biggest cause of unemployment in Australia is the retrenchment of older, more skilled Australian workers and their replacement with 457 visa holders; with no hope of getting back to work, most of them wind up on disability support pension."

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    35. Toby Paltridge

      logged in via Facebook

      In reply to David Arthur

      I'm sure it is a good book, but the mistake you have made in using it as an example to support your point that governments need to finance their expenditure is that Sir Isaac Newton lived in a time when the value of currency was tied to gold reserves. That is no longer the case in modern times and hasn't been since the abandonment of the Bretton Woods system in 1971.

      Australia, like most developed nations, now operates on a fiat currency system with a floating exchange rate. This means that the currency has no real intrinsic value in terms of goods and services.

      For a good explanation of what I am talking about that is written in layman's terms, I suggest you read the following: http://bilbo.economicoutlook.net/blog/?p=2562

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    36. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      Do I have quantitative evidence: no.

      However, I am aware of 2 major concurrent trends.

      1) the bleating by employer groups about shortages of skilled workers.
      2) programmes of retrenchments of workers over 45 years of age in the lead-up to every Christmas. Workers over 45 are generally more trained and skilled, have better judgement and competence.

      Self-defeating, or what?

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    37. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      Thanks Toby, I sort of understand the point now.

      While a currency may have no real intrinsic value in terms of goods and services, the goods and services have real intrinsic value, which can no longer be determined in terms of the currency if governments do not bother with budgeting.

      That is, spending without raising revenue renders the currency worthless as a medium of exchange.

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    38. Toby Paltridge

      logged in via Facebook

      In reply to David Arthur

      Why are experienced workers over 45 being specifically targeted? If companies just wanted cheaper employees and could get them through hiring foreigners on 457 visas, why wouldn't they be firing workers of all ages?

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    39. Toby Paltridge

      logged in via Facebook

      In reply to David Arthur

      Not really, David. Taxes are what create the demand for currency, because the government will only accept taxes in the sovereign currency. This doesn't mean that the government needs to finance its expenditures.

      While excessive spending can lead to inflation, this only occurs if the increase in demand exceeds the capacity of the economy to supply. Currently, there is lots of excess supply in the economy, therefore plenty of room for the government to spend (thereby increasing aggregate demand).

      That said, this doesn't mean that the government SHOULD spend without constraint. Just that government spending should not be predicated on maintaining an arbitrarily defined level of surplus or deficit. Rather, government spending should be based on keeping the economy at full capacity and maintaining price stability, and whatever fiscal position this requires is incidental.

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    40. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      Why are older workers targetted?
      1) Older workers tend to be more highly paid.
      2) There is a perception that older workers will have more sick days and are less malleable.

      Even if older workers aren't specifically targetted, we need also remember that where younger workers are replaced with foreign imports, they are more readily re-employed.

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    41. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      It's not just taxes that create the demand for a currency, it's every real transaction in entire economy.

      "While excessive spending can lead to inflation, this only occurs if the increase in demand exceeds the capacity of the economy to supply. Currently, there is lots of excess supply in the economy, therefore plenty of room for the government to spend (thereby increasing aggregate demand)."

      In a zero tax economy, price inflation occurs if a private sector is burbling away on its own and the…

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    42. Toby Paltridge

      logged in via Facebook

      In reply to David Arthur

      I adopt a Modern Monetary Theory approach, but can also argue from a Keynsian perspective for those who refuse to acknowledge the implications for government spending and monetary policy of a fiat currency system.

      It actually is just taxes that create demand for the sovereign currency. What currency people use in day to day transactions is more a matter of convenience. In Australia we use the AUD for pretty much everything because it is easy and convenient. But there are several countries in the…

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    43. David Arthur

      resistance gnome

      In reply to Toby Paltridge

      "... fiscal budget status is simply whatever is required to reach those objectives [price stability and maintaining full employment]".

      Toby, that's largely what I understand by Keynesian countercyclical fiscal policy. Our governments haven't done too well on maintaining full employment; perhaps this proffers a case for development of population policy?

      In the absence of taxation, how should governments fund their activities - infrastructure, health, education, defence, welfare?

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  3. Mike Stasse

    retired energy consultant

    A decade? Try forever........

    Growth is FINISHED. We were warned forty years ago that there were Limits to Growth, and that within 100 years from the time the Club of Rome wrote its Limits to Growth report civilisation would collapse. Well here we are 40% of the way through this century, no one's done ANYTHING about it, and all the ducks are lining up to make the prophesy come true...... http://damnthematrix.wordpress.com/2013/03/31/there-is-nothing-we-can-do-meadows/

    We are hitting PEAK EVERYTHING......

    Peak Oil has come and gone, and Peak ALL FOSSIL FUELS AND URANIUM is predicted for 2017. https://damnthematrix.wordpress.com/2013/03/22/peak-fossilsuranium-in-2017/

    Australia is bang on target to run out of oil some time before 2020. https://damnthematrix.wordpress.com/2013/04/04/australia-still-on-target-to-run-out-of-oil-by-2020/

    We're looking at Peak Debt, Peak Fish, Peak Water, Peak Soil, and don't get me started on Climate Change.

    Peak Stupidity......

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    1. Greg North

      Retired Engineer

      In reply to Mike Stasse

      Sounds like we had just better keep having fun being SKIDs or whatever while we can eh Mike?

