Mayne: Rudd the reckless Whitlamite
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A respected business figure rang this morning and opened the conversation with the following prediction: “put a note in your diary for yesterday that says ‘one term wonder’”. Kevin Rudd is certainly imperilling his government by embarking on an extraordinarily reckless policy prescription which appears to be motivated by the base political considerations of wedging Malcolm Turnbull. At a time when we need to encourage confidence and project financial strength to the world’s lenders, the PM is out there terrifying the horses with completely over the top rhetoric and spending binges that imperil our AAA credit rating. Here is little Australia with its $1 trillion foreign debt, hugely indebted households and an enormous current account deficit suddenly surrendering its greatest strength — a relatively small but strong federal balance sheet. What is equally remarkable is that normally sensible economic commentators like Fairfax’s Ross Gittins are still pedalling the line that we have “completely eliminated the federal government’s debt”. The Rudd Government inherited about $50 billion in outstanding debts and in May last year Wayne Swan announced this would be increased by $25billion over the next few years. This expansion to the balance sheet was fine because the budget remained strongly in surplus. However, to suddenly reveal the Feds will be producing deficits of $22billion and $35billion in the current and next financial years respectively, is an almighty shock that was largely avoidable. By all means try to encourage infrastructure investment but this year’s $22 billion deficit is entirely caused by the $10 billion December welfare hand out and the $12 billion splash proposed for next month. This money-for-nothing approach is precisely what got the world into this mess in the first place. Welfare spending was already budgeted to be $103 billion in 2008-09 and will now top $130 billion. The Rudd Government should be trimming the crazy middle class welfare of the Howard years, not building on it. So, will the credit constrained world lend us the money? The latest $400 million Federal bond issues was announced on January 21 and it was a success with investors lending 12 year debt at just 4.06% a year. The Australian Office of Financial Management revealed the scary new borrowing program last night: “Over the remainder of the current financial year (that is, to end-June 2009), two Treasury Bond tenders will be held most weeks (generally on a Wednesday and a Friday) with the amount offered at each tender normally in the range of $500 million to $700 million.” How on earth can the government start borrowing more than $1billion a week from private investors when it doesn’t yet have the legislative authority to do it? Malcolm Turnbull is absolutely right to oppose this spending spree because the end game of what Rudd hysterically calls an “unfolding national and international economic emergency” is that sovereign states will default or need a bailout from the IMF. We need a detailed analysis of the Federal fiscal position before Labor should be given any authority to spend another dollar, let alone $42billion. Today’s press should have been all about interest rates hitting record lows and households saving $10billion a year servicing their $1trillion debt. Instead, we just got unnecessary political conflict, frightening headlines and a huge foreign borrowing challenge. Peter Costello completely nailed the PM in The Age today pointing out the sheer hypocrisy of the self-styled fiscal conservative turning into an unreconstructed Whitlamite. Come back Peter, all is forgiven. |
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45 Comments
Our AAA credit rating by who the same agentics that gave AAA credit ratings to the mob that invented the sub prime mortgage
You are joking son the AAA rating is a worthless as Costello,its a con,what a waste of a column.
The vitriol in these comments is just jaw-dropping. If you want to disagree, you could at least do so civilly, if not with rational argument. You lot should confine your subscriptions to GreenLeft Weekly if you only want to read stuff you agree with. Thank heavens Crikey still maintains some semblance of diversity in opinions.
Maybe you can answer the question JamesK that Stephen Mayne has ignored: why has big business aplauded Rudd’s package ?. And while anyone is free to criticise this package-neither Mayne, Turnbull or indeed Peter Costelo offered an alternative (considering Turnbull & Costello were part of a government that helped cause the situation-was Costello telling the truth when he constantly boasted Aussies had never had it so good ?)
As for Israel’s appaling attacks on Gaza: it’s important for Jews to point out that the powerful Jewish propaganda bodies throughout the world do not speak for those of the Jewish race as they imply and that their tired old “anti-Semetic” attacks are further proof of exagertaed claims and lies-given that the vast majority of Israel’s Jewish citizens have had Semetic blood bred out of them for centuries being mainly of East European descent. The majority of Israeli citizens and those in Gaza under attack are Semetic though.
