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Christopher Pyne and the dangerous fantasy of surplus

The fantasy of surpluses peddled by the Coalition becomes dangerous when it substitutes for actual thinking about the economy.

Christopher Pyne

Christopher Pyne, yesterday: “Well if there had been a Coalition government for the last five years, Kieran, I think most people accept that we would have had continuing surpluses.”

Whether “most people” accept that might be a matter for pollsters, but it’s easy enough to use historical data from the budget papers to work out the maths for Pyne’s claim.

Under the Howard government, spending rose an average of $14.5 billion a year between 2001-02 and 2007-08. Assuming this rate of growth had been maintained and there was no attempt to respond to the impacts of the global financial crisis (even though Malcolm Turnbull supported the Rudd government’s first set of stimulus payments), the Coalition would have indeed recorded a surplus in 2008-09, but then sunk over $16 billion into the red in 2009-10 and nearly $14 billion into the red in 2010-11, due to the sluggish recovery in revenue growth — something they’ve steadfastly refused to acknowledge in their attacks on Labor’s fiscal management. In 2011-12, they would have managed a balanced budget.

So, for Christopher Pyne’s statement to be even close to being right, the Coalition would have needed to find an extra $25.7 billion in revenue, or find $25.7 billion in cuts, between 2008-09 and 2011-12 just to get back to balance, let alone generate surpluses. And that’s without a skerrick of stimulus.

So, pop quiz for Pyne: which new taxes would you have put in place, or which programs would you have cut, to address that $26 billion gap?

But wait: if there’d been no stimulus, the rate of unemployment would have gone up to perhaps 7% or 8%, significantly increasing transfer payments. Consumer and business confidence would have collapsed, with resulting falls in retail and other spending. In the resulting recession, more firms would have collapsed, sending still more people onto the dole queues. Personal income tax revenue would have fallen, GST revenue would have fallen, as would corporate profits, further slashing billions from Commonwealth and state budgets. Putting aside the inconvenience of hundreds of thousands of unemployed Australians, Pyne’s Coalition would have had to have found billions more in revenue or cuts in order to keep their surplus.

And, of course, those resulting cuts or tax rises would have driven further economic impacts, slowing the economy further, undermining revenue further, necessitating more cuts or tax rises. You get the point.

The only means of stimulating the economy would have been monetary policy, even though interest rates went down to “emergency lows” under Labor and the majority of mortgage-holders didn’t cut their payments, preferring instead to pay down their debt faster.

That’s not a projection or a fantasy, that’s the brutal reality of what is happening in Europe right now: in an effort to adhere to a particular fiscal policy regardless of its economic impact, the EU is in a depression — yes, a real, 1930s-style depression — that keeps pushing its fiscal targets further away, never mind the 50% youth unemployment and social dislocation. Austerity doesn’t work even at its specific goal of curbing government debt. It’s Sisyphean economics and it’s destroying a generation of European workers.

What is a fantasy is Pyne’s statement, of course, predicated on the broader fantasy peddled by Tony Abbott and Joe Hockey, that the election of a Coalition government next year will magically reset Australia to the Howard years, instantly returning us to a point before the GFC-cruelled revenues, before consumers returned to historical rates of savings and before mining companies began ramping up investment, when the principal task of the federal government was to figure out how to blow the windfall revenues that piled up every year.

That’s a political fantasy and good luck to the Coalition in trying to sell it. Maybe enough voters will believe it, who knows. All’s fair in love and politics.

The more dangerous fantasy, the one that can and will harm the economy, is the one that insists that budget surpluses are the key goal of economic policy, rather than a tool in the service of broader economic outcomes. Whether you believe it because you’re stupid enough to think governments are just like households and must always “live within their means” or you believe it because you have a pathological hatred of debt and think government is always too large, not matter what size it is, it means substituting ideology for thinking, and substituting the means for the ends.

The result is a polity incapable of coherently responding to changing economic circumstances, of doing what the Rudd government did when faced with the challenge of the GFC and retooling its economic approach to preserve jobs. Just ask the Europeans.