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    2. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      Actually, we have not hit peak oil. Production continues to grow and it will do for the foreseeable future. As the price continues to rise on the back of increased demand and increasing scarcity of new deposits, the exploitation of previously uneconomic resources becomes potentially profitable.

      If you look around, you will see the major companies are seriously considering shale oil and tar sands again. As the price goes up further, those resources will become viable.

      So we have quite enough…

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    3. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      NO it isn't. "Production" has been misleadingly portrayed as "increasing" by adding things to the numbers that are not "oil"...... like ethanol, tar sands, shale oil and distillate. These things cannot in a million years be compared to sweet crude that just flows out of the ground. Proper oil has an Energy Return 20 to 50 times that on Energy Invested... Tar sands and shale oil are between 0 and 4. And distillate only has 80% of the energy content of oil, and it is falling just as fast as proper…

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    4. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      You said: 'Exploiting hard to get at sources only puts the price up, when it is clear the economy cannot even afford $90~100 oil.'

      You have it back to front. The increasing price is what makes it profitable to exploit these marginal sources.

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    5. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      NO....... YOU have it bak to front!

      Of course a higher price makes it "viable"...... but it also makes it UNAFFORDABLE!

      Every time it costs me $100 to fill the car, it's money I can't spend on other things.

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    6. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      What you or I can afford is not what's important in the considerations of these companies. Provided somebody, somewhere, can afford to fill their tank then the proposition is viable.

      It's a bit like the prices of luxury houses. It doesn't matter how divorced from any realistic value proposition those prices might be. Provided some very rich person can pay the price, that luxury house will go.

      Similarly, you and I have more buying power than some poor, subsistence farmer in the Phillipines…

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    7. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      Man..... you've lost the plot. HOW on earth can you compare petrol with luxury houses? I can choose whether I can afford to buy a luxury house or not, but the price at the pump is the price at the pump. it costs $100 to fill the car whether you're on $500,000 or $25,000 (which is MORE than I live on BTW....)

      Have you not noticed people whingeing about the cost of fuel and electricity...?? I don't actually hear too many whingeing about the cost of houses though...... because there are still plenty of cheap ones around.

      And we're not talking about the third world here, we're talking about Australia. Stay on topic.

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    8. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      Well, the topic is economics. You're the one who wants to talk about energy.

      Answer my argument above about relative buying power and then we can continue the conversation.

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    9. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      Your post in this part of the thread was about peak oil. I replied to that.

      You replied with a dissertation on the energy extracted / energy expended on fossil fuels.

      Your next reply was about filling your tank.

      Your next one was also about filling your tank.

      So a better question would be, when did you STOP talking about energy?

      Now, would you like to join the discussion of economics or do you want to talk about energy over here by yourself?

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    10. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      Economics UTTERLY relies on energy. If there were no fossil fuels available at all, we would still be living like they did in the middle ages. You have a really strange idea of how the world works.

      Money might lubricate the gears of industry, but it's energy that turns them!

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    11. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      Right, so you're back on energy. Go oh.

      Energy is an input. It is one input. In the same way that dollars do not become oil, oil does not become aluminium.

      Now, if economics is used properly - and it currently is not - the proper values can be assigned to things. Such as the Earth. Scarcity alone would suggest its value should be just about infinite.

      Similarly, if oil were priced according to its scarcity you could not use it to fill your car. It would be too expensive. It would be too…

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    12. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      You see Jerry, it's your insistance of separating energy from the economy that's the problem. Energy is THE input.

      And how do you rate the "viability" of energy? I bet it's in DOLLARS...... I measure it in MEGAJOULES.

      You say "The energy content of fossil fuels is one thing. But there are increasing numbers of alternatives, and with proper (public) investment and establishment of market mechanisms that prevent the current externalisation of costs, these alternatives will become viable…

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    13. Mike Stasse

      retired energy consultant

      In reply to Jerry Cornelius

      Bulldust indeed..........

      If you have a close look at that chart, you will see a peak in 2008, and then a "recovery" in 2011. WHY? It tells you underneath....:

      Crude Oil Definition: 3. Drip gases, and liquid hydrocarbons produced from tar sands, oil sands, gilsonite, and oil shale.

      So there you have it...... the IEA (the source of this data) now openly add unconventional oil with crappy ERoEI of 0 to 4:1 depending on whom to believe. They do this to make the numbers look good.

      Did…

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    14. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Mike Stasse

      No, again you misunderstand and project onto me things I did not say.

      I am not separating energy from the equation. I am merely refusing to promote it to the single input that matters. Empirically, it is not.

      You are all over the place, Mike. You're arguing with yourself.

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  4. Michael Shand

    Software Tester

    I agree with the other commenters that our economic system is fundamentally flawed and cannot be continued indefinitely.

    At the moment it requires continuous growth just to be stable - we are doomed, eventually this is a dead end street

    bring on the collaspe

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  5. Peter Lang

    Retired geologist and engineer

    >"Australian governments face a decade of budget deficits"

    Thank Labor for that. And thank its supporters for voting in and continuing to support the most incompetent government this country has had in over 60 years.

    The left should stop advocating for:
    - more tax and spend
    - wealth transfer
    - more command and control
    - more bureaucracy
    - world government
    - world taxation to pay for the carbon bureaucracy, carbon cops, law courts, military to enforce the world government's laws…

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    1. Garry Claridge

      Systems Analyst

      In reply to Peter Lang

      Re: "We need more rich people because it means everyone is better off."

