Better economic managers? You gotta be shitting me

February 23, 2019
Written by: Kaye Lee
56 Replies

According to just about every journalist, commentator, and Liberal/National politician, the Coalition are better economic managers.

Crap.

Pretty much every problem we have can be laid squarely at their feet.

Despite being the unwitting beneficiary of a mining boom largely due to the expansion of China, John Howard made the stellar decision to sell off Telstra and hasn’t that gone well for us.

Back in 2006 when we still owned a majority share (he had only sold off 49% at that stage), Telstra wanted to move away from copper and start rolling out fibre-to-the-node which could have been slowly upgraded to fibre-to-the-premises to prepare us for the future. Howard and the ACCC put up so many hurdles regarding competition that Telstra gave up. That decision set our telecommunications back twenty years.

We hear a lot about power prices from this government. As the Australia Institute points out:

“The promise two decades ago to Australia was that privatising, corporatising and marketization of the electricity sector would deliver cheaper and better electricity supply. That never happened. Between December 1996 and December 2016 Australian electricity prices increased by 183 per cent—almost three times the overall increase in prices. Instead, privatisation has seen a blow out in the number of managers relative to other workers in the electricity labour force and it now employs an army of sales, marketing and other workers who do not actually make electricity.”

Everybody from the RBA boss on down is saying workers must have a wage rise to keep the economy moving along. But the Coalition, instead, reduce penalty rates for low paid workers, demonise and undermine unions and their ability to negotiate, and stack the Fair Work Commission with fellow travellers who will support the employers’ side every time. This has resulted in a period of the lowest wage growth in history, a growth in precarious employment, and an increase in worker exploitation. Oh, and the highest private debt in the world.

The business and social services community are also in furious agreement that unemployment benefits are so low that they are a hindrance to seeking employment. Despite the fact that over 3 million people are living in poverty, the Coalition launch an all-out attack on welfare recipients, chasing possible debts from a decade ago, imposing draconian compliance regimes, and excluding people from payments altogether for various reasons.

A hot topic for the election – well with Tim Wilson and his cousin anyway – is protecting one of John Howard’s many unsustainable tax concessions. Howard’s tax cuts combined with changes to negative gearing, capital gains, superannuation, excess franking credits and various other claimable expenses etc has severely eroded our revenue base now that the boom is fading away. But as we have seen in some ugly incidents at seniors meetings, trying to get self-funded retirees to actually fund themselves is no easy matter. A gift once given cannot be taken away – unless it’s the baby bonus or the schoolkids bonus or the clean energy supplement to pensioners. Poor people don’t have politicians organise seminars for them to express their displeasure.

There is an enormous body of evidence of the economic return from tertiary education, not just to the individual, but to society. But the Coalition want to pursue the American model where our children must pay, meaning anyone who doesn’t have rich parents will start their adult life with a huge debt which limits their ability to borrow money to buy a home or start a business.

Rather than supporting our vocational education sector and anticipating our future workforce needs, we now import foreign labour to fill skills shortages. Private colleges get accreditation with no evaluation or oversight – all it takes is a wink wink scholarship to a politician’s daughter or attendance at a Liberal Party fundraiser with cheque book in hand. Then they are free to offer intellectually disabled people a free laptop to sign up for courses in rocket science.

As the government wrings its hands about the increasing cost of private health insurance, they sell off the government owned competitor who could have acted as a price standard. But hey, a one-off $5 billion sugar hit in the hand towards being able to promise a surplus is better than the profits it was contributing to the public coffers and any handbrake it may have exerted on prices.

Coalition politicians are eager to tell us how crucial coal is to our economy. So much so that they are considering investing billions of dollars of public money into it. I am yet to find one stockbroker who is advising his clients that they should do likewise. Or any bank that is keen to be involved. Economies that are too reliant on single products expose themselves to great risk, particularly if that product must be phased out for humanity’s survival. How about the economic contribution made by the Great Barrier Reef and the Murray-Darling? How about the economic cost of extreme weather events exacerbated by global warming?

And don’t tell me it’s about jobs. How they can spin that line after refusing to support the car industry is beyond me.

The last couple of weeks have highlighted the Coalition’s practice of handing out huge amounts of government money to dubious players without going through due process let alone diligence, oversight or evaluation. It has gotten so bad that the government has gagged its own Auditor-General from releasing his reports.

These people are not “good economic managers” just because they happened to be in government during a boom time decades ago when my pet rabbit could have delivered a surplus.

They are rank amateurs spouting lines they learned at Young Liberals meetings and reading scripts fed to them by the IPA and the Minerals Council and anyone else out to avoid contributing anything whilst diverting public money into their own pockets.

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Mr Shevill MathersFebruary 23, 2019 at 11:18 pm

Kaye Lee, as always an illuminating article and it gets worse by the day as each new big cash hand out hits the news. I have to wonder why our PM maintains off-shore ‘processing’, which stagnated a long time ago, looking at the obscene cost to the Australian taxpayer of keeping those refugees where they are may well explain the staggering amounts of money given to a ‘company’ (not put out for tender) with question marks hanging over it, well, if there were no refugees off-shore, then those $millions could be better used within Australia. The staff must be living a phenomenal lifestyle, judging by their daily income rate. Is this why the PM keeps turning down NZ offer to take 150 refugees? and he now opens Christmas Island, which has next to zero medical facilities-they send all their patients to Perth WA for medical treatment, including all births. So much of what the LNP have done in recent times does not pass the ‘pub test’ my many a country mile. They are also stacking various departments in such a way as to give the next government either a shoe-in or a mighty headache for an incoming non LNP government.

BigKatFebruary 23, 2019 at 11:31 pm

I don’t know how you do it Kaye ,it must wear you down researching the behaviour of this corrupt government.This week alone three ministers should have been sacked and one ambassador stripped of his posting and sent home in disgrace.Sadley the corruption is so rife in this government that they have no awareness of what constitutes corruption any more.Speaking of economic mastery one could not over look the worlds greatest treasurer Peter Costello selling our gold reserves for a pittance.Has society lost its way when shareholders are profiting from aged care and funeral services?I have said this before but if a society has a total breakdown and anarchy abounds is anyone going to be looking for a shareholder?I don’t think so.

Kaye LeeFebruary 23, 2019 at 11:35 pm

Mr Mathers,

As pointed out in Senate estimates, it would be cheaper to put them up at the Shangri-la hotel overlooking Sydney Harbour which, btw, is where Julie Bishop often stays when she is in town. She and I shared a lift one morning before she was coiffed (she was in her robe and slippers wearing thick rimmed glasses and sporting bed hair, no make-up or jewellery – she studiously avoided eye contact and got out on the beauty floor)

Kaye LeeFebruary 23, 2019 at 11:37 pm

BigKat,

Yes it is wearing. My husband says don’t tell me any more. I will rest in late May.

Michael TaylorFebruary 23, 2019 at 11:41 pm

Ever since Howard used to carp on about how the Libs are just fabulous you-beaut economic managers – which they weren’t – every Tom, Dick or Harry still believes it.

Geezuz, Labor sailed us around the GFC, the Libs have since stuffed things up good and proper, yet recent opinion polls tells us that the Libs are considered better economic managers.

Someone’s pissing in the public’s ears. My finger’s pointing at the pathetic MSM.

KronomexFebruary 23, 2019 at 11:46 pm

They are GREAT economic managers, just not for 90% of Australians.

Kaye LeeFebruary 23, 2019 at 11:53 pm

It’s ridiculous Michael. It shows why they think repeating stuff over and over substitutes for policy….or truth.

I cannot believe that we are having another election about stop the boats and axe the tax.

I want to hear from someone, anyone, what they intend doing for the people who are stuck on Manus and Nauru. It’s only 1,000 of them. Why can’t we have a one-off humanitarian intake and save ourselves billions? And what are we going to do to control the number of asylum seekers arriving by plane which far outstrips any boat arrivals? The idea that we have “secured” our borders by persecuting these people is laughable….or tragic more like.

Whatever way the discussion goes, we MUST find a home for ALL of these people NOW. Christmas Island? FFS give me a break. They are suffering mental illness from being incarcerated with no hope. Changing the view from the cell window is NOT a solution.

Mr Shevill MathersFebruary 23, 2019 at 11:57 pm

Doing that would negate the excuse for having to pay obscene amounts of taxpayer monies, which I am guessing only goes into a few pockets.

Kaye LeeFebruary 24, 2019 at 12:02 am

Tony Shepherd, who did Abbott’s Commission of Audit for him, quit his job as chairman of Transfield with hundreds of thousands of Transfield shares. He was hardly likely, when recommending all his cuts, to suggest we could save billions by treating people who sought our help humanely.

ZathrasFebruary 24, 2019 at 1:10 am

It’s well past time the myth of the Coalition being better economic managers should be exposed for the lie it really is.
Any analysis of comparative economic performance will show it.
Tax as a percentage of GDP is always higher under the Coalition and for all their talk of “smaller government”, the size of the Public Service (direct employees and Contractors) is always higher at the end of a Coalition government than at the start.

Even the so-called Imputation “tax” was considered by Joe Hockey for his first budget but instead they took the “fairer to retirees” option of increasing the retirement age and savagely cutting access to pensions.

