Don’t worry about Australia’s budget position, the Asian head of the International Monetary Fund Anoop Singh insisted yesterday — our debt levels are just 10% of GDP and we maintain a triple-A sovereign debt rating from the three major credit agencies:
“The next budget will lay out the government’s plan to achieve a strong fiscal position … essentially the government has remained keen to return the budget to surplus, and this is a praiseworthy objective that we have supported.”
So why is the Prime Minister telling us to be alert and alarmed — of the “grave and urgent decisions” ahead — while delivering decades of Christmases at once to the Coalition? As Bernard Keane writes today:
“For a government that is flat out communicating even the simple message that it has masterfully managed an economy in unusual and challenging global circumstances, such nuance was certainly beyond Prime Minister Julia Gillard yesterday.”
Don’t expect the nation’s leading commentators to help explain it — they’re too busy screaming about the falling sky. The Australian Financial Review editorial even has the nerve to suggest the dramatic fall in revenue could have been avoided if only the government had listened:
“The Prime Minister portrays the ‘significant fiscal gap’ as an unfortunate and unforeseeable accident, which ‘wasn’t even forecast a few months ago’. But the Financial Review privately warned the highest level of government about this more than four months ago, only to be dismissed.”
Sorry? Privately warned? When did the AFR become a government economic consultant? What else has it been telling Gillard and Treasurer Wayne Swan to do?
The only sensible call today came from The Age‘s economics editor Tim Colebatch. He wrote:
“A month before we vote on September 14, Treasury secretary Martin Parkinson and Finance secretary David Tune will release their own uncensored estimates of Australia’s budget position, thanks to Peter Costello’s Charter of Budget Honesty. I think we need to match it now with a similar innovation: the Charter of Newspaper Honesty.
“This would require newspapers to report budget issues accurately, impartially, and without ignoring issues of relevance. That would be a bit of innovation for some of our papers, who, like the North Korean press, feel they have a duty to guide their readers constantly by ensuring that everything is reported through the prism of eternal truths, such as The Gillard government is bad or Government spending is too high.“
Innovation, indeed. If we can’t even trust the government to be honest about its own budget challenges, somebody has to sort fact from hysterical fiction.
Tim Colebatch’s call for a charter of Newspaper honesty is a refreshing recognition of the Goebbels like (he cites North Korea, which is just as fitting) uality of newspaper reporting. Your editorial notes the breathtaking presumption of the AFR, which is capped by its so so silly cry that increased taxes will be “deadweight loss” in our economy. Oh, please. A “deadweight loss” is the shortfall in output in an economythat fails to achieve the prices for goods required for Pareto efficient outcomes in neo-classical general equilibrium. No economy achieves this Pareto efficient outcome, since it is simply impossible to achieve (the assumptions for it cannot possibly be realised). Nor is it better to try in any way to get closer to what would have yielded the Pareto efficient outcome in all markets in a neo-classical general equilibrium. This is so sad. Michael Stutchberry, of course, the AFR editor imported from the Australian will not realise how sad it is but this will only show that Stutchberry believes as a matter of faith that the semblance of a free market economy in Australia works “as if” it is a fictional neo-classical market economy. It does not. Deadweight losses abound, if only from the incompleteness of markets. Not every good that can be marketed is marketed, mostly because economic agents do not have perfect information about the present and future of the economy. Deadweight losses from monopoly abound. There is a passing semblance of ordinary competition in markets for electrical goods and cars (save for the “deadweight loss” from our small tariffs) but for years our wealthy but small market economy has been price gouged by our great and powerful friends.For years US and UK distributers price gouged us over books. The US in particular, but also the UK, price gouges us over clothing and personal goods. Woolworths has woken up to the price gouging and deciding to do something about it. When people know about the price gouging, they move to close off supply. They throw up smokescreens about fake or defective goods (see the AFR for reporting on this). The US also gouges on IT. look at the high prices Apple, Adobe and others charge in IT for no discernible reason. Why the gouging? Well, we are such a small market that, with exceptions from Asia and in certain markets like electrical goods, there is no strong incentive for other manufacturers to break the monopoly arrangements. The so called “potential” for such breaks is supposed to make monopoly markets work “as if” they were neo-classical perfectly competitive markets but Australia will not see that”potential” have any effect. Secondly, we are such a small and affluent market, that all these price gougers from our great and powerful friends have little incentive to increase their earnings by reducing prices. They can go on getting profit cream at our expense, with poorer Australians struggling over purchases of clothing, etc that were even affordable when Australians travelled overseas with a much lower A$.
Of course, the huffing a puffing about “deadweight losses” is just a bit of North Korean like propaganda for the diversion of resources from public goods that government might provide to companies, so they can pay outrageous salaries to their executives and high dividends to investors, just as the North Korean media praise the diversion of resources to the parasites in its feudal dictatorship, though we should concede that this diversion is much crueller. In Australia we just have a poverty of infrastructure, which frustrates people in Western Sydney, threats to create a two tier US style medical system, where the wealthier will not get into free public access but will pay for access to a better health care system, while the free access system struggles to provide even second best care and threats to rely on private schools for the best education, which the wealthier will pay for, while the public school system struggles to provide adequate education. In this light, we can see why the Gonski proposals are such an appalling bit of overspending. None of this meanness and exploitation of the poorer majority compares thug to the near starvation lack of heralth care and education that is endemic in North Korea. We must be grateful for that. And for not having the appalling prison system, whwre people are forced into state slavery. Mind you, as we ove to US style inequalities, we might also develop a mass prison system, where state slavery is widespread, to terrorise the population and deprive millions of political rights, as occurs in the US. Something to look forward to, after austerity Abbott has a long go, with the enthusiastic support of the Murdoch media and the perhaps less Goebbels like support of Fairfax, with the exception of Tim Colebatch.