EDITORIAL FRIDAY 05.03.10.
If you’re having trouble making ends meet, if you find the struggle to pay for the groceries each week is becoming harder, if you’re busy working flat out only to go backwards, spare a thought for our poor overworked and underpaid politicians. That’s right, the poor dears are just barely able to get by on their parliamentary salaries and at least one former politician found the going so tough that she felt she had no choice but to get out of politics before she went broke. That’s right, according to the former Liberal Party Minister Jackie Kelly it was actually costing her money to remain in Parliament. She is quoted by the Telegraph as saying, “In the end, the financial cost of staying in Parliament was a compelling reason in my decision to leave parliamentary service…”
Heavens above, how could we have been so cruel as to expect tireless and dedicated service from our politicians under such Dickensian conditions? It is beyond belief that such sweat shop conditions could exist in the Parliament in this day and age. No wonder so many of them end up making poor decisions, and struggle to manage even the simplest tasks such as erasing their white boards. Oh, sorry that was a different Kelly in a different government, but you see what I mean. Obviously the sheer stress of fulfilling expectations while secretly fretting over failing to make the mortgage payments has been taking its toll.
Jackie Kelly is suggesting that parliamentary pay should be increased to “better match the salaries of comparable positions in the public and private sectors.” It is often suggested that this disparity of pay means that capable people are less likely to be attracted into politics in the first place, and that better pay would attract better people. Of course, the modest amount of money available to politicians didn’t seem to discourage Malcolm Turnbull, or a number of other independently wealthy people from putting their hands up to serve the community in the Parliament. If the “pay peanuts, get monkeys” argument was valid people such as Mr. Turnbull and Mr. Rudd, both wealthy beyond the dreams of most of us, would never have bothered going into politics in the first place.
While the Parliamentary salary is considerably less than the super salaries paid to the CEOs of big banks for example, even the lowest paid back bencher receives $130 000 a year, before you even think about any of the allowances and benefits that come with the job. That’s around double the average wage, and even that is a misleading figure when you consider that it’s a mean average, not a median. That means far more people have to get by on less than the average than those who make more. Plenty of “average” Australians who have full time work have to make do with $30 000 a year or even less. Any person who can’t make ends meet on $130 000 a year is either incompetent, or just downright greedy.
There’s nothing wrong with anyone wanting to improve themselves, to do better, to earn more, and to advance their position in life. There is even substantial merit to the idea of paying senior politicians such as the Prime Minister more to reflect the level of responsibility which they must bear. But any politician who whinges about their pay, while so many ordinary Australians will never see that kind of money in their lives, has forgotten why he or she was elected in the first place, which is to serve the community, not themselves.
Friday, March 5, 2010
Thursday, March 4, 2010
The First Piece Of The Puzzle
EDITORIAL THURSDAY 04.03.10.
While there can be no doubt that the need for health and hospital reform is overwhelming, there are some legitimate questions about whether the Rudd Government plan will deliver what is needed. Even if it delivers an improvement, will it deliver the best possible outcome, or merely a step in that direction? And even if it is a good idea, what real chance is there of getting the States and Territories to sign on? Without complete agreement, the whole thing falls over, in which case the Prime Minister has promised the issue will be taken to the people with a referendum. Even then, there is no guarantee of success with only 8 out of 44 referenda having succeeded in the past.
This has led to accusations from the opposition that the plan has been deliberately designed to fail, only to be used as an election tactic. It’s an accusation which might find some resonance among people who distrust the government, but the truth is that it is the opposition who are guilty of trying to turn the issue into an election tactic by making that very allegation. Even they know that the need for health reform is both real and urgent, and the plain fact is that this is the plan which has been put on the table. So it’s important to examine the plan itself, not simply divert attention from it by running political interference.
