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Dec 11, 2012

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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66 thoughts on “Christopher Pyne and the dangerous fantasy of surplus

  1. Saugoof

    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

    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

    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

    So saith the “Truth Fairy”?

  5. Jimmy

    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

    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

    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

    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

    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

    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

    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

    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

    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

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

  15. zut alors

    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

    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

    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

    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

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

  20. billie

    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


  21. Jimmy

    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).

  22. Marty

    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.

  23. my say


    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

  24. bjb

    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.

  25. my say

    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

  26. my say

    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

  27. David Hand

    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.

  28. Jimmy

    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?

  29. Mike Flanagan

    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.

  30. qwerty bluett

    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.

  31. Scott

    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.

  32. Mike Flanagan

    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.

  33. SimsonMc

    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.

  34. Matthew of Canberra

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

  35. Hamis Hill

    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?

  36. John64

    “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?

  37. David Hand

    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.

  38. Steve777

    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.

  39. Brefney Ruhl

    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…

  40. Steve777

    #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.

  41. taylormade

    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.

  42. SimsonMc

    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.

  43. Jimmy

    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.

  44. Merve

    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.

  45. Hamis Hill

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

  46. Achmed

    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.

  47. Liamj

    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.

  48. Achmed

    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

  49. Hunt Ian

    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.

  50. David Hand

    I used the descriptive “socialist” because of the shameless way Gillard has put disabled people up as her poster people when there is absolutely no work done whatsoever on its funding and it is unlikely ever to be implemented. It is the burden on the taxpayer that is the cause of delays in a programme such as this. It is a likely reason ALP governments, should they be re-elected will never return to surplus.

    “Socialism” is a derogatory term because it kills wealth creation, as demonstrated by every country in the world that has embraced it. You’ve got to create the wealth in the first place before you can share it out.

    Incidentally, I’m a fan of Turnbull as well.

    Oh, and this site is full of belittling and derogatory comment. Hey, it adds spice!

  51. David Hand

    You make some well reasoned and good points. I think it was not possible during the GFC to know what measures would work and what ones would not.

    But Pyne makes valid points too. The government was in the happy position of having no debt when the GFC hit. So the deficit spending here was from a zero base, unlike the rest of the western world. We are seeing the end game of deficit spending in some european countries right now and the hard truth is that eventually, the piper must be paid.

    In that context, Coalition criticism of the extent of the stimulous packages, especially the second one, are valid.

  52. David Hand

    I’m no fan of Abbott’s direct action plan. I favour a price on carbon. But I can tell you this. The Abbott plan will reduce carbon emmissions. The Gillard wealth redistribution tax masquerading as action on climate change will do very little.

  53. Jimmy

    David Hand – The coalition criticism of the stimulous package is not valid, regardless of the starting point you can’t not spend the money on stimulous (ie run surpluses) and have the growth we had in the past 5 years.

    If the Libs had less debt now they would have higher unemployment, lower growth and less govt revenue and more govt expenditure – those are facts the extent can be debated but the fact remains that if you want the got to have borrowed less since the GFC you are arguing for a worse economy now which would require greater stimulous.

  54. David Hand

    The possible different economic conditions under Liberal policy are not “facts”. They are opinion. Informed opinion, maybe but not facts. More valid opinion than Liberal spruikers like Pyne, but not facts.

    Keane’s dissection of aspects of the government’s stimulous packages in an attempt to unpick Pyne’s assertions are simplistic as well. I accept that the Rudd government’s stimulous packages protected Australia from recession but the arguments that recessions are counter productive to paying off debt have limits. Otherwise Greece would still be rocking merrily along collecting not much tax and paying huge social welfare payments for ever.

    There is an end point to government debt and it’s not pretty.

  55. Jimmy

    David Hand – “The possible different economic conditions under Liberal policy are not “facts”” No David they are facts.
    Just like if your house caught fire and you emptied your swimming pool to put it out and then someone came along complaining that the pool is empty and that they would of left the water in the pool has to concede the fact that they are arguing for letting the house burn down the opposition claiming they would not have spent the stimulous money (which has been proven to have added 6% to our growth figures during the GFC) has to recognise that not spending the money would have hurt the economy.

    Just because we are talking about the Libs hypothetical actions doesn’t mean the factual consequences don’t apply.

    And yes you can pay down debt during a recession but just like Greece and elsewhere in Europe cutting govt spending deepens the recession – in extreme cases you can argue that the pain is worth it in the long run but Australia is a long way from that point.

    And there is an end point to govt debt but that is not what we are talking about here – this is short term borrowing to protect from a recession during tough global economic conditions with a clear plan to get back into surplus (whether it be this year or next is really here nor there) and not habitual deficits for decades.

  56. Achmed

    I’m not sure how relevant it is but places like Greece, Italy, Spain, Britain and the USA have a debt that is running somewhere between 70% and 100% of GDP. Australia is running below 10% (laziness prevents me finding the actual figure) I would have thought that making any comparison between Australia’s economy and these countries is more scaremongering rather than anything else.
    Yes Australia does not to be careful that we don’t slip down that path.

  57. Jimmy

    Acmed – You a dead right about the inaccuracy of the comparison – those who make it are basically saying if australia keep the 2008 level stimulous spending in place for the next 15 years we will be in real trouble – it is a true statement but never going to happen.

  58. David Hand

    The end point of government debt is absolutely relevant. It is those consequences that are the backdrop about why a surplus is good. It was years of surpluses that gave the Rudd government the option of Keynsian stimulation to keep Australians in jobs.