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  • 1
    Saugoof
    Posted Tuesday, 11 December 2012 at 1:27 pm | Permalink

    It “amuses” me hearing statements like this one. Christopher Pyne knows well enough that his statement is wrong but it’s just too good of an opportunity to attack Labor to let slip. The reality is that had the Coalition been in power during the GFC, their response likely would have been somewhat similar to Labor’s. They would have been less generous in going into debt, which would ended up leaving the economy in a bit of a worse shape than it is now, but for all the lunatic slogans that they put forward in opposition, I reckon there are enough sensible people in the Coalition to avoid the worst of those idiotic austerity measures being peddled around Europe.

    Reminds me a bit of all the rubbish the Coalition sprouted during the carbon tax debate. The reality is of course that had the Coalition secured the backing of the independents and Adam Bandt then the Coalition would have presented a pretty much identical carbon tax policy and Labor would have attacked it as a policy that will wipe out Australia.

  • 2
    Jimmy
    Posted Tuesday, 11 December 2012 at 1:32 pm | Permalink

    This article is just fantastic and I hope people forward it to everyone they know.

    The sheer stupidity of the “This is the worst govt in history” crowd is just mind boggling but what is worse the people of this view should know better.

    For example I had an argument with a financial planner the other day who thought that interest rates needed to be 1% lower “to get this joint going again”. Now ignoring the fact that we are currently growing around trend & unemployment is low I said that if we really wanted to stimulate growth both sides of politics should abandon their surplus at all costs approach.
    This lead the planner into a big anti Gillard anti govt tirade which mentioned only the ALP were clinging to their “miserly” surplus (again ignoring the libs claims of getting a bigger surplus) and that this govt has ruined us by racking up $200b in debt.

    When you boil his arguments down you see a man who is complaining the economy is flatlining (retail construction and manufacturing are all F..ked apparently) and want it stimulated while having the govt concurrently run a contractionary fiscal policy so we have no debt - it is just stupidity.

    And what makes it worse is that this man was very much pro Labor in 2007 and assists people in making investment decisions.

  • 3
    Jimmy
    Posted Tuesday, 11 December 2012 at 1:33 pm | Permalink

    Saugoof - “Christopher Pyne knows well enough that his statement is wrong but it’s just too good of an opportunity to attack Labor to let slip.” He also knows that he can make it with no scrutiny being applied by the MSM.

  • 4
    klewso
    Posted Tuesday, 11 December 2012 at 1:33 pm | Permalink

    So saith the “Truth Fairy”?

  • 5
    Jimmy
    Posted Tuesday, 11 December 2012 at 1:33 pm | Permalink

    Saugoof - “Chri stopher P yn e knows well enough that his statement is wrong but it’s just too good of an opportunity to attack Labor to let slip.” He also knows that he can make it with no scrutiny being appl ied by the MSM.

  • 6
    Mark Elliott
    Posted Tuesday, 11 December 2012 at 1:37 pm | Permalink

    You seem to have ignored that fact that the reason that Europe is in so much trouble right now is because countries like Greece ran huge budget deficits in order to perpetually stimulate their economies.
    Running a budget deficit during the GFC was the right thing to do at the time but Labor are the ones promising to produce a budget surplus and that doesn’t seem likely.

  • 7
    Apollo
    Posted Tuesday, 11 December 2012 at 1:46 pm | Permalink

    Mark Elliott, the surplus was very feasible had our currency did not elevate to the possible ‘reserve’ currency and put up with other nations QEs, and/or use a different approach and did not re-open Nauru & Manus island.

  • 8
    SimsonMc
    Posted Tuesday, 11 December 2012 at 1:47 pm | Permalink

    Bernard - don’t underestimate the power of stupid people in large groups.

    Labor need to not only hold onto seats in Qld but actually need to win a few. If you scan through the comment section of the Courier Mail, you start to get a grasp of how hard a task that is for Labor.

    These people are still grappling with fading curtains, so what hope do you think they have of understanding the Australian economy.

    Look they were that stupid to vote in a bloke who before the election said Joh was his hero and now complain when the LNP do whatever they want, 1980’s style.

    How’s that turned out for you Qld?

  • 9
    Apollo
    Posted Tuesday, 11 December 2012 at 1:47 pm | Permalink

    Why fuken mod me for?

    M.ark Ell.iott, the surplus was very feasible had our currency did not elevate to the possible ‘reserve’ currency and put up with other nations QEs, and/or use a different approach and did not re-open Nau.ru & Ma.nus island.