The Zionist government not only steals land-it appropriates words.
Didn’t Peter Costello boast that the Liberals left office with the government in surplus. So why the comment “The Rudd Government inherited about $50 billion in outstanding debts”
You mean the Liberals really did lie to the poor Asutralian electorate
Stephen is just showing his Liberal bias here. What else could Rudd and Co do. The actions in the 1929 disaster were all wrong and the solution to this one which is a copy is to do what Rudd and C0 are doing. The situation now has no resmblence to the Whitlam period which was due to the first oil shock and is just matter that the Liberal Party have always pushed to demonise Labor. Governments must spend to counter recessions. As one who grew up in the last one I really do not want to see a repeat of 1929 again. I thought that Mayne had some sense but that illusion has been destroyed
Er, no Stephen.
With regards to Peter Costello, all is not forgiven Peter - and the average Australians wants to see him return about as much as they want to read dross like this.
Stephen provides little evidence for his claims but his wish to see Costello back is bizarre considering he’s part of the problem. We aslo need a definition of a “resepcted businessman” if not a name.
When things are flying high as in the financial atmosphere created by the Howadr/Costello years (which wre bound to crash as they have) there will be any number of businessmen who will succeed spectacularly-even I know many-but that’s alo part of he problem. The raging conditions of the past 10 years are great for predatoy business and one easily becomes “rspected” but overall there is a penalty to be paid by all-as we do today.
Why then, Stephen, has big business applauded Rudd’s package ?. (are they not respected ?).
As for the AAA credit ratings and the handful of companies that hold whole countries in their blackmailing grip, they should be finally challenged. If they are so successful then why were they giving the USA -AAA credit rating right up until the great crash ?
I wonder sometimes why we subscribe to crikey . This rubbish is for free at the Australian
I congratulate you on excellent article Stephen Mayne!
I am dumbfounded by the media’s complicity and acquiescence to this cynical Rudd manipulation. One has to wonder whether the mainstream media act for Rudd or to inform the people?
That this “stimulation package” is insanity is obvious to anyone with even half a brain and without prejudice. Thus David Sanderson could be ‘forgiven’ his usual silliness were it not for the fact that he always and inanely demonstrates typical leftist bad will.
The same economic forecasters, commentators and soothsayers dredged up by the same media unsurprisingly acquiesce to be “decisiveness” of this charlatan Kevin Rudd.
To explain my earlier comment I have pasted below most of my AFR letter published yesterday:
There is no need for the Government to go into deficit to “Rescue” the economy if they adopt a modern version of the Bankhead-Pettengill Bill introduced into the US Congress in 1933 (“Deficit looms over rescue bid” – page 1 February 2).
The Bill was overtaken by “The New Deal”. The Bill would have created one trillion dollars of self-financing and self-liquidating “Stamp Scrip” to be issued by the government as legal tender. Half the money was to fund welfare and the other half to fund infrastructure.
All the money created would be canceled in one year by the revenues it generated. The money would become self-financing as each week a stamp of 2% of the face value of the notes issued had to be affixed to the back of each note each week to keep them valid. Over 52 weeks the post office would obtain stamp sales of 104% of the issue to provide the cash to redeem the notes and obtain a gross margin of $40 billion dollars for its services.
Merchants would profit by not needing to pay over 2% on each credit card transaction. They would only need to pay 2% of the money remaining in their tills each week. Stamp Script could be given away to businesses to replace bank loans of distressed businesses on conditions that the benefits were shared with their stakeholders.
Today, electronic money could be issued, distributed and stored on the SIM cards of mobile phones. The phones could be scanned or swiped to make payments for purchases including 2% of any weekly balance to be automatically transmitted to the Post Office. Unlike conventional money that can be saved cost carrying money forces people to spend to get the economy going again.
Both John Maynard Keynes and Professor Irving Fisher supported the use of Stamp Script to keep the value of conventional money stable. But more importantly today cost carrying money would stabilize the financial system.