Genuine questions need to be answered about the funding model which has been outlined, but not yet detailed. First, if the Commonwealth is going to divert 30% of the GST from the States to pay for the Commonwealth contribution of 60% of hospital services, isn’t this just robbing Peter to pay Paul? Does the plan provide additional funding for hospitals, or does it simply redistribute the money that is already in the system? Does the activity based payment system provide sufficient money for remote and regional hospitals where activity is at a lower level? Will the local people who are appointed to local boards, sorry, Local Health And Hospital Networks, actually have real control over their own destiny, or will they still be puppets at the end of the financial strings of a new, even more centralized bureaucracy?
And on the topic of bureaucracy, the Prime Minister has promised that bureaucracy will be reduced and made more efficient by this plan, with duplications and overlaps removed. But the whole plan centres on creating a new bureaucracy to distribute the funding and to set the criteria and benchmarks for the local networks. All this while the States will still have their own bureaucracies in health for as long as they make any direct contribution to health whatsoever. There is a real risk that rather than making the system simpler, it could become more complex. While the Prime Minister is saying all the right things about clinical and administrative decision making being brought closer to the community, it remains to be seen if that actually happens.
There are also concerns about what has been left out of the reform plan. What about improving access to dental health care, boosting resources for mental health, and dealing with the challenges of aged care? What we have seen so far is just one piece of a very large jigsaw puzzle which will take some time to put together. I believe that it is a very good move in the right direction, but there are many more pieces of the puzzle yet to be pulled out of the box.
While there can be no doubt that the need for health and hospital reform is overwhelming, there are some legitimate questions about whether the Rudd Government plan will deliver what is needed. Even if it delivers an improvement, will it deliver the best possible outcome, or merely a step in that direction? And even if it is a good idea, what real chance is there of getting the States and Territories to sign on? Without complete agreement, the whole thing falls over, in which case the Prime Minister has promised the issue will be taken to the people with a referendum. Even then, there is no guarantee of success with only 8 out of 44 referenda having succeeded in the past.
This has led to accusations from the opposition that the plan has been deliberately designed to fail, only to be used as an election tactic. It’s an accusation which might find some resonance among people who distrust the government, but the truth is that it is the opposition who are guilty of trying to turn the issue into an election tactic by making that very allegation. Even they know that the need for health reform is both real and urgent, and the plain fact is that this is the plan which has been put on the table. So it’s important to examine the plan itself, not simply divert attention from it by running political interference.
Genuine questions need to be answered about the funding model which has been outlined, but not yet detailed. First, if the Commonwealth is going to divert 30% of the GST from the States to pay for the Commonwealth contribution of 60% of hospital services, isn’t this just robbing Peter to pay Paul? Does the plan provide additional funding for hospitals, or does it simply redistribute the money that is already in the system? Does the activity based payment system provide sufficient money for remote and regional hospitals where activity is at a lower level? Will the local people who are appointed to local boards, sorry, Local Health And Hospital Networks, actually have real control over their own destiny, or will they still be puppets at the end of the financial strings of a new, even more centralized bureaucracy?
And on the topic of bureaucracy, the Prime Minister has promised that bureaucracy will be reduced and made more efficient by this plan, with duplications and overlaps removed. But the whole plan centres on creating a new bureaucracy to distribute the funding and to set the criteria and benchmarks for the local networks. All this while the States will still have their own bureaucracies in health for as long as they make any direct contribution to health whatsoever. There is a real risk that rather than making the system simpler, it could become more complex. While the Prime Minister is saying all the right things about clinical and administrative decision making being brought closer to the community, it remains to be seen if that actually happens.
There are also concerns about what has been left out of the reform plan. What about improving access to dental health care, boosting resources for mental health, and dealing with the challenges of aged care? What we have seen so far is just one piece of a very large jigsaw puzzle which will take some time to put together. I believe that it is a very good move in the right direction, but there are many more pieces of the puzzle yet to be pulled out of the box.
Wednesday, March 3, 2010
The Golden Rule
EDITORIAL WEDNESDAY 03.03.10.