  • 10
    Jimmy
    Posted Tuesday, 11 December 2012 at 1:51 pm | Permalink

    Mark Elliott - ” Greece ran huge budget deficits in order to perpetually stimulate their economies” True but we are a long way from Greece aren’t we, debt less than 10% of GDP, Govt spending being wound back to get the budget back to a neutral setting (whether a surplus is achieved this year or not).

    Running a budget deficit during the GFC was the right thing to do at the time but Labor are the ones promising to produce a budget surplus and that doesn’t seem likely.” And the libs are the ones saying they would of run surpluses through the GFC and bigger surpluses now - which would of and will contract the economy further.
    And if the surplus isn;t achieved it isn’t becuase govt spending is out of control it’s because revenues have fallen.

  • 11
    Laura
    Posted Tuesday, 11 December 2012 at 1:52 pm | Permalink

    it’s this time of belief in an alternate reality that bit the Republicans so hard in the recent election. Ignoring the facts and creating an alternate, fallacious reality, in the end, doesn’t really serve anyone.

  • 12
    Jimmy
    Posted Tuesday, 11 December 2012 at 2:00 pm | Permalink

    Laura - I think that “Beli ef” issue is the big one, you see business & consumer confidence figures being weak because people “bel ieve” the economy is in bad shape no matter how low the unemployment level or inflation and interest rates, people “bel ieve” the carbon tax is bad for the economy without a shred of evidence and they don’t “beli eve” the scientists who demonstrate climate change is a fact.

    People “bel ieve” Gillard is a li ar but don’t care about Abbott’s issues with the truth.

    In some respects I almost hope Abbott’s win’s the next election so I can watch the debacle that befalls us and the altering of history and arguments that follows.

  • 13
    Mike Flanagan
    Posted Tuesday, 11 December 2012 at 2:12 pm | Permalink

    So who would believe C Pyne?
    Why,even Cory Bernardi reckons he is a political opportunist that will say and do anything to satisfy his ambition to be in the bull pit.

  • 14
    Bernard Keane
    Posted Tuesday, 11 December 2012 at 2:41 pm | Permalink

    Hey Mark Elliott visit Spain and lecture them about their “huge budget deficits” before the GFC and see how you go.

  • 15
    zut alors
    Posted Tuesday, 11 December 2012 at 2:53 pm | Permalink

    This is the same Christopher Pyne who declared that automatically registering Australian citizens to vote is ‘rorting’ the electoral system. So excuse me for not giving any credence to his comments on a Treasury matter.

    Lofty fiscal debate isn’t Pyne’s strong point. He should stick to his forte: affected tizz.

  • 16
    drmick
    Posted Tuesday, 11 December 2012 at 3:02 pm | Permalink

    They will serve us up “the depression we did not have to have”, and blame the gillard government for it.
    The NSW experience of that mobs economic management credibility should be a timely warning; they miss a billion dollars in the books???? WTF. No GFC? Geez where were they?

  • 17
    Noely Neate
    Posted Tuesday, 11 December 2012 at 3:08 pm | Permalink

    Honest Question here Mr Keane, obviously I am one of those silly punters at large, but, why is it that the main papers seem to have this Animal Farm attitude of good & bad in relation to ALP coalition? ie Julia is a ‘liar’, liar liar man it never ends, yet they don’t ever pick that up when sometimes it is patently untrue, yet, Hockey, Abbott, Pyne, can say as they wish, regardless of whether what they are saying is being ‘liberal’ with the truth and they are never called on it?

    Deadset serious question… I don’t support either party, but have always been fascinated by that mindset of the big papers? I am not a journo but can see some of it is crap, yet is still blithely reported as fact? (on the TV news too?).

    If you could do an article as to why that is so, would be awesome and maybe educational for the average punter out there?

  • 18
    James Butler
    Posted Tuesday, 11 December 2012 at 3:09 pm | Permalink

    Surpluses are a GOOD thing, not sure why the media keeps talking about how unimportant or bad a surplus is. But what’s bad is when government continues to waste money, increasing welfare while cutting important programs such as scientific research grants, which infact takes Australia backwards.

