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The economy: proposed narrative

By Henry Thornton - posted Friday, 2 May 2014


Treasury has told us that economic growth will be the weakest for 50 years. A key question is why they did not tell Rudd'n'Gillard'n'Rudd that the commodity boom they enjoyed so much would end soon (as all previous commodity booms had) and they should therefore not spend like drunken sailors? If such a message was delivered, it would be good to know, Dr Parkinson, preferably now but at least as soon as you are free to write your biography. Today's blog aims to provide a draft narrative to position the tough decisions needed now to minimise future misery for many Australians.

Of course, it seems highly likely Treasury did not sound the relevant warnings. If they had, Treasurer Swan would presumably not have constantly predicted a strong economy whose budget would whirr back into surplus not too long into the future. Did Treasury and/or successive governments really think Australia was a 'miracle economy' owed a living high on the hog for the feasible future?

Now it is time to sort it out, and Messrs Abbott and Hockey are hard at work telling us it is a whole lot worse than Treasury and Treasurer Swan believed only 6 or so short months ago. Gor blimey, comrades, it now looks pretty gruesome.

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We have been told, correctly, that budget repair is going to take a unified effort from all Australians. Rich folk will cop a tax levy. While pensioners will have their pensions left alone, future pensioners can expect to work for longer. Families earning over $100 K will have to manage without handouts, which seems fair enough to the Thornton family.

Big spending schemes will need to be downsized/implemented more slowly, as even the PM's paid parental leave plan has been trimmed. Since Tassie has turned its back on the NBN, the largest and least useful white elephant of the Rudd'n'Gillard'n'Rudd administrations, why not just cancel the whole idea and let people make their own arrangements for fast internet? Radical, perhaps, but the simplest way to save a lot of money Henry can imagine.

Henry has been priveleged to be the recipient by email of a lovely punch-up between Terry McCrann on one side and John Stone and Des Moore on the other. McCrann has supported the mooted 'tax levy' even if it will raise a relatively small amount, perhaps $2 to $3 billion. Messrs Stone and Moore say this is tiny relative to the overall budgetary problem and suggests it indicates lack of appropriate resolve to cut spending. Whilst one can agree with them on the size of the proposed levy, the political imperative of 'sharing the pain' is presumably the reason it is in the mix.

And on another point of political economy, every responsible commentator agrees that Labor's drunken sailor spending is most of the reason for the budgetary mess, along with the end of the best part of the commodity boom. Current attempts by Labor (and Labor's coalition partners, the Greens) to frustrate the government's attempt to fix the budgetary mess is full of contradictions and illustrates either blind stupidity or gross hypocricy.

The government is taking a beating in the polls and one hopes by budget time it has sorted out the 'narrative' into a few simple propositions.

Here is a first draft:

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1 The budget is in big trouble, and Australia has become very uncompetitive. (Provide examples.)

2. Australia's strategic mistake was to assume record terms of trade would last forever, which produced overspending by governments and unsustainable increases in incomes, including welfare payments generally.

3. The Labor Green alliance boosted government outlays with a number of overly-ambitious spending programs. (Specify)

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Readers are invited to contact Henry here if you wish to contribute to the debate we have to have.

This article was first published on Henry Thornton.



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About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at www.henrythornton.com.

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