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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

the new normal in a post-GFC world? « Previous | |Next »
May 15, 2013

The Gillard Govt's budget strategy is one that locks in its long-term social welfare reforms in education and disability in the context of the shortfall in tax revenues caused by falling commodity prices and a high Aussie dollar. This strategy also involves cuts in spending--eg., the baby bonus, university funding, research incentives, and clean energy funding.

Taking money from tertiary education and giving it to high schools is short sighted. It suggests that the limits of Australia's strategy of decent public services + low taxes has been reached in a a post-GFC world. The days of easy revenue for federal governments is over.

RoweDCurtaincall.jpg David Rowe

It is also short sighted that Australia’s Renewable Energy Agency – the independent institution charged with giving a kick-start to emerging renewable energy technologies and supporting infrastructure – has had its overall funding cut and deferred. What should have happened is a boosting of its the funds to enable the transition to a cleaner economy--eg., a solar thermal energy power station in Port Augusta.

The budget could have the funds by cutting back on the tax breaks for fossil fuels, subsidies for the big miners and subsidies for irrigation farmers. The programs supporting carbon capture and storage, and coal mining more generally, were slashed. The former were all spin, as they were spruiked by the coal companies in the mid 2000s as they tried to fend off carbon pricing and renewable energy support policies.

If the emphasis is on growth and jobs is at the expense of a more sustainable Australia, then it is not clear how Australia's manufacturing base is going to be strengthened to replace the 2015 mining investment run-down. There is still an incoherent roadmap of the Australian economy’s direction as the resources boom comes to an end requiring Canberra to create a 21st century economy.

Austerity is happening, through a mixture of spending cuts in key areas and tax rises, but not the neo-liberal shift to a smaller state. The neo-liberal goal is to attempt to bypass a democratic government to create an integrated global marketplace for financial and mining interests. It involves using the crisis to further the economic reforms needed to undermine the social welfare model and to create a self-organizing market that would allow for mobile capital flows across Australia's borders.

So an economic crisis in Australia has to be manufactured, which is what most of the commentary in the mainstream press is doing with its attack on the Gillard Government for failing to deliver the budget surplus that it had promised. They promised big on the surplus, they didn’t deliver, they look inept.

The attack centred around an $18bn deficit---the government had a spending problem, not a revenue problem--- is designed to destroy the legitimacy of the Labor government so that it is dumped into the dustbin of history, thereby enabling a more compliant Coalition government to implement the neo-liberal mode of governance more effectively in the form of the politics of austerity.

| Posted by Gary Sauer-Thompson at 7:36 AM | | Comments (19)


Australia is an exception to the claim that the West’s economies – including the US’s – are going to endure years of austerity, little or no growth, high unemployment, stagnant living standards, rising inequality and relative if not absolute decline.

There is little talk of currency wars at the moment.

These involve predatory devaluations at the expense of other economies. Japan, for example, has recently seen the yen falling by some 15%, with a corresponding improvement in its export performance coming through as a result, inevitably at the expense of its competitors.

In Australia, having a cost base which enables its manufactured exports to compete in the world – is almost entirely and exchange rate issue . The Australian dollar is too high .

austerity is all about loading the burden of the crisis onto the workers and the poorest so that the institutions of wealth can be protected.

The Coalition will argue that there is a need to separate the public and private spheres and its rhetoric will be that the public sector is cosseted and spoilt. They will begin with the statement: ‘Public expenditure is at the heart of Australia ’s economic difficulties.’

Then add that the greatest inhibition to private sector growth, and the greatest removable cost burden, is the Gillard-Rudd governments burden of regulation on business. So they will take an axe to the regulations and retrench the public servants no longer required.

This, it is claimed , frees up smaller enterprises, restores confidence, and energises them to start hiring.

The Swan Budget continues to rely on Treasury's forecasts, which in the economic downturn, have been overly optimistic. The assumptions and assumed relationships at the core of mainstream economics's model of the Australian economy have been way off target.

"it is not clear how Australia's manufacturing base is going to be strengthened."

what kind of manufacturing? Low high tech industries?

The Labor Party, which is embedded in domestic manufacturing economy, sees the conflict between the interests of the financial sector and those of the manufacturing economy.

But it is afraid to take on Big Mining and its dominance of the economic narrative.Big Mining constantly plays the threat that they will leave Australia if a democratically elected Labor Government challenges the interests of Big Mining. So Big Mining has to be placated.

Hohum....another budget.