    Jimmy, your metaphor about burning a house down is not relevant at all because less stimulous would not have destroyed the economy.

    I will come back to my original point and my reason for commenting here. Pyne’s opinion that a coalition government would be more likely to deliver a surplus is a valid one that people can agree or disagree with. It is not stupid and it is his way of promoting a political point that he hopes will resonate in the electorate.

    Of course, that’s exactly why Keane and you lot are so fiercely critical of it.

  59. Jimmy

    David Hand – “The end point of government debt is absolutely relevant.” The end point is releveant but when you are trying to compare Greece and Australia and the end points are so far apart (ie Australis would have to run big deficts for over a decade to catch up to Greece) the relevance disappears.
    “It is those consequences that are the backdrop about why a surplus is good.” A surplus is good when the economy has the capacity to take it – it is not always good.
    “It was years of surpluses that gave the Rudd government the option of Keynsian stimulation to keep Australians in jobs.” Yes but if Rudd didn’t spend it what good would it have been?

    “Jimmy, your metaphor about burning a house down is not relevant at all because less stimulous would not have destroyed the economy.” It may not have completely destroyed it but it would of been seriously damaged, the amount of damage to the house isn’t the relevant part of my metaphor, it is that we can accurately state as fact that without the stimulous damage would of been done and to try and claim the house wold of been in the same shape now and we could of kept the pool is just stupid.

  60. Achmed

    David Hand – I can’t see how giving the polluters taxpayer money from the budget will produce a reduction in carbon. I do see how it will reduce the amount of money in the pockets of taxpayers because taxes will have to rise to fund it.
    There are a number of questions that need to be answered before I could be convinced that Abbott’s plan makes it worthwhile electing him.

  61. David Hand

    The end point of government debt is the same for everyone. It’s a default and a destruction of asset values as debt has to be written off. It’s just that Greece is a lot closer to it than Australia – something that is not in dispute.

    Rudd was absolutely right to run a deficit in 2009 and any politician from the right who thinks we should have maintained a surplus then is talking nonsense. If The Coalition had been in power I’m confident Costello would have run a deficit.

    There is nothing untoward or even unexpected for a conservative politician to make a political point that his party is a better economic manager than the other lot. It’s up to voters to decide if they think he’s right.

  62. David Hand

    The polluters were given money from the budget and you are right, they haven’t done anything about it. It’s called the carbon tax and the polluters were end users. By happy coincidence is was Labor voting end users who got the compensation.

    The Liberal direct action plan would be just that- direct action. An example is brown coal burning power stations would be given financial help to convert to natural gas. In this way carbon emissions would in reality go down because they wouldn’t get the money unless they made the conversion.

    I’m surprised you can’t see this simple concept. The government pays for change in industry that reduces carbon emissions. By the way, just so we are clear, I’m not supporting direct action as a policy, I’m just explaining how it works.

    I would have preferred a price on carbon to be lower than it is with very little compensation paid, thus allowing the market to shift to greener options by making coal more expensive. The bad scheme we have now creates a fiscal problem should generation shift to non carbon emitting technology because it would cause a reduction in carbon tax revenue but the government would still need to pay Labor voters compensation.

  63. Achmed

    David – I get the principle that Abbott gives them taxpayer money to reduce emissions. We have seen many examples of business having “äccess” to taxpayer money and it ends miserably. Two examples would be what happened in WA – WA Inc it was called. Then we can also look at a more recent example of how businesses rorted and stole taxpayer money during the Pink Batts debacle.
    With the business pocketing millions+,the CEO and Board living in multi-million dollar homes and getting multi-million dollar bonuses and taxpayers still paying out for nothing in return.
    What Abbott’s policy does not detail;
    How will he ensure businesses remove the CT component of price rises?
    How will Abbott determine what component of a price rise was CT and what was normal business operation increase?
    How much will it cost to monitor the spending of taxpayer money by these businesses?
    How much will it cost to purchase the land to plant his trees?
    Where will this land be?(it needs to be the size of Tassie)
    How much will it cost to buy the trees?
    How much for on-going maintenance? (refer to the need by looking at tree “farms)
    How will he keep his promise to keep the tax cuts and compensation payments in place? He is going to repeal the CT Legislation which provides the “income” to pay for those cuts etc.
    I don’t disagree with the concept,its the implementation that is the issue.
    It should always be remembered that businesses have had since the 2007 election where both Labor and Liberal went in with a type of ETS. They have known for 5 years the CT of some type was coming. As is seen as typical of businesses they have shown no corporate/community responsibility and expect the taxpayers to subsidise them

  64. David Hand

    Oh agreed, Achmed.
    I was only talking about the design of the policy. As with any government programme such as pink batts, direct action on climate change is open to mis-spending. That’s why an ETS has been widely accepted by about 5 years now by people on all sides of politics that it is the best option.

    The problem we have with the carbon tax that has been implemented is the compensation to end users. A lower price would give a price signal and free up money to invest in green energy.

  65. Achmed

    It may have been a far better outcome for Australia if Abbott hadn’t removed Turnbull from the Liberal leadership because he disagreed with Turnbull’s position on an ETS and he,(Abbott)held the view that climate change was “crap” at the time. Abbott soon changed his position but has had to take a different position because in the words of so many of his supporters “it’s the role of Opposition to oppose”(sic) An opportunity lost with that change of leadership

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