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Do we now have a budget emergency?

The adults have been back in charge for over three years now. Our economy has been saved from the debt and deficit decimation and everything is back to normal. Scott Morrison take a bow. You have achieved something Joe Hockey couldn’t.

Oops! Hang on. Something’s not quite right here.

The September Quarter national accounts have thrown up something that can’t be right, can it? A negative growth factor of 0.5% could only occur under a Labor government, surely. An annual growth rate of just 1.8%? Doubtless there are people out there who will still blame Labor for it.

And it appears Scott Morrison is trying to. He is demanding that Labor must now support the government’s $48bn tax cut plan because the economy needs it. It’s the same old ‘trickle-down’ rubbish conservative governments have been preaching for years.

“This is the ticket to the next 25 years of growth,” he said on Wednesday. “But we cannot achieve that if we cannot get the partners in this parliament that will engage with us in the national interest, that won’t be engaging in party political games, that won’t engage in negative politics and wrecking and destroying, but will engage to lift the burden on business so they can invest and employ more people.”

Can you believe the economic fantasies this man entertains? He actually believes that a $48 billion tax cut for businesses is in the national interest. The cut is over a 10 year spread, let out in dribs and drabs that business will hardly notice. The savings in most cases will probably pay for a Christmas break-up party, but little else.

The modelling shows the corporate tax cuts will deliver an increase in the GDP of 1% in 20 years’ time. Compare that to a GDP loss of 0.5% in the last three months. Morrison thinks that this is going to save the Australian economy from disaster and set up the next 25 years of prosperity. Talk about delusions of grandeur!

And this is what he is banking on to save his economic record. To those of us who have been warning a recession is immanent, that increased government spending, not tax cuts for business, is what is needed, we say, “we told you so.” But Morrison is not listening.

“To regain our competitiveness, and therefore create and sustain jobs, we must encourage our businesses, which employ most Australian workers, to invest and grow,” Morrison said at a press conference on Wednesday.

For the record, the nine Australian governments are collectively the country’s largest employers to the tune of 2 million workers and it is the government who should be leading from the front. Business is waiting for government to show the way.

1467195256008They will thank Morrison for the tax cuts but won’t invest the proceeds. To think otherwise is sheer fantasy. If Morrison wants to encourage business to invest, then he should lead by example.

Let’s start by constructing the world’s biggest solar plant in South Australia, let’s build a fast train service between Sydney and Melbourne, let’s restore the NBN to its original design (FTTH) and get it finished by the end of 2017. Let’s upgrade our urban transport systems.

There’s plenty of other projects just begging for attention. But no, this government is determined to bring the budget to balance. That’s code for surplus. They won’t spend because they think that deficit spending creates debt and debt is bad.

All of which is sheer bollocks!

How do we get it through their thick heads that the only way out of the mess they have created, is to spend? Even the IMF has changed its mind. After being a major contributor to the economic disaster that is the Eurozone by preaching austerity, they have now decided that infrastructure spending is the new austerity.

maxresdefaultProfessor Bill Mitchell was quick to react. He writes, “The Australian economy has been marching inexorably towards recession for the best part of this year and government refuses to budge from its attempts to impose fiscal austerity. Madness is a euphemism for their policy conduct. Incompetent also comes to mind.”

Hello! Is anyone in Canberra listening?



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  1. Freethinker

    What next for this mob, imitate the ones in Brasil and implement a 20-year cap on federal spending, to bring a widening budget deficit under control?

  2. passum2013

    Yes we should not let Tax avoiders and overseas tax havens example ,,Turnbull and Gena Rhinehart and others also why spend billions on submarines when your broke and pay millions every day on loans

  3. Ted

    MTs agenda is to give the Big4 a $40B tax break with the rest of business getting another $8B. There goes $48B in lost revenue – what the Budget emergency?
    One of the first things the LNP did in government was too remove the national debt ceiling – Public debt is now $784B (State plus Federal):


    LNP are not interested in a functioning economy.
    The idea that Big Business should pay its share of tax is anathema.
    Back to the drawing board boys and girls – get your head around the idea that inequality is the problem and you might make some progress.