      For every new "rich" person we create many more poorer people. Sadly, this is how our economy works!

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    2. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      Not Labor's fault. Capitalism is basically flawed, relying on FRACTIONAL BANKING. Look it up on Google. Banks print money out of thin air (all it takes now is a few keystrokes on a computer) and then charge you interest on it..... What a CON!

      The whole economic system is one great big ponzi scheme doomed to fail, and it will. Labor or no Labor. I actually really hope Abbott wins the next election and then gets the blame when the sh*t hits the fan, and the entire system goes down the toilet. It's all he deserves.....

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    3. Peter Lang

      Retired geologist and engineer

      In reply to Garry Claridge

      What twaddle. Do you think anyone is as poor now as 100 years ago.

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    4. Greg North

      Retired Engineer

      In reply to Mike Stasse

      And now they have the byte dollars and apparently trade is booming!
      Maybe good if you got in early to become a disappearing agent, disappearing with the real $$$!

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    5. Peter Evans

      Retired

      In reply to Peter Lang

      As noted in the article at least part of the problem is the drop in Govt revenue. I have looked at it per capita to remove any issues with changes to GDP over time. In the five Labor budgets Govt revenue per person has increased by about 4.5% per annum despite the introduction of the carbon tax and mining tax. I have adjusted the revenues for this year a bit to account for the recent comments on the drop in revenue growth since MYEO. This rate of growth compares to 6.9% per annum in the last 5 Coalition budgets. As the forecast is for fairly flat growth for the next few years, at least, it is hard to see Budget revenue recovering. After accounting for inflation there is not much more per person to satisfy our growing demands on Govt. See the calls for increased spend on infrastructure etc. I tend to agree with the research that it is unlikely there will be surpluses no matter who is in Government.

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    6. Peter Lang

      Retired geologist and engineer

      In reply to Peter Evans

      Peter Evans,

      Thank you for your response. I am listening, but this is not my area of expertise so I am asking questions and I need to be persuaded that the answers are valid and based on objective impartial analysis.

      You say:
      >"I tend to agree with the research that it is unlikely there will be surpluses no matter who is in Government."

      I recognise the problem is large and difficult to solve. But Labor left the LNP with an enormous black hole in 1996 and they set out to fix it and did…

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    7. susan walton

      logged in via email @live.com.au

      In reply to Garry Claridge

      No! rich people employ people...not only in the business world but in their homes by way of gardeners, housecleaners, pool cleaners etc.... and for the seriously rich, chauffeurs and airline pilots. One wealthy family alone could have all these, or at least some of these personal employees, and that is not counting the employees they may have outside of the home.

      Employees that would be a drain on employment figures otherwise, airline pilots could find employment elsewhere, but housecleaners and pool cleaners are not so well equipped educational wise.

      The bottom line is...rich people employ people, poor people don't!

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    8. susan walton

      logged in via email @live.com.au

      In reply to Mike Stasse

      Labor's fault for not knowing these things = ignorant and uneducated, with a preference for keeping people poor and reliant on welfare by smashing the rich..who in turn say 'up yours jack'....and go overseas.

      Because they can.

      As for this " I actually really hope Abbott wins the next election and then gets the blame when the sh*t hits the fan, and the entire system goes down the toilet. It's all he deserves...."

      What an appalling statement! your spite and dislike of the rich obviously outweighs your consideration for your country and it's future...which will flourish under the Libs, because it always does.

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    9. Ted Stead

      Consultant

      In reply to susan walton

      Susan, you have to think at the macro level, not the micro.

      Imagine $1m; in the hands of a rich person, they may well employ a pool cleaner and a chauffeur, but it's probable that at least some, if not a good proportion, of that money would be saved, as it would be the prudent thing to do.

      Now imagine that as $1000 in the hands of 1000 poor people; it's probable that *all* of that money would be spent, not saved, as poor people generally don't have that luxury. Magnify that by the size of the population and you see that *in aggregate* more people would be employed (and not just as pool cleaners and chauffeurs...).

      So at the aggregate level, redistribution of the same wealth would create more jobs than via the myth of the so-called trickle-down effect.

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    10. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      Today, every person in the developed world has the equivalent of 200 fossil fuel slaves working for them, which no one had 100 years ago........ so OF COURSE we're all "richer"!

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    11. Mike Stasse

      retired energy consultant

      In reply to susan walton

      Are you KIDDING? I'm poor, and I employ car mechanics, garbage collectors, farmers, electricians, cooks, retail assistants..........

      If it wasn't for the likes of me, the rich wouldn't employ anybody.....

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    12. Mike Stasse

      retired energy consultant

      In reply to susan walton

      The country will NOT flourish under the Libs, because the party's over. I am utterly amazed so few commenters here (apart from a couple) actually understand how the economy works, and how it is fundamentally flawed.......

      And I care less about "my country" than I do about the environment we all need to survive and the people who live on the Planet. Countries didn't even exist until a thousand years ago (give or take...)

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    13. susan walton

      logged in via email @live.com.au

      In reply to Ted Stead

      If those 1000 people are employed by one rich person/company they will have an average of $1000 each, to spend every week...that is what generates growth.