When it comes to waste, nobody can hold a candle to the extravagance and croneyism of the current adminitration.

They depend on the tired mantra of better management being mindlessly repeated until it becomes an ingrained and unquestioned fact and it’s time they were called out on it once and for all.

MöbiusEckoFebruary 24, 2019 at 7:18 am

On another two of a whole string of Howard economic and policy failures, we will pay for many more decades to come, and there were many, you can add not splitting Telstra and gifting first home buyers $50 billion in a single hit.

Against advice, Howard refused to split Telstra into retail and infrastructure arms. It would have meant Telstra retail would pay for infrastructure like every other telecom retailer in the market, making for an even playing field and better competition in the market.

On a revenue windfall and a looming election, Howard as he always did, bestowed largess on voters. In this case, he injected $50 billion into the housing market by implementing a generous first home owners scheme, which in some cases was boosted by States’ first home buyers schemes. This big hit to the housing market immediately distorted it and exponentially accelerated rising house prices eventually having the opposite effect by excluding most first homeowners from the market while delivering a boom to property investors, which was probably Howard’s aim in the first place.

Look back at Howard’s overly long reign in power, and it’s littered with policy failures, many with long term detrimental consequences.

Oh, and the highest taxing government in Australia’s history; Howard’s.

The biggest most bloated and inefficient government in Australia’s history; Howard’s.

pierre wilkinsonFebruary 24, 2019 at 7:27 am

I must disagree with your assertion that due diligence was not present when awarding those huge contracts, Kaye Lee. All recipients were donors to or members of the coalition team, so there you go!
And Christmas Island reopening is a master stroke from our despicable PM ProMo. As the medevac law clearly states, it only applies to those currently on Manus and Nauru, so those who find themselves transferred to Christmas Island will find it no longer applies to them! Diabolical.
Please keep educating us with your well researched facts Kaye Lee in the hope that some intelligence will trickle down into the consciousness of the general populace.

Barry Thompson.February 24, 2019 at 8:07 am

I read somewhere that statistics since the second world war prove that Labor when in office, has managed the economy better than the LNP. I don’t recall the source, perhaps it was the ABS
Why Labor doesn’t promote it’s economic credentials and loudly refute the lies told by the LNP every time they are uttered, is beyond me and frustrates me considerably.

whateverFebruary 24, 2019 at 8:17 am

The myth that ‘Interest Rates will always be lower under the LNP’ is unraveling as the Banks abandon whatever handshake agreement they had to peg rates to the official Reserve Bank rates.

Keitha GranvilleFebruary 24, 2019 at 8:35 am

the Medivac issue is sheer lunacy, straight out of Laurel and Hardy. A person is so ill they need to be moved to a hospital with more / better facilities – so they’ll be moved thousands of miles to another hospital with the same or less facilities first. That makes no sense, least of all the extra cost to fly from Nauru all the way to other side of the continent.
This government is run by lunatics

terence millsFebruary 24, 2019 at 8:50 am

I fail to understand how the coalition can hold themselves out as better economic managers : where is the evidence ?

How for instance do they explain the fact that when Labor left government in 2013 and the coalition came to power, government nett debt was $175 billion and we were in dire straits according to the coalition. We were in a Labor driven debt & deficit disaster.

Yet, as at January 2019 nett debt was $373 billion (actual) against a MYEFO estimate of $352 billion.

So they have exceeded their own estimate of debt by $20 billion and $200 billion more than when Labor was in office.

We are told that this government are heading for a surplus in the next budget and this will become a centre-plank in their re-election campaign. When income or receipts exceed outlays or expenditures we have a budget surplus and is evidently an indication that the government is being effectively managed.

Am I missing something here or is debt only a problem when incurred by Labor ?

It’s all here : https://www.finance.gov.au/sites/default/files/january-mfs-19.pdf

TerenceFebruary 24, 2019 at 8:56 am

Pierre Wilkinson

Security contract – Paladin Capital Group worldwide have strong CIA and NSA connections. Senior management are ex USA security and military.

whateverFebruary 24, 2019 at 9:27 am

Paladin is starting to look like Nugan Hand, the mysterious merchant bank.

https://en.m.wikipedia.org/wiki/Nugan_Hand_Bank

Kaye LeeFebruary 24, 2019 at 10:07 am

They just hinted on Insiders that Christopher Pyne might not recontest??? That would be a relief but it does indicate a trend of the Liberal moderates giving up – the rabid right are just too hard to deal with.

Diane LarsenFebruary 24, 2019 at 10:10 am

If I was wealthy I would take out full page adds in all the crap MSM papers and put your article up for all to see to try to blast aside all the repeated crap we have to listen to from liberal/national ministers and assorted hangers on to try to get some truth into political discussion. Hopefully if I became wealthy I would retain my sense of fairness and social equality and pay my fair share of taxation to the betterment of all

Wayne TurnerFebruary 24, 2019 at 10:46 am

Record low wage growth for workers.

Increase of underemployment.

An economy benefitting the big end of town bribers of this mob. At the expense of the rest of us.

This government certainly are the better economic managers…. For themselves,and their BIG BUSINESS BRIBERS. A shame about the rest of us.

terence millsFebruary 24, 2019 at 10:58 am

Christopher Pyne has never been forgiven by the Far-Right of the Liberal Party for his 2017 comments in the Cherry Bar at Sydney Casino when he told the Liberal moderate Luvvies that the internal war with the far-right had been won and that the moderates were in the winners circle with Malcolm Turnbull as prime minister.

It is pretty clear now that the far-right are back in control with Morrison as their sock-puppet and the Abbott/Dutton faction pulling the strings.

Whilst Pyne may see this as the time to jump ship it is probably more to do with the prospect of a drubbing at the election – possibly and hopefully including the demise of both Abbott and Dutton.

StephengbFebruary 24, 2019 at 11:07 am

Great article- thanks Kate Lee.

Terence, the so called debt, represents the total of government securities (bonds) issued by the government. These bods are sold to the private sector, in other words they represent the savings of those who have access money and want to make the access money earn a garrenteed income which is garrenteed absolutely safe.

Now who (apart from superannuation businesses) who has sufficient spare cash to buy bonds ?

Yes you guessed it banks, and the well healed.

Then think if the bond is a piece of paper representing nothing more than an interest baring account why is it a debt, because as you know the RBA can (if parliament appropriates) simply issue every dollar it needs to cover the value of the bond (and the interest payable).

What a bond does is actually take money out of circulation, what do you think this does to the economy.

It contracts the economy.

DianeFebruary 24, 2019 at 12:02 pm

@Kaye Lee – Pyne may not recontest? Oh please let it be true! He’s a complete grub – and as he was responsible for giving the submarine contract to a company who has past history of paying bribes to win contracts, I am pretty sure he has his snout in the trough far deeper than we can even imagine. He also signed off on the contract making lots of noise about Australian jobs that would result, without actually checking the small print of said contract to make sure there was any clause in it confirming that. From the start the French were braying about the number of French jobs it created… now we know who was right!

I live in his constituency – which may be why we actually have the NBN FTP, as he probably has too. Obviously I’m not complaining about having that, but it’s just another sign that he’s got himself at the top of the ‘best interests’ list and the rest of Australia can go get stuffed!

When my family went up to vote last time, my first-time-voter son asked why it sounded like I hissed at some guy handing out ‘How to Vote’ cards – when I explained it was Tosser Pyne himself, my son quite understood!

Kaye LeeFebruary 24, 2019 at 12:07 pm

Diane,

It was purely speculation so don’t rejoice yet, but Barrie Cassidy hinted that there are likely to be a couple more high profile people to go.

It was also funny to hear Kelly O’Dwyer who replaced Pyne to chat with Albanese on the Today show. Anthony said he got on well with Kelly and that she was nicer than Christopher. She responded well that isn’t hard.

Simon Birmingham, another moderate, must be feeling pretty lonely right now?

Michael TaylorFebruary 24, 2019 at 12:16 pm

Ah, Diane, I too was in Pyne’s electorate. (I used to live in Maylands).

Kaye LeeFebruary 24, 2019 at 1:16 pm

At least Christopher is recognisable. My member, Lucy Wicks, could have been replaced by a cardboard cutout and no-one would ever have noticed a difference. She is going to her third election promising locals here that we will join the 21st century by getting mobile phone reception soon – promise.

And has anyone outside Brisbane ever heard of Trevor Evans? Apparently he was chief of staff to Dutton when he was shadow health minister. Might his seat be in trouble? I don’t know him at all.

DianeFebruary 24, 2019 at 1:58 pm

Hope Simon Birmingham goes too! He was the one who said studying the Arts was a “lifestyle choice” and cut off VET Fee assistance to my daughter halfway through her course, meaning her and her fellow students had to self-fund to the tune of $3k a semester or drop out – which more than half had to.

To plagiarise Gilbert and Sullivan – I’ve got a little list, and they’d none of them be missed!

paul walterFebruary 24, 2019 at 2:10 pm

Au contraire, Kaye Lee,

As last weeks revelations in Parliament revealed, they are actually in fact quite good at financial matters when these suit their own interests.