  4. keerti

    Something I don’t understand(!?) Lieberals think that government should be run like a business. What business gives other businesses a gift of $48 billion dollars? This on the basis that those business so endowed will trouser the money and give it to their shareholders living in other countries and not even spend it with the original benefactor. The share holders should be up in arms. In fact they would be looking for ways to sue the directors or to have them charged with corruption.

  5. Ross

    John, the coalition only listens to the fruit bats at the IPA, the coal & mining industry and Gina Rinehart.

    Just because someone is appointed treasurer of Australia does’t mean that person has the slightest clue about economics or running the finances of the nation. Scott Morrison being the latest example.

    As Blackadder would say ”He wouldn’t recognise an economy if it painted itself purple and danced naked on a harpsichord singing look at me I’m an economy” (The same was said about that utterly incompetent leaner in chief Joe Hockey when he was in the chair).

  6. Klaus

    Yes John,

    In their blind ideology, they actually damage the country for years to come. I predict that the response to PISA (bad education outcome to other OECD countries) is the labor party mismanagement of Gonsky etc….

    They are running Australia to the wall and Australians need to fully wake up to these spineless, ideology blinded, malicious (towards the weak and needy), snout in the trough, less than mediocre government.

    I need to stop, god help me.

  7. Freethinker

    Klaus, IMO it will get worse in the future with more saying by extreme right independents and small parties on both levels, federal and state.
    The ball is on the left faction in the ALP to make the party relevant for the middle, and working class if not, people will not think clear and would do a protest or a uninformed vote.

  8. townsvilleblog

    We did not have a budget emergency 3 years ago but with 3 years of mismanagement and stupid inhumane policies aimed squarely at shifting wealth from the poor to the rich, we now do have a budget emergency, with the only solution being one that this L&NP government would never contemplate. The solution is to emulate a Trump policy of taxing the corporations 15% of their income, the big difference being the abolition of “all” taxation deductions. Australia must follow this policy if a Labor government is elected in 2019.

  9. Carol Taylor

    A question, tax cuts for businesses for them to invest in what? It’s the coffee machine argument, a new coffee machine does not create one single additional customer. Customers are created by giving tax cuts to low and middle income earners, not by cutting welfare, not by worker insecurity via a part-time and critically casualised workforce.

    All the way all that Morrison and Turnbull have talked about is cuts, cuts and more cuts, to overtime, to wages, to penalty rates. Sorry guys but an economy cannot function on a wealthy upper class alone.

  10. John Lord

    So very true John and the blaming of LABOR FOR EVERYTHING continues unabated.

  11. helvityni

    Jobson Growth was stillborn….

  12. Kim Southwood

    “But we cannot achieve that if we cannot get the partners in this parliament that will engage with us in the national interest, that won’t be engaging in party political games, that won’t engage in negative politics and wrecking and destroying, but will engage to lift the burden on business so they can invest and employ more people.”

    Can’t help noting how often the LNP use this very petty argument to a) engage public sympathy and support and b) enlist support within Parliament.

    They know exactly how annoyed and frustrated their collective electorates are with party political games and inaction on the real political issues: sustainability/jobs and growth in the context of likely global economic and environmental catastrophe.

    They know this because they themselves developed the art of political ‘gamery’ to all time heights of bullying excellence during the Rudd/Gillard years. Their techniques brought bullies from everywhere out of the woodwork to chorus their support. Hanson’s party rode the wave to unprecedented popularity. In her wake she swept along many disillusioned people naively seeking simple answers to impossibly complex questions … with very human beginnings on a global scale.

    As time goes by Morrison’s words are delivered with an increasingly menacing tone. He is now the self-righteous bully developing the art of transferring his own short-comings to those who dare use the LNP’s old opposition tactics against him.

    Whether or not voters will continue to tolerate the menace in his tone without perceiving its duplicity and pettiness is unclear.