Gives the journalists a good excuse to interview each other.

" a more compliant Coalition government to implement the neo-liberal mode of governance more effectively in the form of the politics of austerity."

We can expect the users of rail, road, hospitals and the like top pay more for fares, tolls and hospital charges. These must be increased because capital in the new environment has a cost – it is no longer just taxpayer funded.

"frees up smaller enterprises, restores confidence, and energises them to start hiring"

The hope is that there is a new surge of economic activity that will start to refill the coffers emerging from scrapping the carbon and mining taxes, red tape reductions and less regulation on business.

If this doesn't happen, then an Abbott Coalition government will be cutting spending in an economic downturn. That means many more businesses will collapse, GDP growth will slow or go backwards, and tax receipts will have plunged lower still.

Have you lot seen the Leigh Sales interview with Wayne Swan last night?
Or read the transcript?

A disgraceful interview.
By Sales - and the ABC.

Its [past] time that the COALition bias at the ABC is called out officially.

Following on from Burgess' comments in a previous post, Sales [on behalf of the ABC] gave the standard [apparently] naïve and fantastic interpretation of the government and the economy and was outright rude from the start to Swan [her first question : "How can you look Australians in the eye?].
Then it got worse.

What on earth is going on at the ABC, they have blown all pretence of objectivity.

I didn't see it. I've given up watching 7.30 or Lateline. I read the transcript.

Sales is just repeating the Coalition's talking points-its an overspending problem not a revenue decline one---rather than thinking independently about why it is important to run a budget surplus now.

The Canberra Press Gallery has little credibility these days.

The Canberra Press Gallery don't seem to be aware that the revenue decline will apply to a Coalition government; nor do they care about the effects of the politics of austerity.

Most media commentary has gone along with the “deficit bad, surplus good” chanting and ignored the fiscal contraction that has taken place with the budget.

In so chanting they avoid saying how much how much slower they would like our economy to be growing this financial year

Leigh Sales assumes that government debt itself is a bad thing and it that must be paid off in total at the first opportunity.

What don't the Canberra Press Gallery exercise their brains and ask for an economic case from those chanting that a budget surplus now is good economics.

Or they could ask what are the effects on the budget from the large permanent income tax cuts made from 2005-06 to 2008-09. How much did they cut government revenue by?

The austerians --the advocates of fiscal austerity, of immediate sharp cuts in government spending— assume that we are experiencing runaway government spending when government spending has begun to decrease.

Why do they want to turn away from boosting growth? Because the economic right has no time for Keynesian economics. These anti-Keynesians keep warning us about the dangers of deficit spending; and they use Greece as an example how dangerous fiscal profligacy can be.

That's where Australia with the fiscal profligacy of the a Labor Govt will end: Australia will become another Greece. The only way out is austerity, even though a turn toward austerity in a slowing economy would have an immediate negative impact. They try to negate that possibility by talking in terms of “expansionary austerity,” the proposition that cutting public spending would actually lead to higher economic growth.

By this they mean that large spending cuts in an advanced country such as Australia is followed by expansion rather than contraction. The reason is that decisive fiscal austerity creates confidence in the private sector, and this increased confidence more than offsets any direct drag from smaller government outlays.

The European experience has shown why Australia joining the austerity club is exactly the wrong thing for a struggling or slowing economy to do.

I suggest you check out right wing profs Reinhart and Rogoff whose magnum opus has been used by the anti-deficit scare mongers to claim that deficits lead to decay.
They are wrong, clearly documented as such, and R@R's work has been shown to be false.
The only debate is whether they were accidentally fraudulent or deliberately so.
Deficits [usually, generally, mostly, just about always] lead to economic growth.
Austerity is the enemy of growth, it has led to, is currently causing high unemployment, depressed economies, social hardship for no economic gain to almost everybody.
To claim it has any sort of credibility the proponents have to stand on their heads so the graphs appear to go in the directions they claim.
It is totally discredited but, unfortunately that doesn't stop it still being espoused. Weird.
And as for the Greece analogy furphy, it doesn't have legs [which again doesn't stop the fantasy peddlers from running it in the conservative media]. Greece is subservient to the Euro, Australia is a in a different ball game altogether in having a sovereign currency.
No comparison.

Here you are, gratis, a start on the R and R fracas, a very gentle kindly, partly accurate report on the falseness of the report used to criticise deficits by the rightists.
There is a lot more info 'out there' its the current big economic scandal and a lot of the comment from credible experts is more scathing than the BBC dares.