Here is yet another example just turned up.

https://www.theguardian.com/media/2014/feb/17/rupert-murdoch-receives-882m-tax-rebate?CMP=share_btn_fb&fbclid=IwAR0BApZR8YYqKZqprxPJHVhEGv1MYniEpjhhENnY9Gv3nubTSVa8bEhMP7c

DianeFebruary 24, 2019 at 2:46 pm

@paul walter and another one https://kangaroocourtofaustralia.com/2018/04/25/julie-bishops-brother-clayton-utz-partner-douglas-bishop-profits-million-by-protecting-the-corrupt-banks/

Kaye LeeFebruary 24, 2019 at 3:13 pm

Or this….

“the Department of Prime Minister and Cabinet confirmed it awarded $320,000 over two years to help produce Warren Mundine’s Sky News television show.”

https://www.theguardian.com/australia-news/2019/feb/22/warren-mundine-steps-down-from-company-that-won-contracts-for-indigenous-job-services

or…

“the grant of $30 million over four years to the News Corp-owned pay TV network Foxtel to help promote “underrepresented sports including women’s sport”.

https://thenewdaily.com.au/news/national/2018/05/15/abc-cuts-foxtel-womens-sport-grant/

All while funds are being slashed to the ABC and SBS

paul walterFebruary 24, 2019 at 3:16 pm

Diane, that was most instructive. Is Julie our later day Bonnie and there appear to be several Clydes.

The coziness would be lovely on a cold July day. I must admit, the last time I read something like that involved Brandis and the Union RC and disbursement of $80,000,000 of taxpayers dollars amongst silky friends of the AG Brandis and others within the feathered nest.

“A slave to money
then you die”- Verve, Bittersweet Symphony

and

https://www.biblegateway.com/passage/?search=Proverbs+6%3A16-19&version=ESV

paul walterFebruary 24, 2019 at 3:22 pm

You know, my old Nanna used to comment , “It’s a great life if you don’t weaken”.

Then she would glance balefully at us with an eyebrow raised and add,

“but you never want to weaken”

Andreas BimbaFebruary 24, 2019 at 3:47 pm

It would be wise to not attack the LNP for increasing the debt substantially even if this exposes their lies and hypocrisy. If the LNP, or more accurately parliament had not blocked the worst of their spending cuts, the economy would probably be in recession and unemployment and underemployment would be far higher than currently.

Deficits are nearly always necessary for economies like Australia’s to compensate for currency outflows that arise from substantial ongoing current account deficits and increases in net savings for the very wealthy so that aggregate spending which drives sales does not shrink and also to enable economic growth. In fact federal government deficits can and should be used to ensure full employment.

The LNP are financially irresponsible for allowing so many hugely expensive tax concessions that overwhelmingly benefit the most wealthy, for allowing so much tax evasion on their watch, for savagely cutting important health, education, social support and infrastructure funding, for severely underfunding the states and local government and for all the wasteful expenditure by the LNP detailed so well by Kaye and others.

The LNP are also financially irresponsible for preventing wage increases that at least match productivity increases, for allowing private debt to increase to record and unsustainable levels, for driving or ignoring many fraudulent privatisations and scams by business, for increasing wealth inequality, for failing to address global warming and wastage of capital by driving a huge expansion of the doomed fossil fuel sector, for driving the increasing precariousness of employment, for actively destroying our manufacturing industry by removing all trade protection which has lead to a very narrowly focussed and vulnerable economy, for failing to address the water crisis and environmental degradation in general, for encouraging speculation in real estate which has made home ownership less and less attainable and for increasing rents in our major cities and for standing by whilst real unemployment and underemployment levels remain very high.

The LNP always leaves a weaker economy to future generations unless they are in the top 1% in which case this privileged minority may prosper materially as the nation as a whole degenerates.

An inevitable consequence of fiat currencies (not linked to a commodity like gold) is that currency issuance by the RBA actually funds all federal government spending and all federal taxation proceeds are extinguished. This happens regardless of any accounting rules or any sales of treasury bonds that may occur. In fact the sale proceeds of treasury bonds are also extinguished and are not used to fund anything. This means that our federal government does not even incur any debt or have any debt nor does it incur any interest expense as currency issuance funds that as well. Treasury bonds and similar securities should really be thought of as a type of term deposit that comprise Australian dollar account balances held at the RBA on behalf of various local and foreign central banks, commercial banks, pension funds and other financial institutions. They are therefore an asset not a debt. The issuance of treasury bonds on a one to one basis to match federal deficits is actually an unnecessary historical relic from when the dollar was linked to gold, and other countries for example Canada do not follow this practice. Bond issuance is actually used to control interest rates which is monetary policy but the same can be achieved by the RBA offering a floor interest rate for excess bank reserves.

Federal taxation does not actually fund federal expenditure but it does provide economic space for federal expenditure so that the government sector does not compete with the private sector for the same real resources which could produce ongoing inflation. It is of course better for taxes on the wealthy to be used to provide economic space for government spending rather than taxes on the less well off.

Taxation can also be used to reduce socially and economically destructive wealth inequality or drive transformations in society such as high taxes on tobacco usage or the transition to environmental sustainability in the form of a carbon tax.

An excellent reference to learn about the reality of government finances and macroeconomics is Warren Mosler’s excellent free book – “The Seven Deadly Innocent Frauds of Economic Policy” available as a pdf document.

Mandatory Readings

Kaye LeeFebruary 24, 2019 at 4:10 pm

“currency issuance by the RBA actually funds all federal government spending ”

The RBA does not issue currency unless you are talking about actual cash.

“Bond issuance is actually used to control interest rates”

That is completely incorrect. Secondary trading in bonds can be used for this, not issuance which is determined by the Dept of Finance.

“The issuance of treasury bonds on a one to one basis to match federal deficits is actually an unnecessary historical relic ”

Nope. The RBA has rules which state the government cannot go into overdraft except in very temporary circumstances and the overdraft must be extinguished quickly by bond issuance. Until it is, the RBA charges interest on the overdraft.

I am not saying the rules can’t be changed but it infuriates me that MMTers pretend they don’t exist.

I also cannot accept the notion that deposits into a government account are somehow “extinguished”. They are not. They are credited to the account which gets debited when they spend.

Lambert SimpletonFebruary 24, 2019 at 4:15 pm

Quiggin seems to like Mosler a little, but queries where the thinking might lead tangentially.

Money for nothing?

Which leads back to the relationship between Keynesianism and MMT.

Anyway, this seems interesting, without actually solving the mystery for me.

http://ralphanomics.blogspot.com/2012/05/difference-between-mmt-and-keynes.html

Lest there be in any misconceptions as to my attitude to Andreas’ posting, let me say I am in basic agreement (given my ignorance of much of economics) with most of the posting, and marvel at the ability of capitalism to dodge its responsibilities via globalisation and Hayekian theology.

Kaye LeeFebruary 24, 2019 at 4:31 pm

Lambert,

I agree with the concept that government spending need not be constrained by revenue but it really bugs me how the current situation is misrepresented.

The RBA is an independent statutory body. Obviously they co-operate with government but they must comply with normal accounting procedures.

MMT seems to me to be an argument without a point. What is its purpose? I assume to explain a mechanism to allow deficit spending. If we allowed the RBA to buy our bonds direct, problem solved. But we don’t. If we could instruct the RBA to just credit an account with a nominal amount and called it e-seignorage or some such term, problem solved. But we don’t. If we wanted to influence interest rates, the RBA could offer interest on overnight deposits instead of trading in bonds. But they don’t. The argument seems esoteric rather than practical to me.

Michael TaylorFebruary 24, 2019 at 6:58 pm

Kaye, one lady on Twitter was very excited about your article:

Telling it like it is!!
Don’t often get excited about reading an article.

Tonight was the magnificent exception. I salute you.

👍You go girl!

Better economic managers? You gotta be shitting me theaimn.com/better-economi… via @AusIndiMedia

terence millsFebruary 24, 2019 at 7:25 pm

In an illustration of what we have to come, Georgina Downer, who has been preselected by the Liberals in Mayo, was allowed to present a taxpayer-funded grant to a bowling club.

The funding was a grant to the club under the federal government’s community sport infrastructure program. Protocol usually dictates that such funding is announced by the local MP [Rebekha Sharkie]. Instead, the Liberal party turned it into a pork barrelling exercise to promote Downer the IPA/Liberal candidate.

Downer was photographed presenting a $127,373 novelty cheque – featuring her face and Liberal party logos – to the Yankalilla bowling club.

This election campaign will not be one for the squeamish : https://www.theguardian.com/australia-news/2019/feb/24/call-for-investigation-after-georgina-downer-presents-cheque-to-bowling-club

DrakeNFebruary 24, 2019 at 8:04 pm

Terence; they have no shame.

“Whatever it takes” and “The end justifies the means.”

“S/he who dies with the biggest toys wins.”

” ‘t was ever thus.”

Kaye LeeFebruary 24, 2019 at 8:07 pm

Nice to hear Michael. We just keep on chipping away.

terence, Downer is copping a pasting on facebook.

StephegbFebruary 24, 2019 at 8:17 pm

Kate Lee,

The RBA Finance Department and Treasury rules, do indeed behave like we are still a country who has a monetory system based on a currency tied to a a commodity (or another currency), because our currency was indeed tied untill 1983. Now our currency is a fiat currency that is foating on the FOREX, the rules in place before 1983 have continued, although unnecessarily.

