Two Questions Scott Morrison Needs to be Asked.

In the next few months, media writers, commentators and interviewers will find politicians breaking down doors in an effort to have themselves heard on radio, written about in print and seen on television.

There’s nothing like an election to remind politicians they are public servants, no better time for them to stick their heads up and say, ‘vote for me, vote for me.’

It’s also the best time for those media personnel who have access, to question politicians on a range of issues, no better time for us to test their knowledge and their sincerity.

At the start of everyday, the Liberal party backroom boys and girls send out the gospel according to the party machine. The parliamentary members are given instruction on the issue of the day, or if there isn’t one, they are given the script for an invented one.

They are told what to say, how to say it, how to fend off questions and generally spruik the party line in a convincing way.

But at election time they are vulnerable. Things happen quickly on a day to day basis. Unexpected issues can spring up from anywhere and catch them on the wrong foot.

Which means they will be nervous and, while confident they have all bases covered, will be fearful of surprises. The one issue where they are all susceptible, is the economy. On this one issue, most of them don’t have a clue.

There is one question a journalist, or anyone else who gains access, can ask; a question that will probably stump them. They should know the answer, given that they make regular decisions that impact on our daily lives, but they probably won’t.

The question journalists, radio commentators and television hosts should ask is: do you understand the principle of the three sectoral balances? The problem is that most media people in a position to ask the question directly, don’t know the answer either.

The three sectoral balances are, government net spending, terms of trade (exports versus imports) and private sector spending. At any given time, the sum total of these three sectors will equal zero.

What chance is there, that a politician will know that? If they do know it, what chance is there that they could answer the next logical follow-up question: if a government is running a surplus (spending less than it withdraws in taxation) and we have a trade deficit (cost of imports exceeds income from exports), what is the impact on the private sector?

The answer to that question is, the private sector will have to borrow to make up the difference to bring the total up to zero.

If a politician doesn’t know the answer to the second question, explaining the answer to them will likely leave them dumbfounded. The answer reveals the flawed nature of government spending reductions during times of low growth.

If a sovereign government cuts spending to reduce its deficit when simultaneously, our trade position is also producing deficits (and large ones as now), the private sector must go further into debt to maintain existing living standards or lower living standards to compensate.

That is because only government spending can increase the assets held in the private sector. Without it, all private sector transactions cancel themselves out.

At the moment, however, while the government talks of the need to reduce spending, it is actually increasing spending. It is doing the opposite of what it is preaching. Such is the hypocritical nature of politics.

This increased spending by government means private sector debt which might be increasing in one area (credit card debt) is cancelled out by the asset a commercial bank gains when extending the credit.

But this will only continue while the government continues its deficit spending. As we all know, that is not their intention.

Scott Morrison wants to return to surplus (i.e. take more money out of circulation). He wants private debt to increase at the expense of government debt.

He says we don’t have a revenue problem, only a spending problem, yet while spending is increasing, revenue is in decline. Morrison is clearly confused hence the tendency to waffle. Thus we have a very good reason to ask him, more than anyone else, if he understands the principle of the three sectoral balances.

It remains to be seen if, in having the principle explained to him, he would change his view in favour of increasing the rate of spending and forget about a surplus for now.

If he doesn’t, our economy will not climb out of its current lethargy and might even comatose.

But we need someone to ask him the question. It needs to be asked in public and televised. I suspect his answer will expose his limited understanding of economics.

If he is able to demonstrate a clear understanding of the three sectoral balances, then he confirms what we all suspect. That this government does not want to improve the lives of its citizens other than those in the top end of town who fund its party.

Someone who has access to Scott Morrison, needs to ask the question.