Balneus

Australian Lefty on Politics, Governance, Science and Info Management

Costello hates debt – so should hate himself

Posted by Dave Bath on 2009-04-29


Regular The Age columnist and my local (probably only part-time) parliamentarian Peter Costello is attacking Rudd/Swan in the paper today ("Enjoy Mr Rudd’s Largess Now – It’ll Hurt Later", The Age, 2009-04-29) in his typical smirking and disingenuous fashion.

Costello points to the problems of paying for debt, and the silliness of "spend! spend! spend" calls from government, yet won’t point out that Australia is in the current mess mainly because of all the national debt accumulated under his watch as Treasurer, and the bubbles he did his best to inflate.

Costello and his boss (the only person able to wipe the smirk from Costello’s face) presided over the longest-running trade deficit in Australian history, a ballooning current account deficit (it’s now about the same size as the GDP), and a massive increase in household indebtedness compared to income.

As long as your budget deficit as a proportion of GDP is less than your current account surplus, with the money coming into the country subject to tax the year after, your budget deficit is sustainable.

And under Howard and Costello, money was leaving the country faster than the economy was growing (the deficit usually between 5% and 6% of GDP), we didn’t invest the debt in infrastructure that would help long-term income prospects, and almost all the increases in asset values were illusory.

But Rudd and Swan aren’t that much better.  The government is pumping out money in ways that doesn’t provide much of a money multiplier, it’s still trying to maintain the unsustainable housing bubble, it’s protecting those that screwed up the economy, … the only bright spots are the ability to talk of an Australian trade surplus without entering the realms of fantasy.

Costello says that Rudd is like a spruiker for furniture that you take home and pay later, one that won’t tell you the interest rate.  Costello was worse… more like a spammer for penis enlargement, because he encouraged crass consumerism and people’s self-worth depending on the size of (illusory) assets compared to the next person.


Notes/See Also:

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10 Responses to “Costello hates debt – so should hate himself”

  1. Al76 said

    I’m a bit confused. Isn’t a current account deficit private debt, which has nothing to do with the government? What can a government do to influence a current account deficit/surplus?

  2. Dave Bath said

    Al76@1 asked "What can a government do to influence a current account deficit/surplus?"

    Traditionally, the CAB tracked the TB: Sell more, more money comes into the country. Buy more than you sell, money leaves the country. The two disconnected markedly in the Howard years as private (not just business, but household) debt skyrocketed.

    It /is/ a general conditions thing. Good government means that a country will get more money coming into the country to provide services. It’s not only things like the desirability overseas of the products and services of a country (including a reasonable manufacturing sector, which is ideally value-add), it’s also in the mindsets that politicians encourage: living-within-means versus affluenza and profligate displays of wealth/spending as a means of one-upmanship.

    Examples:
    * The housing bonus programs usually push up housing prices by more than the bonus by the next Saturday. Irresponsible lending practices (e.g. allowing 100% loans) increase private debt, usually raised overseas by the banks – and interest payments overseas affect the CA.
    * Encouraging private enterprise to produce innovative and “high-end” products (think Germany) creates an overseas market for those products. A good example of encouragement was the significant incentive for Germans to install solar power generation on their own buildings by setting up a pricing regime for households/business to sell that power to utilities. German manufacturing geared up, and thus became a major supplier of such goods. Another example is setting tough quality standards (e.g. safety/emissions controls on cars), when you know the world is going that way eventually – again your producers get a head start in new markets by starting with a domestic advantage.
    * Perhaps controls on transferring funds overseas to tax havens is a way of stemming flow from the big end of town.

    • Al76 said

      Thanks for your detailed answer Dave. That helps my understanding considerably.

  3. Lyn said

    So I gather you’re not feeling very well represented by your local ‘member’?

  4. Dave Bath said

    Had a bad run with local members: Higgins, Goldstein, Corangamite, Wannon.
    There had been decent chaps in each of those electorates (apart from perhaps Higgins) …. but never when I was in them!

  5. memeweaver said

    Hahaha! Will never think of Costello the same way again. Nor penis enlargement for that matter (not that I spend much time thinking about that, I hasten to add).

  6. […] (Dave Bath, 2009) […]

  7. Raf said

    The last decade saw a subtle transfer of public debt to the private sphere and now it’s coming back the other way through corporate welfare and tax cuts.

    However, the main problem has been the government handing off control of monetary policy to the central banks and charging them with controlling the rate of inflation which is a vastly misleading indicator for controlling the economy.

    So Chancellors all over the world can sit back smugly (Cullen, Costello, Brown etc) and say it wasn’t me guv…..central bankers got it wrong……..which of course they did.

    I could go on……but it’s too nice a day here in Christchurch :-)

  8. name altered by editor said

    Will never think of Costello the same way again. Nor penis enlargement for that matter (not that I spend much time thinking about that, I hasten to add).

  9. Costello points to the problems of paying for debt, and the silliness of “spend! spend! spend” calls from government, yet won’t point out that Australia is in the current mess mainly because of all the national debt accumulated under his watch as Treasurer, and the bubbles he did his best to inflate.

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