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Market Forces Rule, Except Sometimes…

Before I start this, I’d just like to tell you how great I am. I mean, I’m really good when it comes to economics. I understand them and I know how they work and that’s because I’m an adult and I’m open for business, and if you want me to get things in order just give me a free hand and don’t ask difficult questions because that just shows that you don’t understand and that you’re just repeating what someone who doesn’t agree with me has said…

Gee, it sounds pretty strange when I say it. Why doesn’t anybody seem to notice when the Liberal Party carry on like that? Apparently Greg Hunt recently said: “In 50 and 100 years’ time, I suspect people will look back on this National Cabinet as being one of the most amazing achievements of the federation in Australia’s first 200 years.” Although I guess it is April Fools’ Day and maybe it’s just one of those jokes that some people take seriously like Clive Palmer. How on earth one could take the 2019 Clive seriously after his previous foray into politics is one of life’s mysteries…

And speaking of life’s mysteries, did you hear the one about how negative gearing was going to lead to house prices crashing and going up at the same time? Ok, ok, that was last year. This year’s mystery is how the government can spend so much money without anyone asking how they’re actually going to pay for it? I mean, if Labor suggest a policy of zero emissions by 2050, then they have to be able to detail where the money is coming from, but the Liberals have managed to find the odd $61 billion here and the odd $130 billion there without any journalist asking where the money’s coming from.

There was the suggestion that the tax cuts may have to be put on hold, but hey, weren’t they legislated? Wouldn’t that mean that Labor and the minor parties would have to agree to let them through the Senate?

Economics is a funny thing… Yeah, all right, no it’s not, it’s actually rather tedious, and subject to all sorts of theories, many of which have no basis in reality. As someone once said, “Yes, it’s all very well to say that your idea actually works, but would it work in theory?”

That’s pretty much been the Liberal rhetoric about Labor’s response to the GFC. “You went too hard, too early and there’ll be nothing left when the recession actually hits,” was the Coalition’s first attack. Later it became, “You went too hard and you didn’t need to because we didn’t actually have a recession!” For years, we’ve been told by the Liberals that Labor keep messing up the economy and the Liberals are the responsible economic managers and you can’t spend your way out of a difficult situation.

So, what’s going on with this whole stimulus package thing? You must have noticed over the years how committed the Liberals are to the whole idea of market forces. You know the way it works: leave things to the market to work out because the government shouldn’t get involved. Smaller government, that’s the answer. No subsidies for things, unless it’s something that only a leftie socialist could object to and then we should give it a bit of a helping hand to enable it to overcome all that prejudice which stems from people who want to stop corporations from making exorbitant profits by not paying tax.

We’ve always had this nice contradiction where market forces are meant to rule but not if it means that the wrong people get hurt. I mean, market forces are ok if factory workers lose their job when things shut down, but not if they means that renewables will put fossil fuels out of business. It all depends on who’s losing their job, and if it’s the PM, then all stops must be pulled out.

So, while just a few weeks ago, the rate of Newstart was just fine because it was only meant to be a temporary thing, suddenly it’s not enough because lots of people who may have been the quiet ones who voted for Scottie are likely to find themselves on it and they couldn’t possibly be expected to live on it. Even temporarily…

Don’t get me wrong. I’m not advocating a Milton Friedman approach here. If I was, I’d be suggesting that if those who have properties negatively geared need to find the money for their mortgage and if they can’t do that because their tenants have all stopped paying rent, well that’s the way the market crashes and this will help find that sweet market equilibrium price when they put the houses on the market and the oversupply brings prices down to a level where more people can afford them. No, I wouldn’t tell you that, but that’s what your IPA Young Liberal would tell you.

At least, that’s what they would tell you if they hadn’t made such a big thing about how Labor’s negative gearing policy was going to wreck the market and drive prices down but only for investors and those who already own their own home. It – apparently – wasn’t going to help first home buyers because prices were going to stay high for buyers; they were only coming down for sellers.

Yeah, life’s mysteries.

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10 comments

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  1. Harry Lime

    I AM WAITING WITH BATED BREATH FOR FREEDOM BOY WILSON TO GIVE US AN EXPLANATION.

  2. Geoff Andrews

    It looks as if the LNP have suddenly discovered Modern Monetary Theory.
    OK, it was only an idea way back in the GFC era but it’s now a theory (WITH a capital “T”, a bit like liberal with a capital “L” – funny how a capital can change the meaning of a word, eh?).
    Can I presume that the phrase “debt & deficit disaster” had now been expunged from our lexicon, never to return?