The point is that MMT is saying that in spite of these rules which are now unnecessary, the government, can and does instruct the RBA to issue our currency in response to the requirement in our Constitution to appropriate money each year.

You cannot seriously believe that money is in finite supply, that it is limited to the supply of gold?. You cannot say that the amount of money available has remained the same since Potious the pilot was in flying training.

Sorry Kaye, I have enourmous respect for you and your writings, but your angst is not very logical to me?

Yes I know I am not the sharpest knife in the drawer, but I have looked at MMT for more than 4 years, I have studied
Adam Smith.
Keynes
Friedman
Lerner
Says law
Hayek
Mitchell
Keen
Kelton
Beneke
Stiglitz
Krugman

And a few others

I am a convert to MMT

MMT’ers do recognise what you say, and yes we do know that these are the rules in place, but we are saying that they are unnecessary, and just produce the wrong picture, and yes we do say so.

MMT is merely a lens to see macroeconomics as it realy is and not what is on display!

Kaye LeeFebruary 24, 2019 at 8:43 pm

“You cannot seriously believe that money is in finite supply, that it is limited to the supply of gold?”

I have never said any such thing. I understand what a fiat currency is. I am not sure why MMTers always talk about the gold standard that we haven’t had for decades. It’s like a script they must regurgitate every time. That has nothing whatsoever to do with my problems with MMT which are more about the process than the potential.

I do appreciate everyone’s efforts to inform me. I am not disputing the value of deficit spending. I just like to pin down the how. I would also like to hear more about possible risks/consequences/safeguards. Giving politicians open slather is a dangerous idea. We already waste an enormous amount of resources on unproductive weapons of war for example.

Lambert SimpletonFebruary 24, 2019 at 9:53 pm

Yeah. am a bit suspicious of this money tree thing.

Seems like I should just go out into the yard and pluck few more hundred off the shrub live like a lord also, if we live in a world where resources are cornucopic. Even the Dalats of India should be living in marble palaces.

Isn’t it actually about finite resources and the struggle to gain control of these for personal salvation?

All the subsequent conflict and wastage as resources are burned up to satisfy induced subjective or fantasy driven wants rather than human needs? Theoretically, no should need to live in poverty, but the species, if it has an idea at all, is that this is not going to happen on its watch.

To have rational economics you have to have rational people and I just don’t see such a state of affairs coming about anytime soon.

The human ape is defined most closely through lack rather than plenitude, no one I’ve noticed lately leaps buildings in a single bound, let alone turns the other cheek, demonstrating adequate rationality or a more generous EQ.

Matters NotFebruary 24, 2019 at 10:12 pm

Suppose it comes down to a choice of expression and underlying belief. First we have:

allowed to present a taxpayer-funded grant

Followed by:

funding … under the federal governments federal government’s community

Methinks the second expression is much closer to the (reality) mark. Georgina was in fact doling out government dollars. She knew it was government dollars. The LNP government certainly knew it was government dollars. Members of the Bowling Club knew it. And yet the majority speak otherwise – someone else’s dollars

Matters NotFebruary 24, 2019 at 10:30 pm

Re:

I am a convert to MMT

Indeed, they are everywhere. In fact – in plague proportions – except of course where it matters. No flashes of insights among the political decision makers. Perhaps they haven’t read widely enough?

PS – check out the meaning that is normally given to convert – its religious affiliations and its reliance on faith as a way of knowing.

Lambert, I suspect an onslaught of those determined to put you on the straight and narrow. Those who really know about such things.

LOVOFebruary 24, 2019 at 10:31 pm

G’day, I just want to ask simple questions about MMT 👀 . … ‘If’n the tax dollar is exhausted/destroyed when paid, what is the unpaid/loopholes/rorted tax dollars role re: MMT? ‘ Wouldn’t the tax rorts available have an impact on inflation because the tax didn’t get paid to be exhausted ? How can inflation be controlled if’n rich bastards won’t pay their way?…just sayin

KronomexFebruary 25, 2019 at 12:33 am

What the hell!

“Ms Buttrose is seen by some in the Morrison government as a sensible and well-regarded figure with the extensive board experience needed to take charge of the public broadcaster.”

https://www.smh.com.au/politics/federal/cabinet-poised-to-appoint-ita-buttrose-as-next-abc-chair-20190224-p50zy1.html

ZathrasFebruary 25, 2019 at 1:44 am

The gold/silver standard was abandoned long ago and our currency no longer has “…promises to pay the bearer…” printed on it.
The simple truth is that money is debt and the cash you hold in your hand represents money that is owed to someone else somewhere within the economy.

Both Pauline Hanson and Donald Trump suggested at different times that all that is needed to eliminate government debt is to simply print more money.

I don’t think the citizens of Venezuela would necessarily agree with that notion.

Andreas BimbaFebruary 25, 2019 at 2:21 pm

Australia historically has nearly always had substantial current account deficits which means Australian dollars accumulate in the accounts of foreign central banks. These funds are also used to buy a substantial portion of our treasury bonds and similar securities. As in many nations Australia’s wealthiest few percent are accumulating wealth even faster than the rest of us are getting poorer so net savings are increasing. Both these circumstances represent currency leakages from the consumption part of the economy (aggregate demand) which is the main driver of sales and employment.

Federal government deficits represent an injection of new Australian dollars into the economy and can be used to counteract any currency leakages and also allow the economy to grow, which is important if our population is increasing. The quantity of dollars in circulation is important as it directly influences the amount of economic activity and this phenomenon can and should be utilized to ensure full employment. It is not just MMT proponents who believe this but this is the core concept of Keynesian stimulus as well. It is not a case of ‘getting money from nothing’ or ‘shaking that money tree’ but more realistically enabling the economy to operate at it’s potential.

In Australia’s circumstances does anyone here seriously think it is better for the federal government to maintain balanced budgets or even worse, pay back it’s debt? This is as silly as stopping the progress of a cricket match, and even pushing the rewind button, because the scorekeeper ran out of numbers to show the score. The consequences are however far worse when it applies to macroeconomics as the lives of millions of people can be adversely affected as it can result in totally avoidable government austerity, economic stagnation or recession and high levels of unemployment and unemployment.

The macroeconomic reality is that the national government through fiscal policy and monetary policy (usually semi independently by the central bank) can target a particular rate of unemployment even as employment levels by the private sector fluctuate. Rather than stupidly aiming for the high NAIRU rate of employment we would all be better off with the full employment condition which is just another target level. Most nations did use fiscal and monetary policy to maintain near to full employment during the post war period up to the 1970’s when business groups began to demand government policies that created higher levels of unemployment and a desperate underclass so as to reduce their input costs.

Now we have nearly all conservatives and most ‘progressives’ including many here at AIMN demanding ‘fiscal responsibility’ which unfortunately means demanding totally avoidable government austerity and high ongoing unemployment.

Economist Steve Keen has estimated that China’s national government fiscal deficit is 14% of GDP while Australia is now on track for a federal government surplus. One of these nations understands fiscal and economic policy.

Japan has also utilised fiscal policy, with occasional neoliberal excursions, as well as competent interventionist economic development policy, to generally maintain full employment from the post-war period to the present day. The sum of their national government deficits is now about 200% of annual GDP yet inflation is negligible nor will such a ‘debt’ EVER BE REPAID as it is not really debt but just Yen created from nothing to keep the economy operating at close to its optimum level.

For a more convincing proof Warren Mosler’s free pdf book – “The Seven Deadly Innocent Frauds of Economic Policy” is well worth reading. The foreword and the first subject in Part 1 offer a good introduction.

Mandatory Readings

Lovo when taxes on the rich are avoided or the rich take excessive advantage of tax concessions this places an excessive tax burden on PAYE and less well off taxpayers which is unjust. Inflation is likely to only become excessive if the federal government deficit becomes significantly larger than it has been historically. When unemployment is nearing zero, this is the best indicator that deficits have reached the upper limit and are optimal.

Andreas BimbaFebruary 25, 2019 at 2:47 pm

Zathras, Venezuela’s economic circumstances are not ours. Venezuela has large US dollar debts which is indeed a solvency risk as their central bank cannot issue US dollars and this is compounded by economic contraction due to excessive reliance on volatile oil and gas exports, the imposition of crippling sanctions by the US and its sycophants as they want the oil, excessive government deficits and a very underdeveloped productive sector of their economy.

Zimbabwe was much the same as Mugabe shrunk the productive output of the important farming sector at the same time as deficit spending excessively and building up large debts in foreign currencies.

The MMT proponents regard price stability or low inflation as a primary policy target and strongly discourage governments from borrowing in foreign currencies. Their more complete understanding of macroeconomics provides the tools to achieve full employment, adequate government services, a healthy economy and with price stability.

Andreas BimbaFebruary 25, 2019 at 5:18 pm

Kaye in response to your comment at 4:10PM.

“The RBA does not issue currency unless you are talking about actual cash.”

All federal government expenditure is performed by the RBA marking up (or depositing into) the appropriate accounts that the commercial banks have with the RBA. The commercial banks can act as intermediaries to pay the final recipients. The RBA is not operationally constrained by tax revenues. If the federal government chooses to spend more than it taxes this makes no difference to the RBA – the RBA will still mark up the appropriate accounts. Currency issuance is another way of describing the marking up of accounts by the RBA.