After a growing sense that the Federal Government has been all talk and no action, culminating in the insulation fiasco prompting questions about whether the Government even has the competence to successfully deliver an outcome when it actually does take action, it seems that all of a sudden somebody has lit a fire under the Prime Minister. After months of criticisms over the failure to act on the insulation scheme, failure to live up to the promise of an “Education Revolution”, and most importantly, failure to deliver health and hospital reform according to their own schedule. Now, in the space of less than a week, the Prime Minister has sidelined Peter Garrett from anything to do with insulation, spent the weekend on television apologizing for not meeting expectations, watched on as Julia Gillard launched the new National Curriculum for schools, and today unveiled his big plan for health and hospital reform.
And not before time. Leaving aside the political considerations of losing ground in the opinion polls, and the realization that an election is looming later this year, time is running out in a very real sense for genuine health reform. With the combined effect of the growing and aging population along with the cost of increasingly sophisticated and high tech medicine, the current health system will collapse in around twenty to thirty years, or possibly even less. Even leaving aside the shortcomings of current administrative practices and structures, the states will simply run out of money. No matter how much any state government might reform its own system, the failure of revenue growth to keep pace with growth in both demand and costs in health will get them in the end.
For that reason, much of what the Prime Minister said today is absolutely correct. The time to act is now. The funding of health care must be the starting point for broader healthcare reform. The management of local hospital and health services must be entrusted to local people at the local level who have an intimate understanding of local needs. Even the finer detail of the Prime Minister’s proposal is not all that different from the concepts put forward by the opposition. Whether you call them Local Hospital Boards or Local Health and Hospital Networks, both sides of politics are talking about giving greater decision making power to administrators and clinicians at the local level. But the real question is just how much autonomy will such local bodies actually have?
Generally speaking, whoever controls the money also controls the decisions. The idea here is to create a structure which will provide the money without imposing a centralized management system. But there can never be a complete disconnect, and there will be a regime of accountability and performance benchmarks imposed from the top. While the promise to increase the Federal Government’s contribution to health funding from around 35% up to 60% means a welcome boost to real dollars, it also means that the Commonwealth holds the whip hand. The real risk is that for all the talk about local decision making, we could actually end up with an even more centralized health system with an even more remote bureaucracy that is even less responsive to the needs of the people they are supposed to serve.
That may not be the immediate outcome, but we should never forget the so called golden rule: “He who has the gold, makes the rules”.
After a growing sense that the Federal Government has been all talk and no action, culminating in the insulation fiasco prompting questions about whether the Government even has the competence to successfully deliver an outcome when it actually does take action, it seems that all of a sudden somebody has lit a fire under the Prime Minister. After months of criticisms over the failure to act on the insulation scheme, failure to live up to the promise of an “Education Revolution”, and most importantly, failure to deliver health and hospital reform according to their own schedule. Now, in the space of less than a week, the Prime Minister has sidelined Peter Garrett from anything to do with insulation, spent the weekend on television apologizing for not meeting expectations, watched on as Julia Gillard launched the new National Curriculum for schools, and today unveiled his big plan for health and hospital reform.
And not before time. Leaving aside the political considerations of losing ground in the opinion polls, and the realization that an election is looming later this year, time is running out in a very real sense for genuine health reform. With the combined effect of the growing and aging population along with the cost of increasingly sophisticated and high tech medicine, the current health system will collapse in around twenty to thirty years, or possibly even less. Even leaving aside the shortcomings of current administrative practices and structures, the states will simply run out of money. No matter how much any state government might reform its own system, the failure of revenue growth to keep pace with growth in both demand and costs in health will get them in the end.
For that reason, much of what the Prime Minister said today is absolutely correct. The time to act is now. The funding of health care must be the starting point for broader healthcare reform. The management of local hospital and health services must be entrusted to local people at the local level who have an intimate understanding of local needs. Even the finer detail of the Prime Minister’s proposal is not all that different from the concepts put forward by the opposition. Whether you call them Local Hospital Boards or Local Health and Hospital Networks, both sides of politics are talking about giving greater decision making power to administrators and clinicians at the local level. But the real question is just how much autonomy will such local bodies actually have?