Dollar Sweetie was always banging on about how he got rid of government debt and how Australia had a AAA rating. I always wondered what the great virtue of an AAA rating was if you weren’t going to borrow any money. Of course the no debt claim was a lie. I think DS WAS going to get rid of all government debt at some stage, but someone with a modicum on economic and financial nouse explained to him that such debt did have a place in good economic management so DS backed off. Of course he continued to perpetuate the no-debt untruth. I always saw it as ironic, when he said he didn’t have any debt, because I had and still have have $100 K of commonwealth indexed bonds in my SMF which have ridden out the shock market fall very well. A lot better than my Rio shares.
PS Don’t be too hard on Stephen, he did get Crikey going. I don’t know how I would stay sane without it.
I suspect Mr Mayne you and Costello have been attending that strange Church Cossie is so devoted to. Your brain (?) is as lame as his. Keep taking the pills mate you are sick.
Nice comment Shann. Hope I get time to look at it sometime.
Orin - I agree completely.
Where to start. Stephen - your comment that this is a “spending binge that imperil our AAA credit rating”? You are the first person I have heard state this. You provide NO facts for it (what a surprise). Just more alarmist claptrap.
Second, you whinge about the 12 billion package as being “money for nothing” which got the world where it is at the moment. Deep thinking there. First, there is infrastructure spending in the 12 billion (that you ignore). Second, the “GFC” is a tad more complex than Government payments. If it were as you say then Howard’s middle class welfare would have sunk the world!
Finally, “We need a detailed analysis of the Federal fiscal position before Labor should be given any authority to spend another dollar, let alone $42billion”. Authority from who? You? They are the Government. You sit on the board of a Kindy.
What arrogance you have! Arrogance and ignorance. Not a great combo Stephen.
Ho ho ho! This idiot thinks that other idiot Costello would do a better job. Moron, do you know whats going on around the world?
Well done Stephen - you have rarely written with such incisive clarity to very accurately describe the stupidity of Rudd and his merry team.
This package of crazed spending is on the one hand downright irresponsible, and on the other hand extremely over the top. Sure we need more housing - not necessarily all for soldiers - and sure we need to fix all the schools that our dumb State leaders have ignored. But not at the risk to our ability to meet these commitments, and so risking our credit ratings etc.
As the maddies come out of the woodwork - most of the enraged respondents here, and the likes of Kerry O”Brien - it should become loud and clear that all they want is the cash-splash and hang the consequences.
Is Malcolm Turnbull so wrong to be asking the questions he is - Rudd and Swan are after all not very good at any form of economic management and not much better at accountability. Let them account and justify what they want to do instead of their constant carping and crying. Children - that’s what they are!!
Remember Mark Latham and Julia Gillard’s Medicare Gold policy? This ‘stimulus package’ is even worse than that. It’s totally pointless. The government’s capacity to borrow should be saved for when and where it’s really needed, eg to assist the unemployed.
I’m no economist , and don’t really have much time for them .
But , throughout my short time on this planet ,the results I’ve seen from the handouts to people , whether it be money or material goods , have never been favourable , mostly devestating .
So, apart from the prospect of gaining a lot of popularity, (i’m sure anyone who stood on the street corner with an open wallet would be extremely popular), what other earthly reason could there be for these constant handouts?
I’m just a simple carpenter , but I’m sure that when times become tough , I’m not going to throw my savings out the door .
Wake up guys. Plenty of bond sales in Europe have failed and bond sales in the US are no longer attracting as much attention as they did at the peak of the crisis (check the yields). With so many countries stimulating at once via debt issuing, there will be competition for capital and it will push the yields up.
As such either interest rates will be forced up or countries will start defaulting. Not a good time for governments to issue debt in this environment.
I agree, there is some seriously nasty attitude being aired here. If the world is in as dire a position as most commenters here state, then the one thing it justifies without further questioning is abandoning the cheap partisan re-run of which politician would be better.
The question asked in the article is one I have been wondering for a long time and neither side of politics seems inclined to answer - can you spend your way out of this kind of financial crisis, and where are trying to get to other than ‘not here’. It has been taken as an article of faith than you can ‘stimulate’ demand which has been destroyed by a lack of credit and that doing so is actually a good idea even if it leads to more indebtedness. I haven’t seen a logical case, let alone a real world proof of concept, of either proposition. If these packages do not work because they cannot work then all Rudd, and all the different versions of stimulus promoted by Turbull, Costello etc will have acheived is to burn the federal surplus. Not a trivial proposition, I would think, and one deserving of some explaination and analysis.