  13. Kaye Lee

    My daughter wrote to our local member asking when the mobile phone towers she has been promising will be built. To her credit, Lucy Wicks did send her a reply eventually, saying she hopes they will come in the next round of funding – let’s put aside that she claimed having already delivered them in her election campaign – but she couldn’t help herself, saying “Labor spent no money on mobile phone towers during their time in office”.

    Will these people ever take responsibility? Over three years in and they are STILL talking about the previous government. It is so unprofessionally childish.

  14. Jason

    Great article in the ABC explaining MMT to the masses. It’s just reality: http://www.abc.net.au/news/2016-12-08/the-great-living-within-our-means-con/8064268

    Good article John thanks. Where’s harquebus complaining about the fact cutting the deficit can’t surely be the cause of a shrinking economy and deflecting about separate issues about infinite growth. Yes infinite growth is a real but separate issue. We already had 2 non-consecutive quarters of growth just from defence spending so we would definitely be in a recession if not for the senate!

  15. jimhaz

    [They won’t spend because they think that deficit spending creates debt and debt is bad]

    Umm, well it is when used for recurrent expenditure.

    It is even bad when used for investment if one takes into account global warming or the use of overseas funds instead of Oz funds.

    It also allows government and business to blackmail us into accepting poor policies.

    In my view they won’t spend in a wider distributive way as that leaves less leeway for tax cuts for the well off and less available for electioneering promises. I’m also convinced the LNP leadership group is wary of fairer distribution as that make Christian based charities less necessary.

    Both Bill Mitchell and the IMF should be treated as tainted advisers.

    Looking at the IMF fine print

    a) It is only investment debt they are talking about and

    b) “he noted that infrastructure projects needed to be better managed because the IMF estimated around one third of public investment was lost to waste, corruption or bad management” ie some of the LNP approved projects are most definitely in that category. What they’d do is spent it on risky and destructive Northern Australian infrastructure for Gina or very low return on investment roads.

    I’d love Australia to have an 18 month “financial” recession as it seems the only way to potentially clean out some of the excess wealth entitlement and rot. Sometimes distasteful tools like maggots or leeches are required to remove dead flesh. A hard recession would do that to at least some degree. It should make housing more affordable, reduce unnecessary consumption and waste and reduce immigration. From this point increased and fairer taxes would be required to reduce the increased public debt, which would be good for Australia in the long term (I think much of the tax reductions from the Howard times simply ended up in the hands of banks via housing inflation).

  16. Kronomex

    Yes, they do need a “budget emergency” (which will of course be all Labor’s fault) to push through the tax cuts for their corporate donours and masters. Labor will also be accused of not playing for Team ‘straya by not backing the ventriloquist dummy and his cronies so they’ll keep dealing under the counter with the independents in both houses to try and get this travesty through. In all honesty I would have to agree with Jimhaz about this country copping a recession, then we’d really find out how badly we’ve been run over the past few years.

  17. Mark Durl

    the only budget emergency i see is the goddamn government! it seems to me things were better under labor, in spite of their infighting! its thanks to labors leadership that we came through the GFC in as good shape as we did.

  18. jim

    The many many machines the LNP has including gerrymander voting makes for a very lopsided democracy indeed…. And why hasn’t the Australia Institute EVER EVER ! been represented on “our” ABCs Q&A while the IPA is on lots.

    According to the International Monetary Fund, the Howard/Costello government was the most profligate in Australia for the last 50 years. Indeed, while the mining boom was gathering pace they cut taxes so far and so fast that they forced the Reserve Bank of Australia to rapidly increase interest rates.

    While countries like Norway took the benefits of resource price booms and banked them in their sovereign wealth fund, Peter Costello cheered on by johnny Howard, chose to cut taxes for the wealthy instead. He knew at the time that his populist generosity to the highest income earners would force future treasurers to choose between budget deficits or cutting spending on the sick, the poor and elderly. No prizes for guessing which our former treasurer prefers……..https://www.theguardian.com/commentisfree/2015/apr/15/peter-costellos-five-most-profligate-decisions-as-treasurer-cost-the-budget-56bn-a-year

  19. Harquebus

    Increased government spending isn’t going to do it and corporate tax cuts are not going to do it. We are facing the inevitable physics problems that the mathematics of compound growth has always said that we will. Currency can not replace energy.
    Those who continually espouse more growth as the only solution to the problems that it has caused should be labelled dangerous and fool.

    “most people still don’t have any idea what peak oil means, much less that its consequences are unfolding around us right now.”
    “maybe no politician can get elected by promising that the economy will continue to contract and energy supplies become ever scarcer.”
    “The fact is that because oil production cannot be increased, economic growth is now over.”
    “From now on, geology and physics call the shots.”

  20. MichaelW

    I thought this government were going to have a budget surplus in their first twelve months of office. What happened?
    Oops sorry I forgot, it’s labors fault.

  21. Kim Southwood

    It will be a national emergency if Morrison handles the budget the LNP way. “There’ll we winners and losers” translates to insecurity and cuts for the majority and handouts for the rich list. Wake up call to vote them out.

  22. Kyran

    “For the record, the nine Australian governments are collectively the country’s largest employers…”
    Nine governments for 24 mill people.
    Where education is defined more by your geography, than your need.
    Where health is defined more by your geography, than your need.
    Where law is defined more by your geography, than your need.
    Where your rights are defined more by your geography, than your needs.
    Jason’s link @ 3.13 is a brilliant read.
    “If you feel like there is a disconnect between your bank balance and what you see and hear on television, you are not taking crazy pills.”
    I would add Claire Connelly to my list of predictions for ABC writers, whose contracts won’t be renewed. Fancy telling the emperor he has no clothes?
    Thank you, Mr Kelly, and commenters. Take care

  23. king1394

    Meanwhile small retailers are awaiting the Christmas spending with bated breath. This is the season that pays the bills for the rest of the year for some of them. But, potential customers are keeping their wallets and purses firmly closed, mainly because there is nothing in them to spend. This Federal Government has policies that keep wages low; keep those who are employed feeling insecure by threatening their futures, keep pensioners and jobless at or below the poverty line. Essentials such as rents, utility bills, rates, insurance, and car costs suck up every last cent for many people.
    It has long been understood that if you give a few dollars to the lowest paid people it will be injected into the economy – it will trickle up! But this Federal Government’s belief that tax cuts will fuel jobs and growth is tooth fairy stuff.

  24. Andreas Bimba

    Many really good comments and thanks again John for your important article.

    I am sceptical about that estimate that the proposed $48 billion tax cut for businesses will deliver a 1% increase in GDP after 20 years.

    At the same time the government is proposing on returning the budget to surplus. This means not only will the business tax cut be matched with budget savings, no doubt by cuts to the most disadvantaged, but that there will be substantial fiscal contraction. The fiscal contraction will trigger a deep recession as private debt levels are already at record levels so there is no room for more money coming from that source. Further the money transfer from the disadvantaged to businesses just in isolation we all know will not produce any economic growth but will achieve the opposite by further suppressing consumption (as well as greatly increase hardship) which will discourage productive business investment.


    Ted @10:05 am, that national debt clock is of no useful purpose as the federal government’s ‘debt’ is not debt as we commonly understand it but is more accurately just a record of additional money spent into the economy by the federal government which is essential for the economy to grow. This ‘debt’ does not and should not be repaid. The interest on government bonds can also over time be avoided by paying out bonds with ‘newly created money’. Quantitative easing is an example of this but has not been done in Australia as yet.

    Jimhaz @1:24 pm, although deficit spending on worthy infrastructure may produce a better return on investment due to improved productivity, deficit spending on social welfare is also economically beneficial as it increases consumption demand and thereby sales and the additional money circulates around the economy creating an ongoing economic benefit. I have no doubt Bill Mitchell is correct in all of his macroeconomic recommendations and we should all realise that the stimulatory expenditure he recommends does not need to be taxed or borrowed but that truly ‘free’ newly created money is used. It is the gap between the current economy and its productive growth capacity (which is an increasing target) that can be met with newly created money.