      A one off $1000 is spent quickly...and gone. It doesn't re-generate for very long...and goes overseas most of the time anyway.

      Labor's idea is to dole out those little bits of cash, not enough to do anything with...just enough to keep the recipients hanging out for the next little handout and reliant on the government...therefore the…

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    14. Gary Murphy

      Independent Thinker

      In reply to Garry Claridge

      Not necessarily. It is quite possible to create wealth. Unfortunately some people find it easier to use their market power to take it from others.

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    15. susan walton

      logged in via email @live.com.au

      In reply to Mike Stasse

      Lol! You don't employ them...you pay them for a service..the owner of the business involved, employs them. You know..the guy at the top? the rich one?

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    16. susan walton

      logged in via email @live.com.au

      In reply to Mike Stasse

      The Vikings lived over one thousand years ago and came from the three countries of Scandinavia: Denmark, Norway and Sweden, they invaded Britain around this time apparently.

      Egypt was invaded in 3,500 B.C. by the Romans...from Italy..:)

      Now you tell me none of this happened?

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    17. Michael Hay

      retired

      In reply to Peter Lang

      Do you think that a Coalition Government will take control of our exchange rate and drop it to a level which will promote export industries, value added industries and fuller employment?
      If not, why should we vote them in, they will merely keep on the idiocy of insisting on a "balanced budget" and a "budget surplus". It does not matter whether a country (or a household) has a debt or not. What matters is the servicing of that debt.'Consider borrowing funds from overseas to create infrastructure - roads, rails, schools, hospitals, renewable electricity - to create a greater boost to the economy of the country - which would create sufficient impetus to service the debt !!
      What say you to being positive ? How about some plans rather than this furore of negativity?

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    18. Michael Hay

      retired

      In reply to susan walton

      Susan, you forgot that wealthy employers tend to substitute employees for machinery. Machinery merely needs repairs (or a tax-deductible replacement) and does not require a continual drain on the company profits due to ever-increasing wages. When money talks it is ONLY money that talks (and, as you point out, the rich then take their gains and nick off with it to some gilded isle of their dreams). There is little room for humaneness in big business; hence the need for a government to take up the slack and provide a base level of money to satisfy the basic needs not provided by the wealthy.
      Fortune does not necessarily favour the brave - only the wealthy !

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    19. Mike Stasse

      retired energy consultant

      In reply to susan walton

      When the Vikings were about, there was no such thing as "Norway", "Sweden", and "Denmark"...... Study European history (like I did went to school in France) and you will see borders moving around like you wouldn't believe...... France itself wasn't even "a country" as we know it today until Napoleon came to become its Emperor. "French" as a language didn't become the national language until 200 years ago, when everyone there spoke dialects and only the elites spoke French.... Vikings were "Norse", and they were tribal, and none of them spoke Swedish, or Norwegian, or Danish. Britain didn't exist then either..... there were Saxons, Scotts, Welsh and English people, and I defy you to find maps with proper borders....

      Egypt wasn't a country. It was "just there"... in fact, the whole Middle East was one big place full of tribal people on Camel back until the Brits waltzed in after WWI and drew lines in the sand, ditto with Africa.

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    20. Mike Stasse

      retired energy consultant

      In reply to susan walton

      Most of those people I employ are self employed actually.... and I haven't noticed any of them were rich.

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    21. Ted Stead

      Consultant

      In reply to susan walton

      Susan, I don't think you really got it. Whether it's a one-off amount of $1m, or $1m per day for a year, or whether the "poor" people are employed by a "rich" person, or whether they are employed by government, the point is that *in aggregate* there would be more economic benefit of that wealth being distributed amongst many people than if it were with a single person.

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    22. Peter Evans

      Retired

      In reply to Peter Lang

      I don't pretend to be a budget expert but the answers lie in a careful study of the article that goes through the items of expenditure in the current budget and looks for where we can save. Yes we can save on health cost but it will likely mean more cost being put on the consumer. Also look at analysis by ACIL Economics. They are touted as Budget experts and review budgets in detail every year. They found that the Coalition left Australia with a structural deficit. What that means is that when the…

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    23. Bronwyn OBrien

      Admin Assistant

      In reply to susan walton

      Hello Susan.

      Whilst it would seem logical that rich people would hire more poor people, in reality they don't necessarily. I know a few very well off business owners that a so tight they won't hire enough staff for their businesses. And they won't hire anyone full time either because it is cheaper to have people part time.
      Many of them take advantage of the Job service provider incentive payments too. A business can get up to $5000 to hire some one who is registered with a Job Network.The…

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    24. Peter Lang

      Retired geologist and engineer

      In reply to Peter Evans

      The intent of my comment was to ask you whether you had thought about how much revenue could be increased by getting stability and confidence back fro business, and providing an environment to cut business costs and improve productivity.

      Regarding your points, I agree the Coalition left a structural budget deficit in 2007. I also recall how the vast majority of people at the time were complaining about them running surpluses year after year and trying to save it in Future Fund and other such…

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    25. David Arthur

      resistance gnome

      In reply to Peter Lang

      One reason people are generally better off now than 100 years ago is technological progress, the fruits of which are adequately distributed.

      That said, it's worth noting that as inequities accumulate, societies stagnate and collapse; do you need examples, or are you capable of imagining the Soviet, French and Ottoman Empires yourself?