Well done Steve - a first class analysis. This time Turnbull and the opposition have got it right in blocking Rudd’s potentially disastrous cash handout proposal.
It seems that once you have been a Liberal staffer the habits of mind you learn there are impossible to throw off, no matter what the circumstances.
Mayne reviews government finances as if he were analysing a big company’s balance sheet and only succeeds in displaying his woeful economic ignorance. Time to go back to your day job as a shareholder activist Stephen and stop pretending that you have anything useful to say as an economic or political commentator.
There is no need for the government to go into debt to re-invigorate the economy. The economy could be re-invigorated much more effectively with the government raising additional revenues by issuing old fashioned cost carrying money as used by thousands of communities in the Great Depression. Cost carrying money would be much more effective because it forces people to spend rather than save. If it became redeemable into Kilo-Watt Hours of renewable energy it could remove the need for carbon trading or taxing to make renewable energy more competitive as shown in my academic article “Money, Markets and Climate Change” available at http://ssrn.com/abstract=1304083. My AFR letter is based on my academic paper: “Options for Rebuilding the Economy and the Financial System” available at http://ssrn.com/abstract=1322210. Cost carrying money removes the bias to invest in financial assets rather than real assets and so a way to build a more efficient, equitable and resilient economy.
Stephen Mayne: If Malcolm Turnbull felt the electorate was in such need of protection. Why didn’t he take Rudd to one side and tell him the opposition would attempt to act like an opposition if he, Rudd, announced more cash handouts? This would have been the moral thing to have done-and don’t tell me he tried that because he would have used it as a cross-reference on the 7.30 report, if he had. As a result of Turnbull’s grand-standing he has walked into Rudd’s trap. From whence he will never be quite the same again. Does anyone imagine Rudd will let this little effort alone? He will use it to crucify our Sir Gwain of Camelot.
To ensure the whole thing became a total farce, Peter the phophet returning from his holiday in a Damascene conversion to far right-wing fundamentalism sails into the Age with a nonsensical blather.
None of the other politicians prepared to star in this Bollywood extravaganza? Fielding should be good for a meaningless tantrum or ten.
Morality, you died yesterday.
I know very little about economics but I do know this - the many people who continue to give us the benefit of their very definite opinions on the economy, still sounding totally convinced of the superiority of their intellect and of their own infallibility, even though their credibility has now been so obviously and totally destroyed, are about as believable as the demented and self-righteous, preaching the word of God with absolute faith and self-belief on street corners. And yes, they may well end up being right but I sincerely doubt it.
People like Stephen should start using words like “I think that…”, “in my humble opinion…”, and “maybe it’s true that…”. Maybe.
Is the writer seriously suggesting that Rudd is either willing or able to wind back the billions of dollars in middle class welfare delivered to the already avantaged in the form of subsidies to private schools and the private health rebate. Get real!
Thankfully some clear analysis. Simply borrowing more to fix a problem caused in part by overborrowing should ring alarm bells!! The alarm bells should only be louder when our money (around $20b) will be long gone before the full effects of our commodity price depression takes effect, probably in the second half of 09. The Dec 08 and April 09 handouts will be of no benefit then to retail workers hoping to hold onto their jobs.
The ALP is in a political panic and is prepared to take economic risk for the sake of winning the political war of who tried hardest and who moved first to take popular action. There is no infinite source of debt, private or public. If W Swan wants to avoid being transfixed by his computer screen while he waits for email to come in from Pakistan then he better just slow down and think through what our financing needs might be not just over the next few months but over the next few years.
deary me.. one little article in support of Malcolm after two consecutive bollockings and
they all come out of the woodwork to protect the Dear Leader…
Sorta sorry that I recently renewed my crikey subscription as I guess paying money to crikey in some way encourages this sort of stupidity.
Comrade Gillard clearly didn’t bring back a summary of Vladimir Putin’s Davos speech.
