A strange third party endorsement. Politicians just love third party endorsements. They think favourable comments from someone they can describe as an independent expert helps convince the public of the merits of their own actions. Kevin Rudd was at it yesterday in question time.

The Opposition squirmed as he told the House of Representatives:

about the fact that for the question of our temporary budget deficit for a temporary debt that will flow to the economy, we will have a temporary debt for Australia which will be the lowest by a country mile compared with all other major advanced economies. Furthermore, when you look at when our temporary debt will reach its height at 13.8 per cent of GDP, that will represent about one-seventh of the debt of the major advanced economies across the world. I would simply draw the attention of those opposite, as they try to score political capital out of this point and this necessary intervention in the economy at this stage, to what Standard and Poor’s have said overnight.

They said:

Tonight’s Commonwealth budget is consistent with Australia’s triple A long-term rating for the country. The triple A rating is the highest rating assigned by Standard and Poor’s.

They go on to say:

We — that is, Standard and Poor’s — believe the deficits and associated borrowings do not alter the sound profile of the country’s public finances. This is underpinned by the strength of the government’s balance sheet, which provides flexibility to absorb debt levels and cyclical deficits of this nature.

That is what the ratings agency Standard and Poor’s has concluded about the budget we delivered last night.

If you are wondering what a ringing endorsement from a ratings agency is worth, then these words about the origins of the world financial crisis might help:

Its origins go back to the beginning of this decade, with the collapse of the dot com boom.

US authorities responded with aggressive cuts in interest rates.

That opened up an era of cheap debt that was accompanied by increasing financial complexity and a greater appetite for risk.

Financial products — from basic sub-prime home loans to complex financial derivatives — were built on the shallow foundations of a cheap debt economy.

Loans were advanced to millions of people, especially in the United States, with no realistic prospect of them ever being repaid.

And those loans were financed through complex financial products that were understood by neither investors nor regulators.

The balkanisation of risk, the attenuation of risk sought the impossible dream of the elimination of risk and responsibility — so that ultimately nobody believed they carried risk and responsibility.

And through it all, the ratings agencies blessed these products as safe investments — ratings agencies that have yet to face their own day of reckoning – and the products they sanctioned continued to proliferate.

Yes, that was the verdict on ratings agencies of our very own Prime Minister addressing the National Press Club in Canberra back on 15 October last year. Strange, then, that he now so values an endorsement by one of them. Perhaps it’s a case of beggars can’t be choosers.

Budget passes readers by — but not at Crikey. Liftouts, wrap arounds, page after page of budget coverage in newspapers throughout the country. Newspaper websites full of the same material. And, by all of indications, studiously ignored by the readers. Take a look at this morning’s list of the top five most read items on the eight major newspaper sites:

There is hardly a fair dinkum budget story among them — tens of thousands of words disappeared into the internet ether leaving barely a trace.

Except at Crikey where out top five reads:

  1. Bernard Keane’s budget overview.
  2. The Crikey budget live blog.
  3. Guy Rundle does the budget.
  4. Alan Kohler the 2009 budget mirage.
  5. Clive Hamilton’s nature will deal with climate sceptics.

Temporary Federal Government decisions. The longest temporary change in Australian economic history started in 1942 when the Commonwealth took over income tax from the States. The then Federal Government promised that the switch was only for the duration of the war. Makes you wonder about temporary budget deficits doesn’t it?

Pandemic potential. Swine flu might have made way for sexual rampages by rugby league players as fodder for the tabloids, but the influenza A (H1N1) virus is not done with yet. A report in the latest issue of the journal Science looks at the pandemic potential of the virus and there is clearly still plenty to worry about.

In search of the G-variant. For a more cheerful report on scientific research I refer you to an article in Prospect dealing with the very important subject of alcohol and the creative process. Good news for drinkers at last — or at least for some of them.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey