What we're talking about

Durkim on New Zealand Gangs Mm, yeah... Real funny, Randhil... more
Kayli on The Boats God help me, I put aside a whole afteroonn to figure this out. more
Raynes on Tax and Pollution Until I found this I thoguht I'd have to spend the day inside. more
James Brown on Mark Latham Mark, you must fell as if you are pushing it uphill, but you are the hope of the side. Keep it up! more
Michael on Halal certification The Halal Choices website is http://www.halalchoices.com.au/product_lists.htmlIt lists all the products that have been ... more
a barker on A few facts on illegal boat people We are the Lucky Country, or are we?.15 years ago maybe.How many Indonesian Officials are taking a a bribe from the people ... more
Robin on The Boats Hey,Thanks! Great post you have written on "The Boats ".Really I can say that your post is very informative, I'll come ... more
dan on A few facts on illegal boat people From what i can see if we dont do something about this flood gate issue,we will have the same nonsense thats happening over ... more
Randhil on New Zealand Gangs This info is the cat's pajmaas! more
Keshawn on CMC Complaint into Queensland Health That's rlelay shrewd! Good to see the logic set out so well. more
howard on Learning from one another? We are such a politically correct and multiculturally sensitive country Islamists are flourishing here. Just as they ... more
PP on Halal certification Thank you for the Halal Choices and the info about Coles - I will not be purchasing meat from Coles henceforth. In the UK it ... more
PP on Halal certification Thank you for the Halal Choices and the info about Coles - I will not be purchasing meat from Coles henceforth. In the UK it ... more
anne white on Halal certification A website that lists all Australian food products that are halal is, HALAL CHOICES.Also I phoned COLES (1800 061 562) and ... more
john on The Taxi Industry No one have the right to do anything they dont want.. you want to drive cabs do it you are not force to do something you do ... more
Diana on Halal certification I just found out about this today! Does anyone know how to get a list of products bearing this logo so we can boycott them? more
lol on New Zealand Gangs lol... this isnt good at all more
Ann on Support our Diggers Is it possible to buy this sticker? I'm sure any number of people would be proud to support our diggers by displaying the ... more
Mimosa on Smith with PM Gillard You mean I don't have to pay for expert adcvie like this anymore?! more
figsen/hypolgirl on Anna Bligh as President Hope you're checking this out Wobblyone. Your comment is one of the cleverist/funniest I have read. Couldn't stop laughing. ... more

Bail-out?

Posted by: Michael Smith | 21 October, 2008 - 12:53 PM

Nobody should think that the Federal Government's $10.4 billion redistribution of money from some taxpayers to others is going to fix the problem that got us into this economic crisis.

It simply won't.

At the best, it's a short-term response and then only to a symptom of the illness - we are living on too much borrowed money and we don't create enough stuff of value to pay for it.

The economic growth that this government and the previous Liberal government crow about is built largely on a mirage. Our domestic consumption is funded by debt - which means it's funded by money we expect to earn tomorrow and not money we have earned today. Debt is OK if it goes towards assets that will make tomorrow better or more productive - a hospital, a new road, or a port. Or towards a major asset that you believe will grow in value beyond the cost of the money - such as a house at the right price.

But when the debt goes to pay for rubbish - plasmas, holidays, credit card purchases - the economy can end up in real trouble.

Our capacity to borrow is finite and it's clear our whole country gets the wobbles when the credit starts to dry up.

Rather than talk about addressing this very difficult problem, the Federal Government's response is to tip more money into consumption so that we'll buy more stuff in the lead-up to Christmas. Economists call it stimulating the demand-side. That should have the very short-term effect of keeping us out of a technical recession for another quarter. But it doesn't address our underlying problem at all.

We need to be more productive and to match our growth in consumption with our ability to pay for it. It's a hard thing to say to people - it will sound harsh - and our political leaders on both sides are avoiding it.

If Kevin Rudd was fair dinkum about the well-being of families, he would be saying two things. The first is to pay down debt. Ultimately that's the painful reality - in the short term we have to reduce our reliance on tomorrow's money.

Secondly if you want to spend more money - either as a country or as individuals or families - find a way to produce more stuff of value. Earn more money. Be more productive. Sell more stuff.

But he doesn't say that.

Consume, consume, consume. That's the mantra coming from the Federal Government. And it's a mantra that will lead us into trouble.

Blog comments

I think the government is doing the right thing end making shore the country continues to have a cash flow. I now have the opportunity to purchase the trailer I need to go to the next level on my business. With Aspinall Trailers support I will design my perfect trailer check www.aspinalltrailers.com

david Monday 8 December, 2008 - 8:36 AM
If it's OK for teachers to stike, maybe we can have a tax payers strike when not happy with government behaviour. They would get the message pretty quickly!

Dave Muller Monday 27 October, 2008 - 12:59 PM