  • 19
    Mike Flanagan
    Posted Tuesday, 11 December 2012 at 3:12 pm | Permalink

    PS to 13;
    A really well constructed article, thanks Bernard.

  • 20
    billie
    Posted Tuesday, 11 December 2012 at 3:20 pm | Permalink

    Chris Pyne reinforces my view that Liberals are economic vandals unfit to govern this country at this time of economic uncertainty.

    Perhaps Australian politicians or their economic advisors need to familiarise themselves with the briefing Professor Steve Keen of University of Western Sydney.

    In his briefing Professor Keen said that there are parrellel between the great depression and todays situation in that they Great Depression and the GFC were caused by a collapse in private debt, however today the private debt to public debt ratio is 1.7 time higher than it was in the 1930s.

    Slides were shown to illustrate that government debt increased as private debt deleveraged. The Great Depression finally ended when World War 2 started when public debt soared to buy, build the armaments needed to win the war. Private companies took the war time opportunity to deleverage their debt further, and there was a debt amnesty.

    Keen advises that cutting US government spending will slow down the US economy and prolong the depression

    Keen talks about a debt amnesty or jubilee where debt is pardoned, ie those people who borrowed on NINJA loans have their debt pardoned

    http://www.debtdeflation.com/blogs/2012/12/06/briefing-for-congress-on-the-fiscal-cliff-lessons-from-the-1930s/

  • 21
    billie
    Posted Tuesday, 11 December 2012 at 3:23 pm | Permalink

    Do we really want to follow Eurpoe down the austerity abyss?

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9733486/Europe-clings-to-scorched-earth-ideology-as-depression-deepens.html

  • 22
    Jimmy
    Posted Tuesday, 11 December 2012 at 3:26 pm | Permalink

    James Butler - “Surpluses are a GOOD thing, not sure why the media keeps talking about how unimportant or bad a surplus is.” This sort of statement is what is wrong with the current debate - yes surpluses are a good thing when the economy is firing on all cylinders but they aren’t a good thing when a recession is looming.
    A surplus contracts the economy by removing funds from it (ie the govt takes out more money in taxes than it spends) a deficit is expansionary (ie the govt pumps in more money than it takes).

    The current fiscal setting (ie a small surplus) is neutral and if that small surplus became a small deficit it would still be neutral. This and the fact that a deficit would be due to the economy contracting and revenue falling rather than excessive govt spending is the reason the more rational commentators say the govt achieving a surplus is unimportant economically (ie it would either stay neutral or become expansionary at a time when the economy needs expanding).

  • 23
    Marty
    Posted Tuesday, 11 December 2012 at 3:28 pm | Permalink

    Mark Elliot: The problem for Greece and then the other PIIGS nations was and is that they no longer have a sovereign currency, so they can not implement their own monetary policy. The ECB also restricts the actions member nations can take in terms of fiscal policy, so they are doubly hamstrung.

    Australia, with our own currency in which balance sheet debts are demoninated, can not ‘go broke’ in the way that Greece has.

  • 24
    my say
    Posted Tuesday, 11 December 2012 at 3:33 pm | Permalink

    Bernard

    i cannot see where this was said.
    was it a news conference somewhere

    why dont journalists like you self ask this or say this to their face

  • 25
    bjb
    Posted Tuesday, 11 December 2012 at 3:35 pm | Permalink

    Marty - “Australia, with our own currency in which balance sheet debts are demoninated, can not ‘go broke’ in the way that Greece has.”

    Which is what all those who bang on about how bad deficits are by comparing us to Eurozone countries fail to see.

  • 26
    my say
    Posted Tuesday, 11 December 2012 at 3:37 pm | Permalink

    but people hear these things
    may be dont understand and
    then just move on in their mind

    well he must right after all he is a politician

    honestly if i never read pollbludger i would not have clue

    sorry to be so ignorant but well that’s me
    dont understand the world of economics

    like most people i would assume
    so they are getting away with this,

    god help us thats all i say

  • 27
    my say
    Posted Tuesday, 11 December 2012 at 3:39 pm | Permalink

    some one in the business needs to speak out
    surley they are concerned
    then the public would listen
    otherwise when they hear it from the labor side
    they assume thats just politics

  • 28
    David Hand
    Posted Tuesday, 11 December 2012 at 4:00 pm | Permalink

    It is very reasonable to say that the Coalition would have run up smaller deficits than the ALP did. That would make a return to surplus easier.