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    26. Robert McDougall

      Small Business Owner

      In reply to Mike Stasse

      and if it wasnt for the poor spending every cent they have, the rich people wouldn't be so rich now

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    27. Mike Stasse

      retired energy consultant

      In reply to David Arthur

      I know I'm sounding like a broken record, but......

      "One reason people are generally better off now than 100 years ago is technological progress"

      It isn't you know. It's fossil fuels. ALL technology has come from FFs. 200 slaves per person.

      1L of petrol = 14 days of human labour. Just let THAT sink in.......

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    28. Mike Stasse

      retired energy consultant

      In reply to Robert McDougall

      What...... one of those one way ones to Mars I saw announed on the news last night...!!

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    29. Mike Stasse

      retired energy consultant

      In reply to Mike Stasse

      In fact, here's a good example...: it takes 250kg of fossil fuels just to BUILD your computer........

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    30. David Arthur

      resistance gnome

      In reply to Mike Stasse

      Thanks Mike, 1L of petrol may well equate to 14 days of human labour, but to how many megabytes of medical knowledge does it equate? To how many gigabytes of physical knowledge does 1L of petrol equate, and to how many terabytes of environmental knowledge?

      There is no doubt that fossil fuel use has greatly facilitated technological development in many areas, but we're well on our way to being wholly independent of geosequestered hydrocarbon ... and a Good Thing, too.

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  6. Clive Hamilton

    Professor of Public Ethics, Centre For Applied Philosophy & Public Ethics (CAPPE) at Charles Sturt University

    The Grattan Institute has made a marked shift to the right in recent times.

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    1. Peter Lang

      Retired geologist and engineer

      In reply to Clive Hamilton

      Surely that must be a good thing. But they haven't moved nearly far enough yet. They still support the Loony Left's doomsday beliefs, as do you.

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    2. Peter Lang

      Retired geologist and engineer

      In reply to Clive Hamilton

      The Left advocate:

      The left should stop advocating for:
      - more tax and spend
      - wealth transfer
      - more command and control
      - more bureaucracy
      - world government
      - world taxation to pay for the carbon bureaucracy, carbon cops, law courts, military to enforce the world government's laws on recalcitrant states (think what would be required to force North Korea, Pakistan and Iran to comply), etc.
      - Agenda 21

      These are passionately advocated by the Left, both in Australia and in other developed countries. In Australia they are advocated by: Labor, Greens, ABC, Crickey, Getup!, NewMatilda, John Quiggin, Clive Hamilton, Robert Manne to name a few examples of the advocates of Left ideology.

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    3. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      The "doomsday scenario" is not a belief. I don't do beliefs. I only do DATA.

      That Swan has to have a deficit is NO SURPRISE....... everywhere else on the planet is doing like wise (except communist China - ironic no?) whether they are led by L or R wing governments. In fact, because everything is going pear shaped everywhere, people are chucking out their governments REGARDLESS of what flavour they are..... in the vain hope that the alternative can "fix it".

      Abbott won't fix ANYTHING. The system is unfixable.

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    4. Darren Parker

      logged in via Facebook

      In reply to Mike Stasse

      When are you off to China, Mike? As you have it all figured out, can I assume your move is imminent? If China won't have you, try Zimbabwe or Cuba.

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    5. Peter Lang

      Retired geologist and engineer

      In reply to Mike Stasse

      >"The "doomsday scenario" is not a belief. I don't do beliefs."

      I was referring to the CAGW doomsday belief that most of the Left do passionately believe.

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    6. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      AGW is real, just look at the numbers. And you don't have to be L or R winged to believe in them. David Cameron’s Tory party is serious about climate change and supports a price on carbon, as does Turnbull, and I'm sure I could find many more...

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    7. Darren Parker

      logged in via Facebook

      In reply to Mike Stasse

      When it starts warming up here, I'll just move my beach towel a few inches further up the sand.

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    8. Mike Stasse

      retired energy consultant

      In reply to Darren Parker

      You know Darren, it has already started. That's why I'm moving from Qld to Tassie. A few inches up the sand won't cut it when you try to grow all your own food like we do and you're hit by a six month drought followed by 2 months of 33+ degrees (and several days over 40) and no rain.

      Plus, Tassie has the most affordable housing, and is run on Hydro which won't be affected by turning the coal fired power stations off.

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    9. Mike Stasse

      retired energy consultant

      In reply to Darren Parker

      And it's far away from the madding crowd as you can get without going to NZ......

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    10. susan walton

      logged in via email @live.com.au

      In reply to Mike Stasse

      "That Swan has to have a deficit is NO SURPRISE.."

      It was to Swan and Gillard...who both touted over and over we will have a surplus...Gillard's own words were that it was not an option!

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    11. Mike Stasse

      retired energy consultant

      In reply to susan walton

      Yes I know, very stupid of them. They should have come to me for advice, I would have told them the party's over. But that's politics for you, lie through your teeth to get elected no matter what party you belong to........

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    12. Michael Hay

      retired

      In reply to Peter Lang

      whoopee! now I can clearly see where a large chunk of the world is heading. I wonder if there is a hint of human ideology in the wind, or is it a case of the world's population becoming sick of being manipulated by wealthy people with the power given to them solely by that wealth. Personally, I have no wish to see another GFC, or another Recession, or another War. Can we not be adequately poor and peaceful?