Generally speaking, whoever controls the money also controls the decisions. The idea here is to create a structure which will provide the money without imposing a centralized management system. But there can never be a complete disconnect, and there will be a regime of accountability and performance benchmarks imposed from the top. While the promise to increase the Federal Government’s contribution to health funding from around 35% up to 60% means a welcome boost to real dollars, it also means that the Commonwealth holds the whip hand. The real risk is that for all the talk about local decision making, we could actually end up with an even more centralized health system with an even more remote bureaucracy that is even less responsive to the needs of the people they are supposed to serve.
That may not be the immediate outcome, but we should never forget the so called golden rule: “He who has the gold, makes the rules”.
Voluntary Tax Will Now Boost Private Profits
EDITORIAL TUESDAY 02.03.10.
I’ve always thought of lotto and lottery tickets as being a form of voluntary tax. When we buy them we know that our money will be going towards providing the services we deserve and expect from Government, with the added benefit of having just the slightest chance of winning a prize. Even if we don’t we still benefit from the hospitals, schools and transport funded from the proceeds. But it’s an entirely different matter to be handing over your hard earned money to a private enterprise who will give you nothing in return unless you are lucky enough to have your numbers come up.
Despite opposition from many sectors of the community, the State Government has finalized the details of its sale of the New South Wales Lotteries Corporation to the Tatts Group in a deal which returns over $1 billion to taxpayers. The sale is expected to be completed by the end of the month. It will see the State government continue to enjoy ongoing revenue from lotteries and games without the burden of actually operating the business. The Government tells us that this arrangement gives the best possible outcome for the taxpayers of New South Wales. Not everyone believes that.
It would seem self evident that if lottery operations can generate enough money to pay the government an ongoing dividend while also generating a profit for the private operator then keeping the operation in government hands should return an even bigger dividend to the taxpayer. Quite simply, with no private enterprise partner to share it with, the Treasury would be able to keep all of the profits for itself to spend on hospitals schools and transport. It just doesn’t seem to make any sense to think that the taxpayer could be better off by giving away some of the profits to a private operator.
Of course, it hasn’t exactly been given away, with the total price tag coming to more than a billion dollars. That’s comprised of $850 million in cash from Tatts, and another $160 million currently held by the Lotteries Corporation being returned to the Government. More to the point, it is not exactly an outright sale either, with the rights to operate the public lottery only valid for the next forty years, after which they revert back to the Government. It’s a bit like selling somebody a house and land where they get to keep the house, but the land is only leasehold. That means that after forty years either Tatts will have to negotiate a new deal, or the Government could find another operator.
Whether or not that represents value for the taxpayer really hinges on two questions. One; will the revenue stream to the government from lotteries increase under private management? And two; just what will the Government do with the $1 billion in cash it will have in its back pocket at the end of the month? On the first point, it is possible that the private operators could develop and expand the business, delivering greater returns to both themselves and the taxpayer. But that remains to be seen. On the second point however, while we will hear all about the boost to hospitals, schools and transport, the reality is that the New South Wales government is digging itself out of a budget deficit hole and the money is likely to be soaked up preventing the state from going backwards.
I’ve always thought of lotto and lottery tickets as being a form of voluntary tax. When we buy them we know that our money will be going towards providing the services we deserve and expect from Government, with the added benefit of having just the slightest chance of winning a prize. Even if we don’t we still benefit from the hospitals, schools and transport funded from the proceeds. But it’s an entirely different matter to be handing over your hard earned money to a private enterprise who will give you nothing in return unless you are lucky enough to have your numbers come up.
Despite opposition from many sectors of the community, the State Government has finalized the details of its sale of the New South Wales Lotteries Corporation to the Tatts Group in a deal which returns over $1 billion to taxpayers. The sale is expected to be completed by the end of the month. It will see the State government continue to enjoy ongoing revenue from lotteries and games without the burden of actually operating the business. The Government tells us that this arrangement gives the best possible outcome for the taxpayers of New South Wales. Not everyone believes that.
It would seem self evident that if lottery operations can generate enough money to pay the government an ongoing dividend while also generating a profit for the private operator then keeping the operation in government hands should return an even bigger dividend to the taxpayer. Quite simply, with no private enterprise partner to share it with, the Treasury would be able to keep all of the profits for itself to spend on hospitals schools and transport. It just doesn’t seem to make any sense to think that the taxpayer could be better off by giving away some of the profits to a private operator.