As not reported in our controlled media here but reported today by antiwar.com by journalist Justin Raimondo, Putin sounds like a Ron Paulite and Austrian Economics convert. The crux of Libertarian Putin’s speech is as follows:
“The entire economic growth system, where one regional center prints money without respite and consumes material wealth, while another regional center manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback.”
“Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years…… This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral…..”
“This means we must assess the real situation and write off all hopeless debts and ‘bad’ assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalization, bonuses, or reputation. However, we would ‘conserve’ and prolong the crisis, unless we clean up our balance sheets.”
“Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.”
I can’t say it any better than that. Is Russia where we are going to find new economic leadership. I hear they have plans for a gold rouble and for mine - I’ll take a kilo or two.
I enjoyed the article purely from a diversity in commentary point of view, but I can’t say I agree with much of it. Those who pronounce the Government’s measures entirely wrong (JamesK, I’m looking at you!) should consider the comment here of Keith Bedford about the 1929 great depression. Sticking with the same policies espoused by Howard and Costello during boom times will not help us in the current climate.
As a Crikey newbie (maybe) I’ve been disturbed by the overwhelming blatant pro-Rudd stories.
Rudd is not God, he is a first-term PM after a not very long time as opposition leader. And in truth he hasn’t shown the ability it takes to deal with these trying times. Mind you, Gillard’s worse…
In my wrap earlier today I noted SM’s partly hyperbolic comment about Rudd wanting to divert from Ho 6 figure donations to the ALP, yesterday. However I still think he was right that Rudd like fictional Gulliver has been staked down by numerous 2nd order political concerns which taken together could trap him or hold him down. This Stimulus mark II does smell to me like a real politik agenda to break free of the Lilliputians:
- Ho’s donations
- a vibe that Rudd was never elected on a platform of economic crisis management more as conservative rich man success in boom times
- unconditional backing in January by PM Rudd of a demonstrably racist murderous element in the Israeli Defence Force (eg page 1 expose’ by John Lyons in the last The Weekend Australian)
- often argued NSW union puppeteering of Rudd’s ascension with the in turn ascension of union leader John Robertson to NSW Parliament preventing the huge energy privatisation agenda of big business
- recent data of collapsing trading destinations with 4 year profile of increasing deficits perhaps the thickest cord on him of all by late Monday 2nd Feb 2009;
- Harvey Norman sledging stimulus mark I as failing to prevent big retail closures;
- probably other issues of individual nuisance value ‘in due season’ (!) but all taken together quite threatening to Rudd’s status and leadership
Gulliver has broken the threads and strode forward with this giant stimulus mark II package. But will it work? If you go to Inside Business on 7 Dec 2008 you can see the proximate cause of the GFC and it was not simply Lehman falling over it seems. But what the underlying systemic causes still remains a mystery to me.
I’m as glad as anyone to get my call/prediction last Monday on a BK string of green infrastructure in energy, and social housing, met in the package of the ALP. But I also well recognise the chorus of the ALP peanut gallery regardless of merit or fact (as above this string via local council 4 years).
Stephen, your sitting on your brain. Thinking Taxpayers will be horrified to read your remarks about Costello. During the ABC interview, Costello was a grinning, gloating clown. I am amazed that this person is a back bencher receiving a Taxpayer funded salary. We are currently in a world wide financial crises, brought about by greed, greed from big business and banks. Howard and Costello encouraged this greed and only thought about the middle and lower income Taxpayers when they realised that these voters outnumbered the greedy and tried to buy their votes. During the Costello era many Taxpayers had to use their credit cards just to survive. Stephen, I think you should rethink your idea about Costello.
I can only think how lucky this country was that Howard wouldn’t or couldn’t hand over the leadership to Costello.
It’s quite clear that rational debate would be quite impossible with ‘The Colonel’.
He clearly lives in a fantasy world of his own prejudice in which the global financial crisis is as a direct result of the actions of John Howard and Peter Costello and the tragedy that is the Middle East is all Israel’s fault
(….and…. blah blah……you have to believe me because I myself am a Jew… blah blah).