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    13. Mike Stasse

      retired energy consultant

      In reply to Mike Stasse

      Wow....... just goes to show it pays to follow links! I wish some bloggers reported what they ACTUALLY read... THIS is whjat NASA actually said and your little blogger mis-reported

      " “Carbon dioxide and nitric oxide are natural thermostats,” explains James Russell of Hampton University, SABER’s principal investigator. “When the upper atmosphere (or ‘thermosphere’) heats up, these molecules try as hard as they can to shed that heat back into space.”

      That’s what happened on March 8th when a coronal mass ejection (CME) propelled in our direction by an X5-class solar flare hit Earth’s magnetic field."

      So there you have it..... CO2 only cools the atmosphere (which is NOT the same as cooling the globe...) when there's a monumental coronal ejection from the Sun..... and then it only lasts a few weeks.

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    14. Michael Hay

      retired

      In reply to susan walton

      Can you not accept that julia and wayne were wrong? no one can forecast accurately when dealing with matters which are not in their own exclusive control. Politicians mouth lots of things - they appear to think that mouthings are preferable to sound logic and serious debate.
      It is the system, and you are just responsible for it as I am.
      Neither of has any control over our parliamentary process, so I cannot see why you should be so ignorant as to believe anything said by a politician for political purposes.

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    15. Mike Stasse

      retired energy consultant

      In reply to Michael Hay

      Thing is, they can't come out and say we're doomed like I can, now can they....??! That's how we got into this mess. NOBODY ever tells it like it is, NOBODY wants to know, the truth is just inconvenient...

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  7. Darren Parker

    logged in via Facebook

    I'm happy to pay higher taxes, but only under an Abbott government.

    I feel far more confident that it will be spent wisely.

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    1. Peter Lang

      Retired geologist and engineer

      In reply to Darren Parker

      Here, Here!

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    2. Henry Verberne

      Once in the fossil fuel industry but now free to speak up

      In reply to Darren Parker

      Darren, is is true that Abbott is planning to appoint Alan Jones as Governor-General?

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    3. Darren Parker

      logged in via Facebook

      In reply to Mike Stasse

      It's my duty - as a responsible citizen.

      Equally, it's my right to complain about what it's spent on.

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    4. susan walton

      logged in via email @live.com.au

      In reply to Darren Parker

      Yes. My thoughts exactly. I lived through the turbulent Hawke/Keating years (all I remember is the strikes and the odds and evens petrol days! because of the strikes..no milk for the kids often, the tankers weren't picking up..farmers pouring milk from the vats onto the ground) paying our house off at 17%.

      Then along came Howard, and many years of calm, financial prosperity, finished paying off our house at 9% ....and no strikes.
      I was sold and never voted Labor again. Not to say I wouldn't in the future, but never with Gillard and Swan at the helm.

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    5. Peter Lang

      Retired geologist and engineer

      In reply to susan walton

      It's hard to guess how long it will be before Labor is ready to handle the purse strings. They have never been good at it, not at the state level not the federal level. Hawke and Keating did pass important reforms that were due and could only be done by a Labor government (strongly supported and encouraged by the Liberals in Opposition) because, as Keating said, he had to get the unions in a head lock, hold them down and pull their teeth out with pliers.

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    6. Mike Stasse

      retired energy consultant

      In reply to susan walton

      And how do you explain the rest of the world going into recession at the same time...?? Was that Keating's fault too..??

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    7. Michael Hay

      retired

      In reply to Darren Parker

      You have faith in politicians? What if Wall Street decides to do another GFC. Will you blame Tony, seeing he is in the chair and not Julia?

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  8. Henry Verberne

    Once in the fossil fuel industry but now free to speak up

    There are a few key causes of the budget deficits but the high dollar must be one indirect cause. Can anyone take a stab at the impact of this on company earnings and hence tax paid?

    Maybe this country needs a "dirty float" whereby the Reserve bank acts to drive down the dollar?

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  9. Greg North

    Retired Engineer

    I do not believe that politicians on either side or even if green are ever fully honest with the Australian public, not that this is new news and for good reason for if they tell everybody you have to start tightening your belt and be very frugal for we just have start handing out less and less and you the population need to start being a lot more self sufficient and minimising use of publicly funded services etc., they would hardly ever expect to be elected.

    But that is the basis of our society…

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    1. Peter Lang

      Retired geologist and engineer

      In reply to Greg North

      Excellent comment. Well written, and obviously put a considerable effort into it. This is an example of the type of considered comment we should expect on the Conversation, instead of the one liner drivel.

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  10. Terry J Wall
    Terry J Wall is a Friend of The Conversation.

    Still Learning at University of Life

    Having read Joseph Stiglitz and a few others of his ilk, I tend to agree that GDP has had its day. The new mantra is GDH (Gross Domestic Happiness) and the countries that the highest ratings on the suggested new standard are the Scandinavian ones.

    To get there, Australia needs to make changes but oh goodness, we will first have to address endemic corruption and with the current abhorrence of transparency, it will be a battle. It can be done, but EVERYONE will have to do their bit.

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  11. Peter Lang

    Retired geologist and engineer

    John Daley,

    >” While increasing productivity and participation are good ideas, they are also unlikely to solve the problem.”

