pweedas said..

As in al things government related which they dont like, they will blow smoke over the whole issue until it looks more like something they do like, with quotes of GDP and percentages and whatever they can find to make the figures appear to mean something other than what they clearly show, which is, the annual tax take is up and has been up on what the last government took in every year they have been in office.

Their problem is that although they knew the previous years under Howard were unusually good boom time years and not likely to continue forever, they dialed in a spending program which could only be sustained provided that the boom times continued.
And even when it became blatently obvious that there was a financial crunch and income was not likely to continue rising at the rate they hoped, they still carried on spending as though it would continue going up. as we all know, it didn't.

I think you have this arse-about. They increased the spending because of the financial crunch. Do you not remember that time? It wasn't that long ago.

Percentages of GDP make sense as a way to compare. I guess your ideal would be that everyone is on the dole, and thus taxation is lower because no one has a job and doesn't have enough income to pay tax. Yep, sounds grand.

FormulaNova said..

kiteboy dave said..

Austerity doesn't help a weak economy, all it does is shut down jobs, shut down spending, triggers a flow on effect that costs as much as you save. Spending locally (infrastructure etc) helps a weak economy.

.

Oh, no, that can't be right . In the idiots guide to economics, stopping spending in an economy saves the economy... Sure... That'll work if you want to send everyone onto the dole.

Keynesian economics sounds reasonable in theory, private sector activity goes down so the public sector steps up to the plate and starts spending. To me there are issues. The main one is once private sector activity goes up, public sector activity does not go down. It goes up too. So we end up with a ratcheting effect as the public sector taking up more and more over time consuming private wealth and loading up debt.


What's going on around much of the developed world looks like Keynsiansim reaching the end of the road.

pweedas said..

ikw777 said..
How can a Country with a triple A credit rating possibly going broke??? Some of these comments make the mind boggle.

Probably in the same way that "structured investment vehicles" and "Credit default swap Options" went from triple A rated to junk status all in a matter of weeks. When the powers taht be decide we are not flavour of the month any more the tide turns and the financiers grab their cash and run out the door. It's just a matter of makng sure when the music stops playing there is a chair close by or we will be left standing out on the floor with other rich and well off countries which lived the envious lifestyle. Like Greece, Cyprus, Spain, Ireland, Iceland, ... Shall I go on? Government bonds for these countries are now rated as junk status.
And no, we are not there yet but with the way things are going over the last 5 years, we are certainly on the road to that particular destination.
The fact is, if we can go from 20 billion in the bank to a deficit of 250 BILLION in just five years, how much further do we need to go before we get the message that we cannot keep spending money that we don't have? And worse than that, a lot of the money is being consigned to ongoing programs. It is not one off spending to lift the economy so we will have to find the increased level of spending every year from now on. If things suddenly pick up and the money pours in then that's fine, but it is really bad management to fix in place a spending program on the assumption that it will. Far better to spend only what we can afford and promise he rest for when things improve.

they are only numbers on a computer screen

Saffer said..

The problem with Swan is not what he delivered. It's what he promised. You never over promise and under deliver, it's suicide no matter what role you have. You can't do a budget (project, household etc) of any sort based on best case scenarios for everything and essentially that's what Labour did. They took the best case for everything and came up with a budget. Many people have said that the previous budgets were political budgets. i.e. designed to impress rather than be an accurate forecast.

There are reasons that projects do budgets based on PERT ((OPTIMISTIC + (4 X MOST-LIKELY) + PESSIMISTIC) / 6) and other forecasting methods to estimate costs. Its for the simple reason that stars don't all align all the time and we don't have a perfect world where you can use the best case scenario of everything. There are always outside factors. Consider your household budget - if you took your budget and based it on interest rates dropping, getting a 8% increase at work, having nothing in the house break, not having to cover any medical emergencies etc, of course you're going to find yourself in trouble because the likelihood of all of those happening is virtually nil. If Swan knew anything about budgeting he would have realised that.

I have seen many projects in private enterprise where they over promise and under deliver. This is in big organisations where individual teams are competing against each other for budget, so they always enhance the benefits and try and hide the disbenefits. I don't think its productive, but in some of these companies, its common place.

Anyway, that's not the way budgets work in government. They are trying to get themselves re-elected at the end of their term. That's what they want above all. Until election time, they don't need to compete with any outside party for funding.

Saffer said..

FormulaNova said..

I have seen many projects in private enterprise where they over promise and under deliver. This is in big organisations where individual teams are competing against each other for budget, so they always enhance the benefits and try and hide the disbenefits. I don't think its productive, but in some of these companies, its common place.

Anyway, that's not the way budgets work in government. They are trying to get themselves re-elected at the end of their term. That's what they want above all. Until election time, they don't need to compete with any outside party for funding.

The problem with Labour's approach to date is that the bull**** budgets they forecasted were not in the election year. I.e. people had an opportunity to see they were complete bull****. Normally it's only the election year budget that is bull****.

I don't know why you can't see that a government budget relies on a lot of external influences. You would have to say the GFC is an exceptional event. Should all governments factor that possibility into a budget?

Question: Do you think there was a GFC in 2008 and do you think it affected Australia?

Saffer said..

FormulaNova said..

Question: Do you think there was a GFC in 2008 and do you think it affected Australia?

And that explains how they got the budget so horribly wrong for the 3 years after that when they knew the GFC was there?

That's where you get back to 'it's politics'. If you sell a nice rosy picture, people are happy and feel good about you. Sell a pessimistic outlook, and even your supporters will think things are bad.

evlPanda said..I hardly think so.
Imagine you make $300,000/year

You are in total debt $20,000
You can print your own money.
Are you going broke?

Easy question and an easy answer.
Whether you are going broke or not is not determined by a snapshot of your present situation. It is determined by the direction you are heading.

So, the answer to the above question is, if we are paying the money back so that we are owing less each year then we are not going broke. In fact just the opposite.
Are we doing that? NO! And we have not done that for the last six years, and we are not trending that way. The words are but the reality is not.
Not only are we NOT paying the money back but weeare getting deeper in debt each and every year.
By definition, that is 'going broke.'

I know many people in this day and age see the solution to every financial squeeze as being to just bung it on the credit card and that's what these clowns have done. But that's where Greece and others went wrong. Sooner or later the lender loses confidence in your ability topayback the loan and not only will not lend you anymore, they call in the loan you already have. On that day you are declared BROKE, even though up to that point you lived the lfe of Riley.

We are not in the middle of a financial crisis. Conditions are actually quite average and have been for the last three years or so. If we are getting deeper in debt in average conditions then we are going broke. Slowly maybe, but broke none the less.
If the plan is to climb out of debt when the boom times return then that's like making your financial planning dependent on you winning lotto.
Good luck with that but it must be obvious to most that it's not a good plan.