“Bond issuance is actually used to control interest rates” “That is completely incorrect. Secondary trading in bonds can be used for this, not issuance which is determined by the Dept of Finance.”

Bond sales are one of the main tools used by the RBA to adjust interest rates. Refer item 4.1 in the link below.

https://www.rba.gov.au/education/resources/explainers/how-rba-implements-monetary-policy.html

A relevant quote from one Bill Mitchell’s recent articles.

“The main instrument of this liquidity management is through open market operations, that is, buying and selling government debt. When the competitive pressures in the overnight funds market drives the interbank rate below the desired target rate, the central bank drains liquidity by selling government debt. This open market intervention therefore will result in a higher value for the overnight rate. Importantly, we characterise the debt-issuance as a monetary policy operation designed to provide interest-rate maintenance. This is in stark contrast to orthodox theory which asserts that debt-issuance is an aspect of fiscal policy and is required to finance deficit spending.”

http://bilbo.economicoutlook.net/blog/?p=381

StephengbFebruary 25, 2019 at 5:20 pm

Thank you Andreas

Very succinct.

Kaue Lee
Yes I know you never said that m0ney was limited but I read your critic of MMT which as you rightly said is about process or the ‘rules’

But I am trying to say that you’re concern about the process and rules is in my view merely about the idea that money is in short supply, where in fact it is not in short supply (limited) but it is that our productive capacity that is limited, so that when we have unemployed underemployed resources there is capacity for a greater supply of money.

That means money used to make greater use of resources not to supply already obscenely rich with even more.

of the limits of avaible money

SGB

Luke PurseMay 31, 2019 at 11:34 pm

You’re so close to nailing this argument. All that is left is to abandon the broken macro economic talk of “revenue”, “coffers”, “taxpayers”, etc. Please, please, look in to MMT. This is the final piece of the puzzle uour trying to put together.

Mark NeedhamJune 1, 2019 at 1:16 am

Kaye, you are spot on.
Now, whom, sold, say the Commonwealth Bank.
QR…….rail, the profitable bit.
& so on….Bastards did. Yours and mine. All a pack of mongrel bastards. Conservative and Labour, BASTARDS.

It all beggars belief.

We need to buy back those National Essential Services that have been given away.
Telstra, Electrics, Water. Rail and Australian Land.

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Mr Shevill MathersFebruary 23, 2019 at 11:18 pm

Kaye Lee, as always an illuminating article and it gets worse by the day as each new big cash hand out hits the news. I have to wonder why our PM maintains off-shore ‘processing’, which stagnated a long time ago, looking at the obscene cost to the Australian taxpayer of keeping those refugees where they are may well explain the staggering amounts of money given to a ‘company’ (not put out for tender) with question marks hanging over it, well, if there were no refugees off-shore, then those $millions could be better used within Australia. The staff must be living a phenomenal lifestyle, judging by their daily income rate. Is this why the PM keeps turning down NZ offer to take 150 refugees? and he now opens Christmas Island, which has next to zero medical facilities-they send all their patients to Perth WA for medical treatment, including all births. So much of what the LNP have done in recent times does not pass the ‘pub test’ my many a country mile. They are also stacking various departments in such a way as to give the next government either a shoe-in or a mighty headache for an incoming non LNP government.
BigKatFebruary 23, 2019 at 11:31 pm

I don’t know how you do it Kaye ,it must wear you down researching the behaviour of this corrupt government.This week alone three ministers should have been sacked and one ambassador stripped of his posting and sent home in disgrace.Sadley the corruption is so rife in this government that they have no awareness of what constitutes corruption any more.Speaking of economic mastery one could not over look the worlds greatest treasurer Peter Costello selling our gold reserves for a pittance.Has society lost its way when shareholders are profiting from aged care and funeral services?I have said this before but if a society has a total breakdown and anarchy abounds is anyone going to be looking for a shareholder?I don’t think so.
Kaye LeeFebruary 23, 2019 at 11:35 pm

Mr Mathers,

As pointed out in Senate estimates, it would be cheaper to put them up at the Shangri-la hotel overlooking Sydney Harbour which, btw, is where Julie Bishop often stays when she is in town. She and I shared a lift one morning before she was coiffed (she was in her robe and slippers wearing thick rimmed glasses and sporting bed hair, no make-up or jewellery – she studiously avoided eye contact and got out on the beauty floor)
Kaye LeeFebruary 23, 2019 at 11:37 pm

BigKat,

Yes it is wearing. My husband says don’t tell me any more. I will rest in late May.
Michael TaylorFebruary 23, 2019 at 11:41 pm

Ever since Howard used to carp on about how the Libs are just fabulous you-beaut economic managers – which they weren’t – every Tom, Dick or Harry still believes it.

Geezuz, Labor sailed us around the GFC, the Libs have since stuffed things up good and proper, yet recent opinion polls tells us that the Libs are considered better economic managers.

Someone’s pissing in the public’s ears. My finger’s pointing at the pathetic MSM.
KronomexFebruary 23, 2019 at 11:46 pm

They are GREAT economic managers, just not for 90% of Australians.
Kaye LeeFebruary 23, 2019 at 11:53 pm

It’s ridiculous Michael. It shows why they think repeating stuff over and over substitutes for policy….or truth.

I cannot believe that we are having another election about stop the boats and axe the tax.

I want to hear from someone, anyone, what they intend doing for the people who are stuck on Manus and Nauru. It’s only 1,000 of them. Why can’t we have a one-off humanitarian intake and save ourselves billions? And what are we going to do to control the number of asylum seekers arriving by plane which far outstrips any boat arrivals? The idea that we have “secured” our borders by persecuting these people is laughable….or tragic more like.

Whatever way the discussion goes, we MUST find a home for ALL of these people NOW. Christmas Island? FFS give me a break. They are suffering mental illness from being incarcerated with no hope. Changing the view from the cell window is NOT a solution.
Mr Shevill MathersFebruary 23, 2019 at 11:57 pm

Doing that would negate the excuse for having to pay obscene amounts of taxpayer monies, which I am guessing only goes into a few pockets.
Kaye LeeFebruary 24, 2019 at 12:02 am

Tony Shepherd, who did Abbott’s Commission of Audit for him, quit his job as chairman of Transfield with hundreds of thousands of Transfield shares. He was hardly likely, when recommending all his cuts, to suggest we could save billions by treating people who sought our help humanely.
ZathrasFebruary 24, 2019 at 1:10 am

It’s well past time the myth of the Coalition being better economic managers should be exposed for the lie it really is.
Any analysis of comparative economic performance will show it.
Tax as a percentage of GDP is always higher under the Coalition and for all their talk of “smaller government”, the size of the Public Service (direct employees and Contractors) is always higher at the end of a Coalition government than at the start.

Even the so-called Imputation “tax” was considered by Joe Hockey for his first budget but instead they took the “fairer to retirees” option of increasing the retirement age and savagely cutting access to pensions.

When it comes to waste, nobody can hold a candle to the extravagance and croneyism of the current adminitration.

They depend on the tired mantra of better management being mindlessly repeated until it becomes an ingrained and unquestioned fact and it’s time they were called out on it once and for all.
MöbiusEckoFebruary 24, 2019 at 7:18 am

On another two of a whole string of Howard economic and policy failures, we will pay for many more decades to come, and there were many, you can add not splitting Telstra and gifting first home buyers $50 billion in a single hit.

Against advice, Howard refused to split Telstra into retail and infrastructure arms. It would have meant Telstra retail would pay for infrastructure like every other telecom retailer in the market, making for an even playing field and better competition in the market.

On a revenue windfall and a looming election, Howard as he always did, bestowed largess on voters. In this case, he injected $50 billion into the housing market by implementing a generous first home owners scheme, which in some cases was boosted by States’ first home buyers schemes. This big hit to the housing market immediately distorted it and exponentially accelerated rising house prices eventually having the opposite effect by excluding most first homeowners from the market while delivering a boom to property investors, which was probably Howard’s aim in the first place.

Look back at Howard’s overly long reign in power, and it’s littered with policy failures, many with long term detrimental consequences.

Oh, and the highest taxing government in Australia’s history; Howard’s.

The biggest most bloated and inefficient government in Australia’s history; Howard’s.
pierre wilkinsonFebruary 24, 2019 at 7:27 am

I must disagree with your assertion that due diligence was not present when awarding those huge contracts, Kaye Lee. All recipients were donors to or members of the coalition team, so there you go!
And Christmas Island reopening is a master stroke from our despicable PM ProMo. As the medevac law clearly states, it only applies to those currently on Manus and Nauru, so those who find themselves transferred to Christmas Island will find it no longer applies to them! Diabolical.
Please keep educating us with your well researched facts Kaye Lee in the hope that some intelligence will trickle down into the consciousness of the general populace.
Barry Thompson.February 24, 2019 at 8:07 am

I read somewhere that statistics since the second world war prove that Labor when in office, has managed the economy better than the LNP. I don’t recall the source, perhaps it was the ABS
Why Labor doesn’t promote it’s economic credentials and loudly refute the lies told by the LNP every time they are uttered, is beyond me and frustrates me considerably.
whateverFebruary 24, 2019 at 8:17 am

The myth that ‘Interest Rates will always be lower under the LNP’ is unraveling as the Banks abandon whatever handshake agreement they had to peg rates to the official Reserve Bank rates.
Keitha GranvilleFebruary 24, 2019 at 8:35 am

the Medivac issue is sheer lunacy, straight out of Laurel and Hardy. A person is so ill they need to be moved to a hospital with more / better facilities – so they’ll be moved thousands of miles to another hospital with the same or less facilities first. That makes no sense, least of all the extra cost to fly from Nauru all the way to other side of the continent.
This government is run by lunatics
terence millsFebruary 24, 2019 at 8:50 am

I fail to understand how the coalition can hold themselves out as better economic managers : where is the evidence ?