Of course, it hasn’t exactly been given away, with the total price tag coming to more than a billion dollars. That’s comprised of $850 million in cash from Tatts, and another $160 million currently held by the Lotteries Corporation being returned to the Government. More to the point, it is not exactly an outright sale either, with the rights to operate the public lottery only valid for the next forty years, after which they revert back to the Government. It’s a bit like selling somebody a house and land where they get to keep the house, but the land is only leasehold. That means that after forty years either Tatts will have to negotiate a new deal, or the Government could find another operator.
Whether or not that represents value for the taxpayer really hinges on two questions. One; will the revenue stream to the government from lotteries increase under private management? And two; just what will the Government do with the $1 billion in cash it will have in its back pocket at the end of the month? On the first point, it is possible that the private operators could develop and expand the business, delivering greater returns to both themselves and the taxpayer. But that remains to be seen. On the second point however, while we will hear all about the boost to hospitals, schools and transport, the reality is that the New South Wales government is digging itself out of a budget deficit hole and the money is likely to be soaked up preventing the state from going backwards.
Monday, March 1, 2010
Joining The Chorus Of Condemnation
EDITORIAL MONDAY 01.03.10.
Not so long ago, Prime Minister Kevin Rudd was defending the government’s record vigorously. It was his government that saved the nation from the Global Financial Crisis. It was his government which had delivered on its promise for workplace relations reform. It was his government which had been frustrated by a hostile Senate in its efforts to meet other election promises. It’s not so long ago that the home insulation scheme was a huge success delivering energy efficient insulation to more than a million homes, and any problems with the scheme were caused by a few cowboys and shonky operators who were doing the wrong thing. Not so long ago, Peter Garrett was a first class minister doing a first class job and the Prime Minister was standing by him just as he had done the previous week, and just as he would continue to do in the following week. Except that he didn’t.
Instead, the Prime Minister announced that the buck stops with him, that he took full responsibility for everything, and that he was disappointed with his own performance. Then, he demoted Peter Garrett anyway, when the logical thing to do would have been to demote himself. After all, he had just finished saying that everything was all his fault, and the truth is that it was Kevin Rudd along with his Deputy and the Treasurer and the Finance Minister who cooked up the scheme, while Peter Garrett was stuck with the job of making it work. Perhaps Mr. Garrett might have done things differently, but most reports indicate that he acted responsibly, dealing with problems as they were brought to his attention. But the fundamental problem was with the government’s apparent inability to recognize that there was a problem at all.
By stark contrast, Kevin Rudd now seems to have no hesitation in condemning his own performance, and that of his government, in some sort of bizarre effort to win back the confidence of the public. This might be a new tactic for Mr. Rudd, but it’s not a new tactic in politics at all. The former Queensland Premier Peter Beattie did this all the time. Whenever any kind of Government scandal erupted, Peter Beattie would call a press conference, stand behind the microphones with either a grim face or a big smile, whichever was more appropriate for the occasion, and say something like, “It’s wrong, it’s not good enough, and I’m going to fix it.” And he got away with it time after time. For some reason, people actually believed him. Of course, Mr. Rudd comes from Queensland, so he would know this only too well.
The problem is that Mr. Rudd is not Peter “Hollywood” Beattie, the self-described “media tart”. Where Mr. Beattie had a talent for salesmanship, Kevin Rudd is an entirely different individual, so it remains to be seen whether this tactic will succeed for the Prime Minister. There have been reports that some senior Ministers are concerned that he might be over playing the part and encouraging broad scale condemnation of the Government, undermining what they see as a strong record of solid accomplishments. Of course, not everyone sees it that way, with a growing perception that the Rudd Government has been long on talk and short on action. In the last few weeks and months it has become increasingly popular to criticize the Government and question its competence.
Being popular is something that seems to appeal to the Prime Minister, so perhaps he has just decided to join the chorus of condemnation so that he doesn’t feel left out.