    I find that statement surprising. I would have thought higher productivity is the obvious answer. Singapore, with no resources to export and ¼ Australia’s population, exports more in total value than Australia (Singapore $415 billion, Australia $264 billion). The difference is due to productivity.

    It seems to me we can remove our deficits (over time) if we want to. I would have thought the first thing to do is to free up business and especially small business. And fix Federal-state responsibilities, accountabilities and financial arrangements.

    Can get rid of the structural budget deficits if we significantly improve productivity?

    What are the most important things we could do to improve e productivity sufficiently to remove the structural deficits?

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    1. Mike Stasse

      retired energy consultant

      In reply to Peter Lang

      And Singapore (like Japan!) is in for one hell of a collapse WTSHTF...

      Why is everyone so hung up on MONEY...?? It's the availability and cheapness of resources that got us "here", and it's all over now......

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  12. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    If - always the big issue in economic forecasts - if things stay the same - if the world economy stays floppy, if our dollar stays high, if tax avoidance continues as the world's fastest growth sector ... crystal-balling is full of ifs. And here all the ifs are awful.

    There are things that can be done of course to change the relationship between social spending and GDP growth - tinkering with the GST which is by international standards low, stripping away some of the rorts like family trusts which…

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  13. Michael Bolan

    Systems practicioner

    In a time of instant messaging one to many, a revolution in social media, search engines that can inform us within seconds; surely it isn't too much of a stretch to identify democratic methods of decision and policy making that do not rely on the outmoded, inefficient, cumbersome and rule based organisational form of bureaucracy.

    Our governments employ hundreds of thousands of bureaucrats who set regulations into law in an impossible number of pages of legislation. The result is a system of 'governing…

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  14. robert roeder
    robert roeder is a Friend of The Conversation.

    retired

    The forest and the trees story. In the 11th century the Chinese government became the first to introduce fiat money. The term of debt was 3 years, after that 3 years the debt was rolled over at interest. In theory this fiat was backed by gold silver or silk.
    From 1944 to 1971 the Bretton Woods agreement managed the value of currency for the major world economies. The US dollar was set at $35=1 troy ounce of gold. In 1971 the US president Nixon passed a number of measures which became known as the…

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    1. Mike Stasse

      retired energy consultant

      In reply to robert roeder

      ABSOLUTELY....

      "this can only last until someone blinks or defaults, this system has lasted only because if the music stops the house of cards collapses."

      AND the music stops when oil can't be extracted fast enough and cheaply enough to keep it going. It's exactly what happened in 2008 when oil hit $147 a barrel.

      "The notion that we must have growth in our economies fuels this scam and passes the debt onto we the people or more correctly the people of the future."

      THE ONLY reason we…

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    2. Mike Stasse

      retired energy consultant

      In reply to Terry J Wall

      The debts will NEVER be repaid. It's high time we stopped pretending they will, and CANCEL the bloody lot!

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  15. Geoffrey Harold Sherrington

    Boss

    There is an urgent need to address, by Royal Commissions, the corruption of Government process.
    In simple terms, modern Australian Governments have increasingly been telling people what they must take, with next to no prior public consultation. In principle, the opposite must apply. Governments are elected to express the majority will of the people. Governments have also extended their activities to matters far beyond Constitutional intent.
    This is a corrupt way to govern, in the broad sense. In…

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  16. Bob Down

    logged in via email @bigpond.com

    4% is miles and miles better than some so called leading economies who run deficits from 20% to anything up to 95% and above, some European deficits are over at 103% of GDP.
    Whilst we certainly won't like these predicted numbers, in context they paint our economy as one with vitality and strength, in a region set to become the power house of global economy and trade.
    Having said all that, the endless and narrow focus on surplus is directing peoples attention away from real issues like the value…

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    1. Toby Paltridge

      logged in via Facebook

      In reply to Bob Down

      Why on Earth does Australia's "underlying gold reserves" have anything to do with current economic debate? The gold standard was abandoned back in 1971, don't you know.

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    2. Bob Down

      logged in via email @bigpond.com

      In reply to Toby Paltridge

      Yes I do know, but a safe haven in gold is a prudent move. The current system of debt creation is flawed, all states in the Commonwealth according to the constitution have the ability to to create credit and fund capital works and infrastructure without taxing the population. The gold standard and fractional reserve banking effectively gave the reigns of every countries finances to private corporations. The creation of debt, for "customers" then charging interest to pay it back is financial slavery, I don't know all the ins and outs of finance but I just know the way things are run by banks is wrong and the never ending cycles of boom and bust will continue forever until we jail the bankers, sack the politicians who are not working in our collective interests and institute some harsh punishments for financial thieves holding us to ransom over money created out of nothing.

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  17. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    OMG!!! Aren't public attitudes in contemporary Australia about economics bloody appalling? Seem to unleash all sorts of anxieties about the end of the world on one hand or the apparent virtues of trickle-down economics. Like it's all so big and huge and unknowable. So intractable and inevitable and there's just like so absolutely nothing to be done. Like economics runs us rather than the other way around.

    Unencumbered by information or understanding folks seem to read into any data - usually…

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    1. Terry J Wall
      Terry J Wall is a Friend of The Conversation.

      Still Learning at University of Life

      In reply to Peter Ormonde

      Peter, you will be aware I guess that of all the so called Economists in the world (overpaid to hell and back) only one predicted the GFC.. ONE!