    Your deficit mathematics have the same credibility as Wayne Swan’s. They change every few weeks by billions of dollars. You have no idea what the effect on the economy by say, not doing the pink batts roll out or the wasteful school hall programme might have done.

    You are guessing, Bernard, and a self-serving guess at that.

    Pyne’s basic point, that the Labor Government has overdone deficit spending, is at least a valid view. It is also reasonable to believe that a Coalition government will pay off Labors debt quicker than the ALP can. Don’t forget there’s all those unfunded grand socialist programmes like the NDIS and the looming bail-out of the NBN to pay for yet.

    Economic growth is the name of the game and the ALP does not look like it has a game plan now the golden goose of the resources companies is no longer laying.

  • 29
    Jimmy
    Posted Tuesday, 11 December 2012 at 4:11 pm | Permalink

    David Hand - Bernards “Deficit mathematics” might be a bit of guesstemation but it is beyond doubt that the govt’s stimulous spending did have a positive impact on growth and also kept unemployment low.
    This very fact makes your statement “That would make a return to surplus easier.” ridiculous, once an economy sheds jobs and goes into recession the effort to rectify it is far greater than the prevention.

    And how is it “also reasonable to bel ieve that a Coalition government will pay off Labors debt quicker than the ALP can.” when you look at the libs policies of removing 2 taxes, spending billons on “direct action” and it’s paid paretnal leave and promising to cut taxes and increase pensions?

  • 30
    Mike Flanagan
    Posted Tuesday, 11 December 2012 at 4:33 pm | Permalink

    David Hand;
    I would suggest you review your assumtion on Pink Bats
    The impact their installation on electricity consumption alone has had a major impact on both private consumer budgets and investment on the upgrade of electricity production, let alone on the gold plated distribution system. And that’s without the consideration of the carbon footprint credits equivalent.
    You assert the BER programme is ‘wasteful’. Pray! on what grounds?
    I have always been under the impression that if you want technical and financial innovation and sophistication it is hard to engender with 8th graders. To enable this nation to pursue the innovation and industrial renewal that the coming years will require a leakless roof over the heads of our next generation.We will always rue the day we dont focus on the development and education of our children and young adults.
    Furthermore I have yet to hear or find a teacher or headnmaster, that wasn’t a paid up member of the liberal party, complain of the additional and upgraded class rooms etc that the BER represents.

  • 31
    qwerty bluett
    Posted Tuesday, 11 December 2012 at 4:50 pm | Permalink

    i love australian politics. no matter what the coalition says it’s taken as truth and no matter what labor does they’re considered incompetent and the worst government in history.

    How’s that turned out for you Qld?”
    well, people get the government they deserve.

  • 32
    Scott
    Posted Tuesday, 11 December 2012 at 4:55 pm | Permalink

    There is absolutely no way to prove or disprove Chris Pyne’s statement. It’s a pure hypothetical. That is why he is able to get away with it.
    I wouldn’t waste too much time crunching the numbers on this one.

  • 33
    Mike Flanagan
    Posted Tuesday, 11 December 2012 at 5:18 pm | Permalink

    David H;
    That should read ‘pray tell……..”
    This damn thing has a mind of its’ own for it decided I had finished and posted. Shame we didn’t have a BER in my long distant youth!
    Further to the above post David, I think you would find the moneys for the NBN have been alllocated and accounted for in past budgets and makes up the capital structure of a corporate body that will, in the not too distant future, be paying dividends to the consolidated revenue. In the meantime all Australians are share holders in the enterprise.
    It seems to me to be logical, in our aspirations for both our younger generation and the future of the nation in a evermore sophisticated world , we should require the best available communication system nationwide.

  • 34
    SimsonMc
    Posted Tuesday, 11 December 2012 at 5:18 pm | Permalink

    David Hand

    May I remind you that the supposed “socialist programme – NDIS” that you hiss at, is the same program that is supported by your beloved Libs? Furthermore, how sad is your ideology that you somehow think that a civilised society shouldn’t afford care and assistance to those less fortunate. Thankfully in both my circle of friends and business associates (many rusted on Libs), I have not found anyone so selfish that they think the NDIS is a bad idea.