I realise that Jonathan Green and many other nutters like the Colonel who frequent this board would like it to be so. But just because their tortured prejudices contort their perception does not actually change reality.
oh dear what hysterical cr.p 1 businessman and Stephen mayne dont like it so its the end of the world
also stop defaming Whiltam. a great deal of the infrastructure we use to this day came about because of him.
what a sad, patheticlittle sook is stephen mayne, with his head stuck in costello`s arse, no understanding of the reason behind the stimulus package, read up on the great depression, governments of the conservative brand, cut wages , pensions, servicemens pay, and increased taxes, and look what happened, you wanker, why in gods name would crikey seek comments from an idiot, you sold out of crikey,so stay out.
Good on you Stephen! I’m glad I subscribe to Crikey. It’s an excellent site you founded.
Stephen, I’m starting to think there’s substance abuse involved here mate….go see someone will you?
Just another thought. Could we bypass the big Big Pete as treasurer option and bring back Lord Keating of Kamkazi. He’s making a nuisance of himself in the media at the moment, because he’s bored. We might as well stick him on the treasury benches so he can lock horns with Malcom II and Big Pete. Much greater entertaintment value that Big Pete smirking his way through the sessions from the treasury benches. We’ve all had enough of that! By the time their egos have exhausted themselves we can all move on. Maybe something would be achieved.
I’m sure Crikey is attempting balance. But Stephen sometimes arguments are so loaded its not worth expending your credibility. Had Turnbull turned the other cheek today he and the Liberals would be much better off. Had you done the same…maybe the same result. A byline doesn’t buy credibility.
A moronic contribution.
the proposed package hits the spots that can be done for the moment:
1. cash stimulus to preserve critical retail and services sector jobs.
2. insulation of housing - a solid contribution to environmental infrastructure and a good job creating activity for the unskilled labour (delivered by small private sector contractors) who will be severely hit
3. schools spending - sorely needed capital expenditure with real and enduring future social and economic benefits. Provides work for hard hit construction sector.
4. welcome tax benefits for small business equipment purchases
Of the 200B government borrowing, more than 50% is simply the inevitable and unavoidable result of collapsing tax revenues due to the financial crisis.
This package is designed to reduce a further collapse. Every dollar spent in such a manner creates economic activity which in turn has a positive impact on future tax revenue. To do nothing will guarantee a worse result and greatly threaten our economy and the government’s bottom line.
The Coalition position which would entrench further tax cuts is opportunist, would permanently undermine the tax base, and would not have the immediate impact required.
Stephen Mayne is, in my view, an economic illiterate.
Hey who was the noted business leader? Rodney Adler or John Dorman Elliot?
Tell us who or she is so we can short the shares in his/her company, with views like that the shareholders have no hope.
Stephen, how could you be so reckless and silly - stating clear facts, logic and thorough analysis while others are losing their heads? Rudd is pushing RELIGION - and you’re talking ECONOMICS?!
Get back to swallowing Rudd’s hysteria, think the same way the rest of the religious fanatics here have. Like many sheeple, you should start believing that a Keynesian solution will fix the problem!!! How could you be so analytical - bringing historical precedent into the argument? You must be, judging by most of the comments on this post, either a drug taker or a rabid, mindless ideologue! Let’s not argue the facts, let’s play the MAN, not the ball.
This so-called “cure” is worse than the illness. It is Whitlamism at it’s worst. Keep up the good work SM.
Err ..”..the crazy middle class welfare of the Howard years..” meets “..Come back Peter, all is forgiven..”. Maybe I wasn’t paying attention but I’m pretty sure that the afrementioned Peter was leading the ‘crazy’ gang during those wasted years.
But hey - thank goodness that, after all these ” frightening headlines” , we can relax with the thought that this is just an one term aberation and the top end of town will soon resume control with a steady hand on the tiller. Their track record clearly shows that they know what they’re doing.
Still I’m a little puzzled by the anaylsis of why were are where we are ..the ” money-for-nothing approach”. Is this a claim that the world recession was caused by excessive handouts, where institutions were reluctantly forced to throw money at poor people and were surprised when they could not pay it back ? I don’t recall getting communication suggesting that, even though it was known that it would all end in tears, I must be granted access to unlimited funds. Maybe the kings were too busy counting their money ( and their trophy queens feasting on bread and honey ) to notice the circling black birds.
Personally I blame federation.