Not so long ago, Prime Minister Kevin Rudd was defending the government’s record vigorously. It was his government that saved the nation from the Global Financial Crisis. It was his government which had delivered on its promise for workplace relations reform. It was his government which had been frustrated by a hostile Senate in its efforts to meet other election promises. It’s not so long ago that the home insulation scheme was a huge success delivering energy efficient insulation to more than a million homes, and any problems with the scheme were caused by a few cowboys and shonky operators who were doing the wrong thing. Not so long ago, Peter Garrett was a first class minister doing a first class job and the Prime Minister was standing by him just as he had done the previous week, and just as he would continue to do in the following week. Except that he didn’t.
Instead, the Prime Minister announced that the buck stops with him, that he took full responsibility for everything, and that he was disappointed with his own performance. Then, he demoted Peter Garrett anyway, when the logical thing to do would have been to demote himself. After all, he had just finished saying that everything was all his fault, and the truth is that it was Kevin Rudd along with his Deputy and the Treasurer and the Finance Minister who cooked up the scheme, while Peter Garrett was stuck with the job of making it work. Perhaps Mr. Garrett might have done things differently, but most reports indicate that he acted responsibly, dealing with problems as they were brought to his attention. But the fundamental problem was with the government’s apparent inability to recognize that there was a problem at all.
By stark contrast, Kevin Rudd now seems to have no hesitation in condemning his own performance, and that of his government, in some sort of bizarre effort to win back the confidence of the public. This might be a new tactic for Mr. Rudd, but it’s not a new tactic in politics at all. The former Queensland Premier Peter Beattie did this all the time. Whenever any kind of Government scandal erupted, Peter Beattie would call a press conference, stand behind the microphones with either a grim face or a big smile, whichever was more appropriate for the occasion, and say something like, “It’s wrong, it’s not good enough, and I’m going to fix it.” And he got away with it time after time. For some reason, people actually believed him. Of course, Mr. Rudd comes from Queensland, so he would know this only too well.
The problem is that Mr. Rudd is not Peter “Hollywood” Beattie, the self-described “media tart”. Where Mr. Beattie had a talent for salesmanship, Kevin Rudd is an entirely different individual, so it remains to be seen whether this tactic will succeed for the Prime Minister. There have been reports that some senior Ministers are concerned that he might be over playing the part and encouraging broad scale condemnation of the Government, undermining what they see as a strong record of solid accomplishments. Of course, not everyone sees it that way, with a growing perception that the Rudd Government has been long on talk and short on action. In the last few weeks and months it has become increasingly popular to criticize the Government and question its competence.
Being popular is something that seems to appeal to the Prime Minister, so perhaps he has just decided to join the chorus of condemnation so that he doesn’t feel left out.
Friday, February 26, 2010
If Only I Could Find My Hairdryer.
EDITORIAL FRIDAY 26.02.10.
Hello, I’m Kevin Rudd and it’s all my fault. Now stop bothering my poor old mate Peter Garrett who has just been the meat in the old sandwich and really deserves a fair shake of the sauce bottle. It’s not his fault that shonky operators have scammed the ceiling insulation scheme. I mean, how could he have been expected to know that dodgy contractors would crawl out of the woodwork just because we offered to give away $1600 of taxpayers’ money to anyone who could show us a Bunnings receipt?
No, Peter is not to blame. He is just the poor patsy left holding the bag because we put him in charge of a plan cooked up by Wayne, Julia, Lindsay and me after a strong cup of tea and a long discussion about merchant bankers and executive salaries. Obviously those people, the ones who really run the economy, had stuffed up and we had to step in and fix up their mess for them. The important thing was to hand out money like confetti so that everybody would think that we were a bunch of cool and groovy party animals who had rescued the economy. You should see Wayne in his John Travolta disco suit.
Never mind about the loss of life, the almost 100 house fires, the 1000 electric roofs, and the 240 000 potentially substandard installations, feel the $2.4 billion party vibe in the economy. The house is rockin’. Or maybe it’s just smouldering, it’s hard to be sure unless I get up into the roof and check for myself. Either way, the buck stops with me. I’m in charge. And if anything goes wrong, I’m here to fix it. My name is Kevin, I’m from Queensland, and I’m here to help.