    There really is no amount of logic that can bridge the ignoramus stratosphere.

  • 35
    Matthew of Canberra
    Posted Tuesday, 11 December 2012 at 5:34 pm | Permalink

    It’s very simple. If peter costello was treasurer, the GFC wouldn’t have happened because of magic.

  • 36
    Hamis Hill
    Posted Tuesday, 11 December 2012 at 5:35 pm | Permalink

    Austerity in the conservative Australian East Coast regimes has already derailed the growth upon which a budget surplus depends.
    The conservative economic negativity, now running for half a decade, is also having it effect.
    And an Abbott Recession is inevitable as Abbott will cause massive mortgage defaults among the “Howard Battlers” whom that charlatan deliberately addicted to debt.
    The message has to go to the Big, Middle and Lower ends of cities, towns and villages to look overseas and see for themselves what Abbott Austerity will do to their businesses.
    They can sve themselves by boycotting advertising in the conservative-supporting MSM and by denying any financial succour the conservative politicians.
    The scare must be put in, hard, to avoid an inevitable Abbott recession.
    Surely even the banks can see the threat to their $1.25 Trillion mortgages, six times higher than govrnment debt.
    Surely even the banks can recognise the danger averted by Swan when the GFC broke exacerbated by the massive housing debt bubble left by Howard.
    Just how economically suicidal are Banks and their shareholders?

  • 37
    John64
    Posted Tuesday, 11 December 2012 at 6:30 pm | Permalink

    Assuming this rate of growth had been maintained and there was no attempt to respond to the impacts of the global financial crisis (even though Malcolm Turnbull supported the Rudd government’s first set of stimulus payments)”

    … and right there, you lost it. If we accept this hypothetical fantasy response, and pretend the wind is blowing in that direction, and then believe in unicorns… here’s why it would’ve been REALLY bad!

    I could just as easily argue that under a Coalition, we wouldn’t have had a recession because under a Coalition Government, people naturally spend more thus stimulating the economy because they believe the economy is being will managed and LOOK, A UNICORN.

    I have just as much hypothetical basis.

    which new taxes would you have put in place, or which programs would you have cut, to address that $26 billion gap?”

    Building the Education Revolution” (aka School Halls nobody asked for) = $14 Billion
    “Pink Batts Scheme” (aka burn everybody’s house down) = $3 Billion
    “National Broadband Network” (aka everyone can now tweet and update facebook!) = $50 Billion [oh wait, that no-one’s not actually on the books, is it?]
    Not having a blow-out in Asylum Seeker arrivals by maintaining the Howard policies = $4 to 8 Billion
    Not vying for a seat on the UN Security Council = $3 Billion (IE: The cost of increases in Foreign Aid that paid for it)
    Compensation to coal industry for Carbon Tax which wouldn’t have been implemented = $5.5 Billion

    So, how much is that so far? Do I get my unicorn now?

  • 38
    David Hand
    Posted Tuesday, 11 December 2012 at 7:24 pm | Permalink

    Where to begin.. where to begin.

    SimsonMc - This discussion is about whether Pyne’s view about a surplus being more likely under the coalition is reasonable. It’s not about the NDIS. The relevance of the NDIS in this thread is its impact on the deficit. I support the NDIS. Tony Abbott supports the NDIS.

    Mike, for you to even ask if the BER was wasteful shows how much ALP cool-aid you must have been drinking. Its purpose was to stimulate the economy through splurging money quickly into many communities around the country. Whether or not we got value was secondary. The spin merchants in the government got working once it was perceived as a political problem. Their PR solution was yours - they wheeled out Labor voting teachers to say how grateful they were. Pity they didn’t ask the poor sods paying for it.

    Jimmy, - A lot of measures were put in place to counter the GFC and it is a reasonable view that the stimulous spending was not entirely needed. The fall in the cash rate to the emergency low level of 3% (just like today!!) did an enormous amount to maintain spending as did the guarantee to the banks.

    Hey, I’m not criticising any specific measure that was taken by the Rudd government in 2009, I’m just defending Pyne from the left wing ridicule in this publication.