  25. totaram

    Andreas Bimba: Thanks for doing all the hard yards. I’ve grown tired of counteracting the usual mumbo-jumbo which ignores all the historical data, past explanations on this very blog, and just asserts various outcomes on the basis of postulated relationships which are often contradicted by the data. Maybe I’m too old to care anymore. Keep up the good work. Best wishes.

  26. Jason

    Jimhaz, I get where you’re coming from but why would you want millions of Australians to suffer under an unnecessary recession and all the human toll that goes with businesses closing down, mass unemployment and social and crime issues that go with it. It ends up costing us way more than it supposedly saves. As mark twain is quoted as saying “for every school you don’t build you build a jail”. So true. There are much better ways to soften the overpriced housing market than the blunt tool of unnecessary recession. We don’t even have growing wages for starters!

    Jim Norway has a sovereign wealth fund of foreign currency mostly in USD from oil. It doesn’t help it to spend domestically unless it’s buying imports. They’re still trapped in neoliberal nonsense. Sad but true.

    Harquebus yes energy is needed but it has absolutely nothing to do with how much currency the government does or doesn’t spend. Talk about that but be clear it’s got nothing to do with the article. Not selling all out LPG for starters as exports would mean Australia has cheap power for millennia without renewables. Focus on that if you want. Renewables are a smarter solution IMO but I don’t want to argue about that here. Focus on LPG instead for domestic use. It’s also much less polluting for power.

  27. Red Leaf

    The government thinks that running a country is the same thing as running a business. Then they want businesses to invest so that the economy will improve yet they fail to follow through with their own ideology and ensure that the business that is the federal government invests in the country too. Something isn’t adding up here.

  28. Matters Not

    government thinks that running a country is the same thing as running a business

    Indeed they do. The ‘political’ problem is that the broad electorate operates on that very same understanding. Add ‘households’ as well to complicate the problem. And to magnify the claimed ‘misunderstanding’, there’s very little pressure to challenge that current ‘common sense’.

    Politically, ‘faith’ is much more powerful than ‘rationality’ or ‘science’. Would you believe the vast bulk of the population operate on the belief that there’s an ‘all powerful’ up above who ‘knows all’ and ‘determines all’?

    They ‘believe’ so why not you?

  29. Kaye Lee

    Our economy shrank by 0.5% in the September quarter….now why would that be?

    Public sector spending fell in the September quarter, weighing on economic growth.
    Government consumption spending, mainly the goods and services used in the provision of government services, fell 0.2 per cent in the three months to September, according to the Australian Bureau of Statistics.
    Public sector investment slumped by 10.4 per cent.
    Total public sector spending fell 0.7 per cent


  30. Harquebus

    Currency is being substituted for diminishing energy returns so, it is related. Also, note that more debt is always producing less growth and more debt. Even at zero or near zero interest rates economic growth is sluggish and has been for quite some time because, physics trumps economics and that’s it. I didn’t make the rules.

  31. Pingback: Do we now have a budget emergency? | THE VIEW FROM MY GARDEN

  32. Max Gross

    We had Sloppy Joe now we have Slop Morrison. And I’m still waiting for those electricity bills to drop in price. Anyone for a $100 lamb roast?

  33. totaram

    Red Leaf: You have connected the dots, but unfortunately in all the noise and obfuscation, the average punter doesn’t get it. If business should invest, why not the govt? Indeed, govt. debt is much smaller than private sector debt, so they are the ones who should invest. In fact, what most people miss is the simple accounting identity that tells us that the private sector cannot save, if the govt. deficit and our export deficit do not cancel out sufficiently, to allow a surplus for the private sector. Why should the private sector save? Because it is in debt up to its eyeballs and a default would lead to another mini-GFC. On the other hand govt. debt is nowhere near as large and there is no danger of default as the entire debt is denominated in AUD which the govt. issues. In fact the govt. “debt” is mostly an illusion, but we will leave that for another time.

  34. Pingback: The myth of Jobs Growth – Australia Awaken – ignite your torches

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