How for instance do they explain the fact that when Labor left government in 2013 and the coalition came to power, government nett debt was $175 billion and we were in dire straits according to the coalition. We were in a Labor driven debt & deficit disaster.

Yet, as at January 2019 nett debt was $373 billion (actual) against a MYEFO estimate of $352 billion.

So they have exceeded their own estimate of debt by $20 billion and $200 billion more than when Labor was in office.

We are told that this government are heading for a surplus in the next budget and this will become a centre-plank in their re-election campaign. When income or receipts exceed outlays or expenditures we have a budget surplus and is evidently an indication that the government is being effectively managed.

Am I missing something here or is debt only a problem when incurred by Labor ?

It’s all here : https://www.finance.gov.au/sites/default/files/january-mfs-19.pdf
TerenceFebruary 24, 2019 at 8:56 am

Pierre Wilkinson

Security contract – Paladin Capital Group worldwide have strong CIA and NSA connections. Senior management are ex USA security and military.
whateverFebruary 24, 2019 at 9:27 am

Paladin is starting to look like Nugan Hand, the mysterious merchant bank.

https://en.m.wikipedia.org/wiki/Nugan_Hand_Bank
Kaye LeeFebruary 24, 2019 at 10:07 am

They just hinted on Insiders that Christopher Pyne might not recontest??? That would be a relief but it does indicate a trend of the Liberal moderates giving up – the rabid right are just too hard to deal with.
Diane LarsenFebruary 24, 2019 at 10:10 am

If I was wealthy I would take out full page adds in all the crap MSM papers and put your article up for all to see to try to blast aside all the repeated crap we have to listen to from liberal/national ministers and assorted hangers on to try to get some truth into political discussion. Hopefully if I became wealthy I would retain my sense of fairness and social equality and pay my fair share of taxation to the betterment of all
Wayne TurnerFebruary 24, 2019 at 10:46 am

Record low wage growth for workers.

Increase of underemployment.

An economy benefitting the big end of town bribers of this mob. At the expense of the rest of us.

This government certainly are the better economic managers…. For themselves,and their BIG BUSINESS BRIBERS. A shame about the rest of us.
terence millsFebruary 24, 2019 at 10:58 am

Christopher Pyne has never been forgiven by the Far-Right of the Liberal Party for his 2017 comments in the Cherry Bar at Sydney Casino when he told the Liberal moderate Luvvies that the internal war with the far-right had been won and that the moderates were in the winners circle with Malcolm Turnbull as prime minister.

It is pretty clear now that the far-right are back in control with Morrison as their sock-puppet and the Abbott/Dutton faction pulling the strings.

Whilst Pyne may see this as the time to jump ship it is probably more to do with the prospect of a drubbing at the election – possibly and hopefully including the demise of both Abbott and Dutton.
StephengbFebruary 24, 2019 at 11:07 am

Great article- thanks Kate Lee.

Terence, the so called debt, represents the total of government securities (bonds) issued by the government. These bods are sold to the private sector, in other words they represent the savings of those who have access money and want to make the access money earn a garrenteed income which is garrenteed absolutely safe.

Now who (apart from superannuation businesses) who has sufficient spare cash to buy bonds ?

Yes you guessed it banks, and the well healed.

Then think if the bond is a piece of paper representing nothing more than an interest baring account why is it a debt, because as you know the RBA can (if parliament appropriates) simply issue every dollar it needs to cover the value of the bond (and the interest payable).

What a bond does is actually take money out of circulation, what do you think this does to the economy.

It contracts the economy.
DianeFebruary 24, 2019 at 12:02 pm

@Kaye Lee – Pyne may not recontest? Oh please let it be true! He’s a complete grub – and as he was responsible for giving the submarine contract to a company who has past history of paying bribes to win contracts, I am pretty sure he has his snout in the trough far deeper than we can even imagine. He also signed off on the contract making lots of noise about Australian jobs that would result, without actually checking the small print of said contract to make sure there was any clause in it confirming that. From the start the French were braying about the number of French jobs it created… now we know who was right!

I live in his constituency – which may be why we actually have the NBN FTP, as he probably has too. Obviously I’m not complaining about having that, but it’s just another sign that he’s got himself at the top of the ‘best interests’ list and the rest of Australia can go get stuffed!

When my family went up to vote last time, my first-time-voter son asked why it sounded like I hissed at some guy handing out ‘How to Vote’ cards – when I explained it was Tosser Pyne himself, my son quite understood!
Kaye LeeFebruary 24, 2019 at 12:07 pm

Diane,

It was purely speculation so don’t rejoice yet, but Barrie Cassidy hinted that there are likely to be a couple more high profile people to go.

It was also funny to hear Kelly O’Dwyer who replaced Pyne to chat with Albanese on the Today show. Anthony said he got on well with Kelly and that she was nicer than Christopher. She responded well that isn’t hard.

Simon Birmingham, another moderate, must be feeling pretty lonely right now?
Michael TaylorFebruary 24, 2019 at 12:16 pm

Ah, Diane, I too was in Pyne’s electorate. (I used to live in Maylands).
Kaye LeeFebruary 24, 2019 at 1:16 pm

At least Christopher is recognisable. My member, Lucy Wicks, could have been replaced by a cardboard cutout and no-one would ever have noticed a difference. She is going to her third election promising locals here that we will join the 21st century by getting mobile phone reception soon – promise.

And has anyone outside Brisbane ever heard of Trevor Evans? Apparently he was chief of staff to Dutton when he was shadow health minister. Might his seat be in trouble? I don’t know him at all.
DianeFebruary 24, 2019 at 1:58 pm

Hope Simon Birmingham goes too! He was the one who said studying the Arts was a “lifestyle choice” and cut off VET Fee assistance to my daughter halfway through her course, meaning her and her fellow students had to self-fund to the tune of $3k a semester or drop out – which more than half had to.

To plagiarise Gilbert and Sullivan – I’ve got a little list, and they’d none of them be missed!
paul walterFebruary 24, 2019 at 2:10 pm

Au contraire, Kaye Lee,

As last weeks revelations in Parliament revealed, they are actually in fact quite good at financial matters when these suit their own interests.

Here is yet another example just turned up.

https://www.theguardian.com/media/2014/feb/17/rupert-murdoch-receives-882m-tax-rebate?CMP=share_btn_fb&fbclid=IwAR0BApZR8YYqKZqprxPJHVhEGv1MYniEpjhhENnY9Gv3nubTSVa8bEhMP7c
DianeFebruary 24, 2019 at 2:46 pm

@paul walter and another one https://kangaroocourtofaustralia.com/2018/04/25/julie-bishops-brother-clayton-utz-partner-douglas-bishop-profits-million-by-protecting-the-corrupt-banks/
Kaye LeeFebruary 24, 2019 at 3:13 pm

Or this….

“the Department of Prime Minister and Cabinet confirmed it awarded $320,000 over two years to help produce Warren Mundine’s Sky News television show.”

https://www.theguardian.com/australia-news/2019/feb/22/warren-mundine-steps-down-from-company-that-won-contracts-for-indigenous-job-services

or…

“the grant of $30 million over four years to the News Corp-owned pay TV network Foxtel to help promote “underrepresented sports including women’s sport”.

https://thenewdaily.com.au/news/national/2018/05/15/abc-cuts-foxtel-womens-sport-grant/

All while funds are being slashed to the ABC and SBS
paul walterFebruary 24, 2019 at 3:16 pm

Diane, that was most instructive. Is Julie our later day Bonnie and there appear to be several Clydes.

The coziness would be lovely on a cold July day. I must admit, the last time I read something like that involved Brandis and the Union RC and disbursement of $80,000,000 of taxpayers dollars amongst silky friends of the AG Brandis and others within the feathered nest.

“A slave to money
then you die”- Verve, Bittersweet Symphony

and

https://www.biblegateway.com/passage/?search=Proverbs+6%3A16-19&version=ESV
paul walterFebruary 24, 2019 at 3:22 pm

You know, my old Nanna used to comment , “It’s a great life if you don’t weaken”.

Then she would glance balefully at us with an eyebrow raised and add,

“but you never want to weaken”
Andreas BimbaFebruary 24, 2019 at 3:47 pm

It would be wise to not attack the LNP for increasing the debt substantially even if this exposes their lies and hypocrisy. If the LNP, or more accurately parliament had not blocked the worst of their spending cuts, the economy would probably be in recession and unemployment and underemployment would be far higher than currently.

Deficits are nearly always necessary for economies like Australia’s to compensate for currency outflows that arise from substantial ongoing current account deficits and increases in net savings for the very wealthy so that aggregate spending which drives sales does not shrink and also to enable economic growth. In fact federal government deficits can and should be used to ensure full employment.