    He has a view. Bernard and you can disagree with it. But it is less dangerous to the economy than the damage likely to be inflicted on the economy as Swan goes after the El Dorado of a 12-13 surplus.

    Now that’s a “dangerous fantasy of surplus” for you.

  • 39
    Steve777
    Posted Tuesday, 11 December 2012 at 9:54 pm | Permalink

    Orthodox economic management requires that the budget be reasonably balanced over the whole economic cycle, with deficits in bad years to cushion the effects of slow growth or recessions, paid back by surpluses in good years when revenues are increasing, with government debt maintained at sustainable levels.

    Deficits year in year out regardless of how the economy is a ridiculous and probably an impossible strategy, as any first year economics student would know. Christopher Pyne is either lying or he doesn’t know what he’s talking about.

  • 40
    Brefney Ruhl
    Posted Tuesday, 11 December 2012 at 10:02 pm | Permalink

    Frankly I’m beyond caring who wins the next election. All things being equal things will pan out almost the same. We’ve missed the boat on climate change, the boat people policies will continue to be shameful, banks will continue to rip us off, etc.
    The only thing that really p*sses me off is that the one big nation-building initiative, the NBN FTTH model, will be scrapped for purely political purposes. The entire industry knows that the Coalition’s privatised FTTN model will be less efficient, out of date within a decade and more expensive in the long run. Turnbull loves to cite the American model, please, with so many telcos all wanting their own patch, the talked about fibre roll-out is a shambles.
    But hey, I’m resigned to second-best (for the community) from the Coalition’s IT policies, after ten years of Howard I’m used to it…

  • 41
    Steve777
    Posted Tuesday, 11 December 2012 at 10:29 pm | Permalink

    #39 - apologies - I meant surpluses year in year out are a ridiculous strategy.

    Of course so would chronic deficits as the situation in the USA and Europe attests. But credible economic commentators (e.g. Shane Oliver of AMP) are not concerned if the return to surplus is postponed to 2014 because of difficult conditions next year. WE are moving in the right direction.

  • 42
    taylormade
    Posted Tuesday, 11 December 2012 at 10:53 pm | Permalink

    Pyne doesnt know what he is on about, is simply playing politics on Labours promise to deliver a surplus. Will continue all the way to the May budget, seems every time there is a poor economic indicator released Labour will have to defend it, ie we are determined, we stand by the MYEFO projections, growth at trend. And a round and round we go.

  • 43
    SimsonMc
    Posted Wednesday, 12 December 2012 at 8:50 am | Permalink

    David Hand

    In recent times, one of the main weapons used by the conservative side of politics when discrediting or demonising a government program that they disagree with is to call it “socialist” (see Obamacare – USA and Rudd’s mining tax – Aust) to the point where the term has now become derogatory reference in modern day political commentary. As you are on the crikey site rather than spending all your time nodding sagely at Piers and Bolt, one would assume that you have an IQ greater than those of the Western Sydney persuasion, so I suspect that it was no accident that your description of the NDIS as a “great socialist programme” was not meant to be an unreserved endorsement of your support.

    For the record, I am not a paid up member of the ALP nor the LNP. If the truth be known I am in the vein of the MTP – Malcolm Turnbull Party: true liberals who believe in a free market but still think the market can have a social conscience. If you want to argue about funding of the NDIS then that’s fine, however be clear about your views, don’t use belittling and divisive language when describing a concept that you support. The NDIS “programme” can exist under many different funding models so the debate surrounding each are totally different.

    So if you want to know where to begin, you could try by ensuring that you use suitable contemporary adjectives in your posts and that you have a better grasp on the effects that this might have in the conveying of an argument.

  • 44
    Jimmy
    Posted Wednesday, 12 December 2012 at 9:11 am | Permalink

    David Hand - Yes there were a range of measures taken during the GFC and yes low interest rates did play their role but interest rates are currently at that same “emergency levels” in a global economic climate that while soft is significantly better than during the GFC and economic growth is slowing and that is with fiscal policy being neutral.

    On the ABC news the other night they compared todays 3% cash rate to the 2008 3% cash rate and govt sector contribution to growth - in 2008 the govt sector was adding
    6% to growth, currently it is removing 3%. They aren’t hypothetical figures they are reality - so if you want to reduce that 6% back in 2008 it does have consequences.