      We would be better off to have the ABC interviewing clairvoyants, at least half of them would get it right.

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  18. John Kelmar

    Small Business Consultant

    An honest and efficient Government should NEVER run on a deficit. Running a deficit is a flawed economic principle developed by Keynes to solve an immediate problem rather than a long term strategy. Unfortunately all Universities and Schools believe that a deficit is the only way to go, and to obtain a pass in Economics one must continue to espouse this theory, hence it results in all economics thinking the same.

    If we considered the Government as a Business, then for a business to survive it…

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    1. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to John Kelmar

      I see why you would be consulting to small businesses John.

      They'll never get any bigger either with that sort of thinking - never borrow money - never go into debt - never invest.

      I suspect that economics isn't the subject area on which you'd be advising them - god I hope so.

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    2. Ted Stead

      Consultant

      In reply to John Kelmar

      Oh my goodness this is so, so wrong.

      "If we considered the Government as a Business" - there's your first mistake. Government is not a business. It's a government.

      Some facts; Australia runs a permanent current account deficit:
      http://goo.gl/2CWiI
      This is a benefit to us, as we get cheap electronics, cars and such like.

      Australians also save a good proportion of our savings:
      http://goo.gl/i1r2q
      This is good as it allows us to save for trinkets and baubles in the future.

      The sectoral…

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    3. Toby Paltridge

      logged in via Facebook

      In reply to John Kelmar

      Except the government isn't a business, John, and comparing it to one is a false comparison. Neither businesses (nor households) own the currency which they use to purchase goods and services, but the Australian Federal Government does. Hence, the former are indeed revenue constrained, but the latter is not. The Fed. Govt. can spend as much as it wants and will always have money as it produces it.

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    4. margaret m

      old lady

      In reply to John Kelmar

      In part I agree we once had a currency underpinned by our gold reserves. We once owned taxpayer/ government run income generating assets via our essential services purchased built via taxpayers money for the benefit of taxpayers. Our assets were sold to Big Business they are still very profitable but now we pay the bills and they enjoy the profits thats another one of those neoliberal ideas governments can't run business wrong. Just a quick check services have not improved just gotten more expensive…

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  19. Mike Stasse

    retired energy consultant

    Our governments continue to fund climate change with over $10 billion worth of big polluter handouts every year - creating more pollution and blocking clean energy.

    There's 10 billion that could go straight into paying off debt.......

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    1. Terry J Wall
      Terry J Wall is a Friend of The Conversation.

      Still Learning at University of Life

      In reply to Mike Stasse

      Spot on Mike. But the average punter either doesnt think or is scared of the dark; but most likely both Oh of a new Winston Churchill to led the masses during the forthcoming global adjustments.

      Read about you on your blog. Interesting lifestyle and/ but I am very glad that your brain is still running full noise!

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  20. Lee Emmett

    Guest House Manager

    'Structural changes in the economy are likely to leave Governments across Australia facing budget deficits of around 4% of GDP for at least the next decade, according to research released today.'

    However, Fabrizio Carmignani, Associate Professor at Griffith University, writes elsewhere in The Conversation:

    'In their paper, Herdon, Ash and Pollin report that average annual GDP growth is 2.2% in countries carrying a debt to GDP ratio above 90%, 3.2% in countries with debt to GDP ratio between…

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  21. Robert McDougall

    Small Business Owner

    how about we cut out business welfare, i.e. billions to failing motor companies, fossil fuel subsidies, public forking out billions to put in infrastructure for the benefit of multinationals etc.

    If the whole neo-con-liberal-freemarket ideologues want small government and don't believe governments should own business enterprises (you know, cba, aus post, power companies, medibank etc) then why do they always have their hand out to the taxpayer to pay subsidise their investments? And thats without going into the whole "sorry, we messed up and f73cked the global economy, can we have a few billion of taxpayers money?"

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  22. margaret m

    old lady

    I agree there is no situation. Mr Abbott not that long ago was telling us he was going to produce a surplus in his first year does that not tell you the lies that have been told. If our economy was that bad we would not have a AAA rating which I heard the last Liberal National Party Government didn't have. If things were that bad Mr Abbott couldn't say he would have a surplus in his first term. He changed that now because it suits him but happily ignores the factors if it doesn't fit in with his game play. The high dollar is impacting negatively just one influence on the treasury purse. Fear and uncertainty and more fear and uncertainty just Mr Abbott game to muddy the waters and allow him to avoid the real issues and facts.

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  23. margaret m

    old lady

    A decade of deficit 10years to pay off the investment NOT BAD I had a 30yr debt for my house alone. You buy a car you may have a 5yr loan. I am still trying to digest that we are even discussing this issue. The past Liberal Country Party failed to invest in infrastructure failed to resolve and stood by while our hospital systems were desparate for a federal / state resolution. The river down south was dying Mr Howard gave some money to some growers to improve their watering system. There are…

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  24. margaret m

    old lady

    Just remember Globalisation has sent a lot of our jobs off shore. Jobs - employees that once paid taxes that supported the local economy. Those deficits are hidden by successive governments by vilifiying the unemployed but also by creating a casual pool of employees and lots of part time jobs. That is a global happening until our governments in at least the developed countried get together and unpick this system that enables global exploitation. Government coffers all over are depleted because…

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