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economic realities « Previous | |Next »
December 21, 2012

Finally the Gillard Government accepts economic reality.

The politics of austerity (savage cuts) is not appropriate when economic growth is low and government revenue has taken a large hit. A slowdown in economic growth means that as you try to achieve a surplus through austerity all you do is drive economic growth downwards.

The economic reality is that annualised growth rate during the quarter was only 2 per cent, and the government's tax receipts in the first four months of the year to June were $3.9 billion lower than estimated. This has been caused by lower commodity prices and competitive pressures on the economy that are related to the Australian dollar not following commodity prices down. The Australian dollar is becoming a reserve currency.

The anti-Keynesian neo-liberals will attack the Gillard Government under the guise of government waste, spending too much money, broken promises, and bad economic management. A national failure the AFR calls it. In the neo-liberal view a budget surplus signifies good management of the economy irrespective of context.

PopeDSurplus.jpg

What the neo-liberals won't say is that the politics of austerity involves slash and burn and the privatisation of public services. Will the Coalition go down that road--ie., follow the conservative government’s in the states who are pushing for surpluses at all costs? Or will they back off the spouting the party line in the face of the economic reality of declining economic revenue and reduced government spending?

Labor shot themselves in the foot because they made a budget surplus into a symbol of their responsible economic management. Now that they can’t deliver this will be used to indicate they’re not economically responsible. Therefore they have bad economic credentials.

Labor has been unable to argue the basic principle in the public sphere: namely, that deficits per se are neither good nor bad. What matters is the appropriate use of fiscal policy and the specific purposes of a deficit. They accepted the naive neo-liberal view that getting one’s household in order and paying off the bills was the measure of good economic management of small open economy such as Australia’s.

| Posted by Gary Sauer-Thompson at 6:36 AM | | Comments (6)
Comments

Comments

For past three decades--- the neoliberal era---Australia has suffered increasingly from what some economists and various commentators have called “deficit fetishism”. This is a belief that a budget deficit is (almost) always to be avoided, while a surplus is (almost) always to be preferred.

The Gillard Government has failed to confront neoliberal ideas--eg., that good fiscal policy is akin to austere (and rather fundamentalist) household budgeting.

The choice for Labor was: either face an angry barrage of broken promise accusations from the Opposition while the voters are doing their Christmas shopping; or cut $15 billion from government spending during an election campaign?

Keynesian economics:

When the economy is strong, allow the surplus to occur and grow. When the economy is soft, allow the surplus to shrink and when there is a risk of recession, run a deficit to support economic activity and jobs.

So Labor finally backs reverses course on it's foolish quest.... Just a few days after fudging it's foreign aid commitments. How convenient.

Cartoon says it all...uuurrk!

Wayne Swan was an economic lightwieght(fucking dill) 20 years ago. So to give him credit he has worked very hard to get to the point where he is now.