    So while you can argue about the specific level of stimulous the idea that a coalition govt would have run surpluses, ie contracting the economy, and we would be just as well off today is laughable.

    Scott - The numbers might be hypothetical but the logic is clearly faulty - contracting the economy during the GFC would have had negative consequences - Pyne is trying to say we would of had exactly the same growth, unemployement levels etc under a lib govt but govt sector contribution to growth would of been significantly less, that doesn’t add up.

  • 45
    Merve
    Posted Wednesday, 12 December 2012 at 9:51 am | Permalink

    I know someone who works in a large IT company. Their work is drying up because the government is cutting back on spending. Big business wants a deficit at the moment, but are too gutless to support Labor and will never criticise the Libs. Business knows a manageable deficit in these economic times makes sense.

  • 46
    Hamis Hill
    Posted Wednesday, 12 December 2012 at 11:10 am | Permalink

    Essential question to all levels of business owners:
    “Can you afford an Abbott Recession?”.

  • 47
    Achmed
    Posted Wednesday, 12 December 2012 at 12:40 pm | Permalink

    I look forward to seeing the costings of Liberal policies. Perhaps they will use the Parliamentary Budget Office this time round. It was setup by the Howard Govt to provide some election costings “honesty”.
    I don’t hold any hope of Liberals acknowledging the hypocricy of Abbott and Hockey who in seperate speeches overseas praised the Australian economy. Abbott described it as “enviable” in his London speech.
    At this time all the Liberals have got is; “big bad tax”, “she’s bad, I’m good”, “we would do it better”, “we would do it at less cost” with no explanation of how.

  • 48
    Liamj
    Posted Wednesday, 12 December 2012 at 6:16 pm | Permalink

    Don’t hold your breath Achmed, the LNP know their real policies are unsaleable even to Hun readers, expect nothing but vision statements until after&if they win govt. Oh, and more bought witnesses & misuse of courts: Grech; Blewitt; Ashby .. looks like a pattern of corrupt behaviour to me.

  • 49
    Achmed
    Posted Wednesday, 12 December 2012 at 6:34 pm | Permalink

    Liamj - Ýou’re right. I have been trying for months and months to get a Liberal supporter to explain how Abbott’s Direct Action Carbon Plan will be less costly to taxpayers than the current carbon “tax”. All I get ïs “Liberals won’t reveal this because Labor might steal it”. Give me a break!!, Labor already have a policy that has now been legislated. If they were going to steal THE PLAN they could have when Abbott first raised it, all they needed to do was tease out the detail, something the Libs can’t/won’t do

  • 50
    Hunt Ian
    Posted Wednesday, 12 December 2012 at 9:22 pm | Permalink

    James Butler, surpluses are not “a GOOD thing”. People who buy houses spend more than they earn. Companies that make investments spend more than they earn. In many cases, all of these things are, and surpluses are NOT, “a GOOD thing” . It is hard to think of any organisation for which surpluses are always a good thing. Of course, always spending more than you earn is a way to put your creditors at risk. So yes, if you take on debt you must be able to pay it back. But countries can operate with a certain % of GDP of debt indefinitely without any trouble so long as they do not reduce their capacity to pay by reducing taxes on those best able to pay.

    David Hand, of course, does not where to start in addressing the errors of all those who think that aversion to debt is simply an excuse to reduce the state so that it cannot redistribute income from rich to poor. We must not do that, since all good old Liberal Party ideologists know that laissez faire is ideally best as abstractions in economic theory show to them, if not to economists, like Joseph Stiglitz, who have a grasp of the real world.

    The austerity policies of Europe reflect a number of problems in Europe that come from the Euro common currency and Germany’s insistence that inflation must be avoided at all costs. Germany insists that this is to avoid their hyperinflation of the late twenties of the last century, where people with money lost it all. Germany wants austerity because it wants too minimise losses for investors, of which the richest in Europe proper are German, although the British are just as rich but not part of the Euro. These policies have induced a 1930’s style depression in Greece and close to that in Spain, with recessions elsewhere. not sure why the media keeps talking about how unimportant or bad a surplus is. But what’s bad is when government continues to waste money, increasing welfare while cutting important programs such as scientific research grants, which infact takes Australia backwards.

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