The LNP are financially irresponsible for allowing so many hugely expensive tax concessions that overwhelmingly benefit the most wealthy, for allowing so much tax evasion on their watch, for savagely cutting important health, education, social support and infrastructure funding, for severely underfunding the states and local government and for all the wasteful expenditure by the LNP detailed so well by Kaye and others.

The LNP are also financially irresponsible for preventing wage increases that at least match productivity increases, for allowing private debt to increase to record and unsustainable levels, for driving or ignoring many fraudulent privatisations and scams by business, for increasing wealth inequality, for failing to address global warming and wastage of capital by driving a huge expansion of the doomed fossil fuel sector, for driving the increasing precariousness of employment, for actively destroying our manufacturing industry by removing all trade protection which has lead to a very narrowly focussed and vulnerable economy, for failing to address the water crisis and environmental degradation in general, for encouraging speculation in real estate which has made home ownership less and less attainable and for increasing rents in our major cities and for standing by whilst real unemployment and underemployment levels remain very high.

The LNP always leaves a weaker economy to future generations unless they are in the top 1% in which case this privileged minority may prosper materially as the nation as a whole degenerates.

An inevitable consequence of fiat currencies (not linked to a commodity like gold) is that currency issuance by the RBA actually funds all federal government spending and all federal taxation proceeds are extinguished. This happens regardless of any accounting rules or any sales of treasury bonds that may occur. In fact the sale proceeds of treasury bonds are also extinguished and are not used to fund anything. This means that our federal government does not even incur any debt or have any debt nor does it incur any interest expense as currency issuance funds that as well. Treasury bonds and similar securities should really be thought of as a type of term deposit that comprise Australian dollar account balances held at the RBA on behalf of various local and foreign central banks, commercial banks, pension funds and other financial institutions. They are therefore an asset not a debt. The issuance of treasury bonds on a one to one basis to match federal deficits is actually an unnecessary historical relic from when the dollar was linked to gold, and other countries for example Canada do not follow this practice. Bond issuance is actually used to control interest rates which is monetary policy but the same can be achieved by the RBA offering a floor interest rate for excess bank reserves.

Federal taxation does not actually fund federal expenditure but it does provide economic space for federal expenditure so that the government sector does not compete with the private sector for the same real resources which could produce ongoing inflation. It is of course better for taxes on the wealthy to be used to provide economic space for government spending rather than taxes on the less well off.

Taxation can also be used to reduce socially and economically destructive wealth inequality or drive transformations in society such as high taxes on tobacco usage or the transition to environmental sustainability in the form of a carbon tax.

An excellent reference to learn about the reality of government finances and macroeconomics is Warren Mosler’s excellent free book – “The Seven Deadly Innocent Frauds of Economic Policy” available as a pdf document.

Mandatory Readings
Kaye LeeFebruary 24, 2019 at 4:10 pm

“currency issuance by the RBA actually funds all federal government spending ”

The RBA does not issue currency unless you are talking about actual cash.

“Bond issuance is actually used to control interest rates”

That is completely incorrect. Secondary trading in bonds can be used for this, not issuance which is determined by the Dept of Finance.

“The issuance of treasury bonds on a one to one basis to match federal deficits is actually an unnecessary historical relic ”

Nope. The RBA has rules which state the government cannot go into overdraft except in very temporary circumstances and the overdraft must be extinguished quickly by bond issuance. Until it is, the RBA charges interest on the overdraft.

I am not saying the rules can’t be changed but it infuriates me that MMTers pretend they don’t exist.

I also cannot accept the notion that deposits into a government account are somehow “extinguished”. They are not. They are credited to the account which gets debited when they spend.
Lambert SimpletonFebruary 24, 2019 at 4:15 pm

Quiggin seems to like Mosler a little, but queries where the thinking might lead tangentially.

Money for nothing?

Which leads back to the relationship between Keynesianism and MMT.

Anyway, this seems interesting, without actually solving the mystery for me.

http://ralphanomics.blogspot.com/2012/05/difference-between-mmt-and-keynes.html

Lest there be in any misconceptions as to my attitude to Andreas’ posting, let me say I am in basic agreement (given my ignorance of much of economics) with most of the posting, and marvel at the ability of capitalism to dodge its responsibilities via globalisation and Hayekian theology.
Kaye LeeFebruary 24, 2019 at 4:31 pm

Lambert,

I agree with the concept that government spending need not be constrained by revenue but it really bugs me how the current situation is misrepresented.

The RBA is an independent statutory body. Obviously they co-operate with government but they must comply with normal accounting procedures.

MMT seems to me to be an argument without a point. What is its purpose? I assume to explain a mechanism to allow deficit spending. If we allowed the RBA to buy our bonds direct, problem solved. But we don’t. If we could instruct the RBA to just credit an account with a nominal amount and called it e-seignorage or some such term, problem solved. But we don’t. If we wanted to influence interest rates, the RBA could offer interest on overnight deposits instead of trading in bonds. But they don’t. The argument seems esoteric rather than practical to me.
Michael TaylorFebruary 24, 2019 at 6:58 pm

Kaye, one lady on Twitter was very excited about your article:

Telling it like it is!!
Don’t often get excited about reading an article.

Tonight was the magnificent exception. I salute you.

👍You go girl!

Better economic managers? You gotta be shitting me theaimn.com/better-economi… via @AusIndiMedia
terence millsFebruary 24, 2019 at 7:25 pm

In an illustration of what we have to come, Georgina Downer, who has been preselected by the Liberals in Mayo, was allowed to present a taxpayer-funded grant to a bowling club.

The funding was a grant to the club under the federal government’s community sport infrastructure program. Protocol usually dictates that such funding is announced by the local MP [Rebekha Sharkie]. Instead, the Liberal party turned it into a pork barrelling exercise to promote Downer the IPA/Liberal candidate.

Downer was photographed presenting a $127,373 novelty cheque – featuring her face and Liberal party logos – to the Yankalilla bowling club.

This election campaign will not be one for the squeamish : https://www.theguardian.com/australia-news/2019/feb/24/call-for-investigation-after-georgina-downer-presents-cheque-to-bowling-club
DrakeNFebruary 24, 2019 at 8:04 pm

Terence; they have no shame.

“Whatever it takes” and “The end justifies the means.”

“S/he who dies with the biggest toys wins.”

” ‘t was ever thus.”
Kaye LeeFebruary 24, 2019 at 8:07 pm

Nice to hear Michael. We just keep on chipping away.

terence, Downer is copping a pasting on facebook.
StephegbFebruary 24, 2019 at 8:17 pm

Kate Lee,

The RBA Finance Department and Treasury rules, do indeed behave like we are still a country who has a monetory system based on a currency tied to a a commodity (or another currency), because our currency was indeed tied untill 1983. Now our currency is a fiat currency that is foating on the FOREX, the rules in place before 1983 have continued, although unnecessarily.

The point is that MMT is saying that in spite of these rules which are now unnecessary, the government, can and does instruct the RBA to issue our currency in response to the requirement in our Constitution to appropriate money each year.

You cannot seriously believe that money is in finite supply, that it is limited to the supply of gold?. You cannot say that the amount of money available has remained the same since Potious the pilot was in flying training.

Sorry Kaye, I have enourmous respect for you and your writings, but your angst is not very logical to me?

Yes I know I am not the sharpest knife in the drawer, but I have looked at MMT for more than 4 years, I have studied
Adam Smith.
Keynes
Friedman
Lerner
Says law
Hayek
Mitchell
Keen
Kelton
Beneke
Stiglitz
Krugman

And a few others

I am a convert to MMT

MMT’ers do recognise what you say, and yes we do know that these are the rules in place, but we are saying that they are unnecessary, and just produce the wrong picture, and yes we do say so.

MMT is merely a lens to see macroeconomics as it realy is and not what is on display!
Kaye LeeFebruary 24, 2019 at 8:43 pm

“You cannot seriously believe that money is in finite supply, that it is limited to the supply of gold?”

I have never said any such thing. I understand what a fiat currency is. I am not sure why MMTers always talk about the gold standard that we haven’t had for decades. It’s like a script they must regurgitate every time. That has nothing whatsoever to do with my problems with MMT which are more about the process than the potential.

I do appreciate everyone’s efforts to inform me. I am not disputing the value of deficit spending. I just like to pin down the how. I would also like to hear more about possible risks/consequences/safeguards. Giving politicians open slather is a dangerous idea. We already waste an enormous amount of resources on unproductive weapons of war for example.
Lambert SimpletonFebruary 24, 2019 at 9:53 pm

Yeah. am a bit suspicious of this money tree thing.

Seems like I should just go out into the yard and pluck few more hundred off the shrub live like a lord also, if we live in a world where resources are cornucopic. Even the Dalats of India should be living in marble palaces.

Isn’t it actually about finite resources and the struggle to gain control of these for personal salvation?

All the subsequent conflict and wastage as resources are burned up to satisfy induced subjective or fantasy driven wants rather than human needs? Theoretically, no should need to live in poverty, but the species, if it has an idea at all, is that this is not going to happen on its watch.

To have rational economics you have to have rational people and I just don’t see such a state of affairs coming about anytime soon.