    And another thing. If a white knight chucks, say, $1 million to a public company in financial trouble with a capitalized value of, say, $9 million, the normal market/capitalist rules would suggest that the company would then gratefully issue shares to the white knight, giving him/her a 10% ownership in the company.
    Except when the white knight is the Reserve Bank – that would be labeled “nationalisation by stealth”)

  3. Rossleigh

    Yeah, there seems to me to be an argument for the government to lend the Future Fund a few extra billion to invest in the share market while it’s down. This would have the effect of stabilising the market and it could be repaid at a profit when the market hits higher prices somewhere down the track.

  4. Terence Mills

    To get back into office the coalition (mainly the Liberal Party ) promised tax cuts in the order of $158 billion way into the future and coming into full effect by 2024.

    At the time, the Parliamentary Budget Office warned that these tax cuts have removed from the economy the “buffer” against revenue shocks into the future. The caution was contained in the PBO’s medium-term fiscal projections :https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Budget_Office/Publications/Research_reports/Medium-term_budget_projections.

    Guess what, the revenue shocks have arrived and still the coalition government are refusing to concede that their bonanza of tax cuts was neither prudent nor sensible.

    It would be near impossible for the coalition to walk back their exuberance in cutting tax revenue so can I be the first to say sorry to the next generation who are going to have to pay back the debt.

  5. New Bruce

    GA D&D are probably now “unparliamentary words” along with “Rort”, which occured just before the shit really hit the fan.
    If I didnt know for sure he was too stupid, I might have thought that agnus tailspin had caused this entire mess in order to take the spotlight off himself for a bit.

    This entire financial freeforall is a bit like having loads of “safety distanced” people in one of those big game show money whirlwind things, and every time something doesn’t work out according to plan A, plan B is to suck the money from under the grating on the floor and pump it back in at the top, with scotty and feudenburger grinning inanely and proclaiming “Look at us, we are wonderful, we are magic.”

    Virgin Australia….. Richard Brandson has a few spare shekels. $36B of them at last count. It’s his toy, or tax dodge.
    And just Nationalise the hospitals and have done with it. And the CBA and the Energy Grid while they are throwing the confetti around. They can always say “Oooops, but it’s worked out better for us all.” later.

  6. Frank Smith

    You are not meant to mention or even think about Newstart, Rossleigh – Don’t you know it has been magically superceded by Jobstart – a new GENEROUS program brought to us by the Liar from the Shire. And it now has an even more GENEROUS marketing partner, Jobseeker. “Jobstart and Jobseeker” – an absolutely brilliant advertising slogan – barely even three words! “How good is that?”

  7. Lurline

    I was surprised to google covid19 and see that it’s a disease, a virus to be exact, and has health repercussions. I mean apparently the elderly and disabled are most at risk of this virus, but all of a sudden they’re the lowest paid people in the country. It’s expensive being disabled and trying to guard your health against a disease that could kill you, but we’re not even given a break on how many prescriptions we need for the safety net.

    The economic crisis that this virus presents is all that interests this government, so they’ll given people who lose their jobs more money to battle through, yet pensioners are expected to fumble our way through on less than $500 a week, the $750 bonus only covers my 3 month chemist bill for this year, so I don’t actually get a bonus, and I need to buy masks, hand sanitiser, etc and risk my mental health by isolating myself for no help to achieve this.

    Sorry, I tried to start writing this in a humorous manner, but it’s too effing serious to joke about.

  8. Andrew Smith

    Aggressive neo liberalism ideology on the way up including tax cuts, hollow out govt. services and funding (to help remove govt. from people’s lives), nobble unions/awards then when a black swan events occurs Keynesian economics becomes acceptable i.e. flush public money through the economy, directed at corporates especially; supposed anathema to Conservatives, relying on Keynesian socialism on the way down.

    By international standards Australia has low federal state debt, still moderate when states are included, but everyone has become conditioned to focus negatively upon costs, taxes, debt and govt.

    Fact is, in a global low interest rate environment, and supported by the likes of Kennett (and Howard on NewStart), Australia can well afford to use debt now to support budgets and for state led investment; any bond sales above a low inflation rate would be viewed positively in global markets.

    Ironically one of the ideological influences of these guys including the IPA, Koch’s et al., Ayn Rand, who aggressively opposed govt., spending, taxes etc. was compelled to rely upon social security in her twilight years……

  9. paul walter

    Enclosuring.

    Everything changes and nothing.

    Socialisation of debt, privatisation of wealth.

  10. Bronte ALLAN

    What a great article–as usual–Rossleigh! I really love it (NOT!!) when this stupid bloody COALition mob always blames Labor when it comes to how good the libs are at managing the economy & finances etc It must have just a fluke when Labor successfully managed the GFC all those years ago. And how good is this Slomo bloke in (finally) giving all the poor buggers on what was the dole a huge kise in their benifits!! What an amazingly fine “specimen” he really is?

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