Now if only I could find my hairdryer.
Hello, I’m Kevin Rudd and it’s all my fault. Now stop bothering my poor old mate Peter Garrett who has just been the meat in the old sandwich and really deserves a fair shake of the sauce bottle. It’s not his fault that shonky operators have scammed the ceiling insulation scheme. I mean, how could he have been expected to know that dodgy contractors would crawl out of the woodwork just because we offered to give away $1600 of taxpayers’ money to anyone who could show us a Bunnings receipt?
No, Peter is not to blame. He is just the poor patsy left holding the bag because we put him in charge of a plan cooked up by Wayne, Julia, Lindsay and me after a strong cup of tea and a long discussion about merchant bankers and executive salaries. Obviously those people, the ones who really run the economy, had stuffed up and we had to step in and fix up their mess for them. The important thing was to hand out money like confetti so that everybody would think that we were a bunch of cool and groovy party animals who had rescued the economy. You should see Wayne in his John Travolta disco suit.
Never mind about the loss of life, the almost 100 house fires, the 1000 electric roofs, and the 240 000 potentially substandard installations, feel the $2.4 billion party vibe in the economy. The house is rockin’. Or maybe it’s just smouldering, it’s hard to be sure unless I get up into the roof and check for myself. Either way, the buck stops with me. I’m in charge. And if anything goes wrong, I’m here to fix it. My name is Kevin, I’m from Queensland, and I’m here to help.
Now if only I could find my hairdryer.
Thursday, February 25, 2010
Barnaby’s Day Of Reckoning Will Come
EDITORIAL THURSDAY 25.02.10.
Despite repeated calls from the opposition for the Federal Government’s economic stimulus program to be withdrawn, the evidence seems to indicate that any such move would pull the rug out from under the economic recovery. Much of the support has been directed towards the construction industry and the latest figures show that if it wasn’t for government projects the sector would be devastated. The December quarter figures show a significant fall in residential building, both for the quarter itself and compared against the previous year. Meanwhile the non-residential sector grew to $9 billion dollars which only appears healthy until you remember that almost $3 billion of it came from public sector construction. Without the government programs the result would have been a 16% fall instead of an 18% improvement.
Obviously, in terms of the economy and protecting employment, halting the stimulus package now would be a disaster. You only have to look at the impact on the insulation industry when the government was forced to pull the pin on the ceiling insulation program last week with thousands put at risk of unemployment and a $40 million transition package rushed into place yesterday. So, just what is the opposition on about? If they are wrong in their calls to end the economic stimulus, could they also be wrong about other things such as their warnings over budget deficit and government debt?
The short answer is “yes… and no”. Shadow Finance Minister Barnaby Joyce has attracted a considerable amount of criticism for making some apparently outrageous claims along with a couple of embarrassing mistakes. His primary concern seems to be focused on the issue of government debt, and the fear that some day it might become so big that we cannot pay it back. Ongoing budget deficits will only add to that debt, and he is right to point out that at some stage the deficit must be brought under control. If not, Senator Joyce has warned that Australia will eventually face a “day of reckoning”. In basic terms he is absolutely right when he says that “if you do not manage debt, then debt manages you.” Anyone who has ever had a credit card debt get out of hand can readily understand that.
However, the alarmist claims of Senator Joyce are also misleading. Because of the Global Financial Crisis, the federal budget would have swung into deficit no matter what the government did, and no matter who was in government. As the economy slows, tax receipts fall. As the economy recovers they will rise again. The argument against increasing the deficit in order to spend money on stimulating the economy because it would send the country into debt is a flawed one because it fails to recognize the benefits of curtailing recession and supporting the economy as it recovers, delivering growing tax receipts which will reverse the deficit in due course as part of a cyclical process.