The human ape is defined most closely through lack rather than plenitude, no one I’ve noticed lately leaps buildings in a single bound, let alone turns the other cheek, demonstrating adequate rationality or a more generous EQ.
Matters NotFebruary 24, 2019 at 10:12 pm

Suppose it comes down to a choice of expression and underlying belief. First we have:

allowed to present a taxpayer-funded grant

Followed by:

funding … under the federal governments federal government’s community

Methinks the second expression is much closer to the (reality) mark. Georgina was in fact doling out government dollars. She knew it was government dollars. The LNP government certainly knew it was government dollars. Members of the Bowling Club knew it. And yet the majority speak otherwise – someone else’s dollars
Matters NotFebruary 24, 2019 at 10:30 pm

Re:

I am a convert to MMT

Indeed, they are everywhere. In fact – in plague proportions – except of course where it matters. No flashes of insights among the political decision makers. Perhaps they haven’t read widely enough?

PS – check out the meaning that is normally given to convert – its religious affiliations and its reliance on faith as a way of knowing.

Lambert, I suspect an onslaught of those determined to put you on the straight and narrow. Those who really know about such things.
LOVOFebruary 24, 2019 at 10:31 pm

G’day, I just want to ask simple questions about MMT 👀 . … ‘If’n the tax dollar is exhausted/destroyed when paid, what is the unpaid/loopholes/rorted tax dollars role re: MMT? ‘ Wouldn’t the tax rorts available have an impact on inflation because the tax didn’t get paid to be exhausted ? How can inflation be controlled if’n rich bastards won’t pay their way?…just sayin
KronomexFebruary 25, 2019 at 12:33 am

What the hell!

“Ms Buttrose is seen by some in the Morrison government as a sensible and well-regarded figure with the extensive board experience needed to take charge of the public broadcaster.”

https://www.smh.com.au/politics/federal/cabinet-poised-to-appoint-ita-buttrose-as-next-abc-chair-20190224-p50zy1.html
ZathrasFebruary 25, 2019 at 1:44 am

The gold/silver standard was abandoned long ago and our currency no longer has “…promises to pay the bearer…” printed on it.
The simple truth is that money is debt and the cash you hold in your hand represents money that is owed to someone else somewhere within the economy.

Both Pauline Hanson and Donald Trump suggested at different times that all that is needed to eliminate government debt is to simply print more money.

I don’t think the citizens of Venezuela would necessarily agree with that notion.
Andreas BimbaFebruary 25, 2019 at 2:21 pm

Australia historically has nearly always had substantial current account deficits which means Australian dollars accumulate in the accounts of foreign central banks. These funds are also used to buy a substantial portion of our treasury bonds and similar securities. As in many nations Australia’s wealthiest few percent are accumulating wealth even faster than the rest of us are getting poorer so net savings are increasing. Both these circumstances represent currency leakages from the consumption part of the economy (aggregate demand) which is the main driver of sales and employment.

Federal government deficits represent an injection of new Australian dollars into the economy and can be used to counteract any currency leakages and also allow the economy to grow, which is important if our population is increasing. The quantity of dollars in circulation is important as it directly influences the amount of economic activity and this phenomenon can and should be utilized to ensure full employment. It is not just MMT proponents who believe this but this is the core concept of Keynesian stimulus as well. It is not a case of ‘getting money from nothing’ or ‘shaking that money tree’ but more realistically enabling the economy to operate at it’s potential.

In Australia’s circumstances does anyone here seriously think it is better for the federal government to maintain balanced budgets or even worse, pay back it’s debt? This is as silly as stopping the progress of a cricket match, and even pushing the rewind button, because the scorekeeper ran out of numbers to show the score. The consequences are however far worse when it applies to macroeconomics as the lives of millions of people can be adversely affected as it can result in totally avoidable government austerity, economic stagnation or recession and high levels of unemployment and unemployment.

The macroeconomic reality is that the national government through fiscal policy and monetary policy (usually semi independently by the central bank) can target a particular rate of unemployment even as employment levels by the private sector fluctuate. Rather than stupidly aiming for the high NAIRU rate of employment we would all be better off with the full employment condition which is just another target level. Most nations did use fiscal and monetary policy to maintain near to full employment during the post war period up to the 1970’s when business groups began to demand government policies that created higher levels of unemployment and a desperate underclass so as to reduce their input costs.

Now we have nearly all conservatives and most ‘progressives’ including many here at AIMN demanding ‘fiscal responsibility’ which unfortunately means demanding totally avoidable government austerity and high ongoing unemployment.

Economist Steve Keen has estimated that China’s national government fiscal deficit is 14% of GDP while Australia is now on track for a federal government surplus. One of these nations understands fiscal and economic policy.

Japan has also utilised fiscal policy, with occasional neoliberal excursions, as well as competent interventionist economic development policy, to generally maintain full employment from the post-war period to the present day. The sum of their national government deficits is now about 200% of annual GDP yet inflation is negligible nor will such a ‘debt’ EVER BE REPAID as it is not really debt but just Yen created from nothing to keep the economy operating at close to its optimum level.

For a more convincing proof Warren Mosler’s free pdf book – “The Seven Deadly Innocent Frauds of Economic Policy” is well worth reading. The foreword and the first subject in Part 1 offer a good introduction.

Mandatory Readings

Lovo when taxes on the rich are avoided or the rich take excessive advantage of tax concessions this places an excessive tax burden on PAYE and less well off taxpayers which is unjust. Inflation is likely to only become excessive if the federal government deficit becomes significantly larger than it has been historically. When unemployment is nearing zero, this is the best indicator that deficits have reached the upper limit and are optimal.
Andreas BimbaFebruary 25, 2019 at 2:47 pm

Zathras, Venezuela’s economic circumstances are not ours. Venezuela has large US dollar debts which is indeed a solvency risk as their central bank cannot issue US dollars and this is compounded by economic contraction due to excessive reliance on volatile oil and gas exports, the imposition of crippling sanctions by the US and its sycophants as they want the oil, excessive government deficits and a very underdeveloped productive sector of their economy.

Zimbabwe was much the same as Mugabe shrunk the productive output of the important farming sector at the same time as deficit spending excessively and building up large debts in foreign currencies.

The MMT proponents regard price stability or low inflation as a primary policy target and strongly discourage governments from borrowing in foreign currencies. Their more complete understanding of macroeconomics provides the tools to achieve full employment, adequate government services, a healthy economy and with price stability.
Andreas BimbaFebruary 25, 2019 at 5:18 pm

Kaye in response to your comment at 4:10PM.

“The RBA does not issue currency unless you are talking about actual cash.”

All federal government expenditure is performed by the RBA marking up (or depositing into) the appropriate accounts that the commercial banks have with the RBA. The commercial banks can act as intermediaries to pay the final recipients. The RBA is not operationally constrained by tax revenues. If the federal government chooses to spend more than it taxes this makes no difference to the RBA – the RBA will still mark up the appropriate accounts. Currency issuance is another way of describing the marking up of accounts by the RBA.

“Bond issuance is actually used to control interest rates” “That is completely incorrect. Secondary trading in bonds can be used for this, not issuance which is determined by the Dept of Finance.”

Bond sales are one of the main tools used by the RBA to adjust interest rates. Refer item 4.1 in the link below.

https://www.rba.gov.au/education/resources/explainers/how-rba-implements-monetary-policy.html

A relevant quote from one Bill Mitchell’s recent articles.

“The main instrument of this liquidity management is through open market operations, that is, buying and selling government debt. When the competitive pressures in the overnight funds market drives the interbank rate below the desired target rate, the central bank drains liquidity by selling government debt. This open market intervention therefore will result in a higher value for the overnight rate. Importantly, we characterise the debt-issuance as a monetary policy operation designed to provide interest-rate maintenance. This is in stark contrast to orthodox theory which asserts that debt-issuance is an aspect of fiscal policy and is required to finance deficit spending.”

http://bilbo.economicoutlook.net/blog/?p=381
StephengbFebruary 25, 2019 at 5:20 pm

Thank you Andreas

Very succinct.

Kaue Lee
Yes I know you never said that m0ney was limited but I read your critic of MMT which as you rightly said is about process or the ‘rules’

But I am trying to say that you’re concern about the process and rules is in my view merely about the idea that money is in short supply, where in fact it is not in short supply (limited) but it is that our productive capacity that is limited, so that when we have unemployed underemployed resources there is capacity for a greater supply of money.

That means money used to make greater use of resources not to supply already obscenely rich with even more.

of the limits of avaible money

SGB
Luke PurseMay 31, 2019 at 11:34 pm

You’re so close to nailing this argument. All that is left is to abandon the broken macro economic talk of “revenue”, “coffers”, “taxpayers”, etc. Please, please, look in to MMT. This is the final piece of the puzzle uour trying to put together.
Mark NeedhamJune 1, 2019 at 1:16 am

Kaye, you are spot on.
Now, whom, sold, say the Commonwealth Bank.
QR…….rail, the profitable bit.
& so on….Bastards did. Yours and mine. All a pack of mongrel bastards. Conservative and Labour, BASTARDS.

It all beggars belief.

We need to buy back those National Essential Services that have been given away.
Telstra, Electrics, Water. Rail and Australian Land.
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