The opposition is also guilty of exaggerating the relative size of our debt. Roughly, it’s around 15% of our Gross Domestic Product. That’s like a household with a $100 000 income taking out a $15 000 mortgage. By comparison the United States government debt is around 90% of their GDP, and their budget deficit alone is roughly the size of the entire Australian economy. The truth is that the Australian economy is in good shape, although there is still a considerable risk of being subjected to the ill effects of problems in the rest of the world, and abruptly ending the stimulus package would inflict unnecessary damage with no benefit to anyone.
At the same time, that doesn’t relieve the Government from any responsibility for having poorly managed aspects of the stimulus, such as the roof insulation scheme. It doesn’t protect the Government from criticisms that its school hall building program has been inefficient and poorly targeted. It doesn’t justify the failure of the Government to invest precious taxpayer dollars into long term infrastructure assets which will deliver value for money for generations to come. There can be no doubt that the short term quick fix of the economic stimulus has been highly successful, but the long term legacy may yet turn out to be one of regret at mismanaged programs and missed opportunities.
Despite repeated calls from the opposition for the Federal Government’s economic stimulus program to be withdrawn, the evidence seems to indicate that any such move would pull the rug out from under the economic recovery. Much of the support has been directed towards the construction industry and the latest figures show that if it wasn’t for government projects the sector would be devastated. The December quarter figures show a significant fall in residential building, both for the quarter itself and compared against the previous year. Meanwhile the non-residential sector grew to $9 billion dollars which only appears healthy until you remember that almost $3 billion of it came from public sector construction. Without the government programs the result would have been a 16% fall instead of an 18% improvement.
Obviously, in terms of the economy and protecting employment, halting the stimulus package now would be a disaster. You only have to look at the impact on the insulation industry when the government was forced to pull the pin on the ceiling insulation program last week with thousands put at risk of unemployment and a $40 million transition package rushed into place yesterday. So, just what is the opposition on about? If they are wrong in their calls to end the economic stimulus, could they also be wrong about other things such as their warnings over budget deficit and government debt?
The short answer is “yes… and no”. Shadow Finance Minister Barnaby Joyce has attracted a considerable amount of criticism for making some apparently outrageous claims along with a couple of embarrassing mistakes. His primary concern seems to be focused on the issue of government debt, and the fear that some day it might become so big that we cannot pay it back. Ongoing budget deficits will only add to that debt, and he is right to point out that at some stage the deficit must be brought under control. If not, Senator Joyce has warned that Australia will eventually face a “day of reckoning”. In basic terms he is absolutely right when he says that “if you do not manage debt, then debt manages you.” Anyone who has ever had a credit card debt get out of hand can readily understand that.
However, the alarmist claims of Senator Joyce are also misleading. Because of the Global Financial Crisis, the federal budget would have swung into deficit no matter what the government did, and no matter who was in government. As the economy slows, tax receipts fall. As the economy recovers they will rise again. The argument against increasing the deficit in order to spend money on stimulating the economy because it would send the country into debt is a flawed one because it fails to recognize the benefits of curtailing recession and supporting the economy as it recovers, delivering growing tax receipts which will reverse the deficit in due course as part of a cyclical process.
The opposition is also guilty of exaggerating the relative size of our debt. Roughly, it’s around 15% of our Gross Domestic Product. That’s like a household with a $100 000 income taking out a $15 000 mortgage. By comparison the United States government debt is around 90% of their GDP, and their budget deficit alone is roughly the size of the entire Australian economy. The truth is that the Australian economy is in good shape, although there is still a considerable risk of being subjected to the ill effects of problems in the rest of the world, and abruptly ending the stimulus package would inflict unnecessary damage with no benefit to anyone.
At the same time, that doesn’t relieve the Government from any responsibility for having poorly managed aspects of the stimulus, such as the roof insulation scheme. It doesn’t protect the Government from criticisms that its school hall building program has been inefficient and poorly targeted. It doesn’t justify the failure of the Government to invest precious taxpayer dollars into long term infrastructure assets which will deliver value for money for generations to come. There can be no doubt that the short term quick fix of the economic stimulus has been highly successful, but the long term legacy may yet turn out to be one of regret at mismanaged programs and missed opportunities.
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