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teonanacatl

Australia's national debt

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So I hear it always thrown around in politics about how in debt we are as a country- a scary concept when one actually thinks about it.

So I thought Id look it up.

Graph from wikipedia (good enough for me)

http://en.wikipedia.org/wiki/Australian_government_debt#mediaviewer/File:ABS-5232.0-AustralianNationalAccounts-FinancialAccounts-FinancialAssetsLiabilitiesNationalGeneralGovernment-AmountsOutstanding-ChangeIn.NetFinancialPosition-TotalCounterpartySectors-A3425093R.svg

Of recent times every significant increase in debt appears to be correlated with labour in power, and every decrease in debt with liberal? For example liberal gov 1996-2007.

Whats your thoughts?

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My thoughts are:

  • correlation =/= causation
  • the reduced public debt under the last Coalition Government (Howard) was due to the rise of China and not good management by the Coalition
  • the Australian economy at the time of the Howard Government wouldn't have been able to take advantage of the rise of China if it weren't for Gough Whitlam establishing diplomatic relations with China back when Labor was in power (the Coalition opposed this because communism). The Keating reforms also helped, but they did weaken the union movement which was a big mistake in my opinion (because it put a break on wage increases).
  • that Howard's pork-barrelling tax cuts during the good times are the reason why Australia is now facing a structural deficit (i.e. the Government isn't collecting enough tax now that the economy is slowing down)
  • that the last Labor Government was unlucky that they had to deal with a Global Financial Crisis. Increased public spending (i.e. the stimulus package) was essential for keeping the Australian economy afloat. Economists consider Wayne Swan to be a bit of a hero for keeping Australia out of recession.
  • the structural deficit isn't urgent in the short term but needs to be addressed in the medium to long term. This should be done by closing loopholes in Australian tax law and by making sure corporations pay their fare share of tax. Increases to the GST won't do anything to reduce the budget deficit (that money goes to the State and Territory Governments).
  • The biggest threat to the Australian economy in the short-term is private debt. According to our current PM, "high house prices are a good thing". That "good thing" is hurting the Australian economy.
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lnp sold telstra worth some $40b+ plus all the gold ( at firesale prices) plus they had the best economic conditions in the mining boom pt1 and that all adds up to budget surplus

but don't confuse a budget surplus with good economic management, and certainly don't associate the lnp with superior economic skill just because, look at the current budget, blown out by some 30 billion since hockey came into power and they're still giving away tax breaks,

the bottom line is the lnp only came into the "liberals is good for the economy" farce because they sold all of australias assetts and had the best economic conditions in history which had nothing to do with them, you watch at the end of their term australias economy will be in a plenty worse state thatn when they took over

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Thanks guys figured there was much more too it. The idea is still pretty scary! Pretty scary how fast it is increasing and the levels its at in some countries.

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just remember when people say "debt and defecit" hockey plonked $9Bn on the reserve bank, restored the super tax offsetts for high income earners which stacked 3+Bn onto the budgest, and restored the fucking novated lease tax rort which added another 2+BN to the defecit. hockey is literally the worst treasurer in history because he consistent;y make terrible decisions in the face of harsh economic news, it's as thoug his blind partisanship prevents hims from making any sound decisions at all, i don't want to do away with democracy but hockey in charge of the economy is really the cause for me to say hey maybe a technocratic elite will be best? someone who wont just throw away billions of dollars to their mates?

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Didn't world bank recently say to the govt they could borrow some stupid amount of money at almost zero % interest due to our great credit rating?

We have one of the best credit ratings in the world overall..

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choice-supportive bias is the tendency to retroactively ascribe positive attributes to an option one has selected. For example, if a person buys a computer from Apple instead of a computer (PC) running Windows, they are likely to ignore or downplay the faults of Apple computers while amplifying those of Windows computers. Conversely, they are also likely to notice and amplify advantages of Apple computers and not notice or de-emphasize those of Windows computers.

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Haha PC/windows has advantages? :P

Totally get where you're coming from.

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I don't understand why anyone thinks that debt is OK if there is no plan to pay it back.

I'd prefer to live in a country with zero debt than in a country with any debt. Any interest paid on the debt is money that could be better spent on anything other than debt repayments.

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I'd be more concerned about the private debt ponzi scheme / serfdom and people spending stupidly on unproductive assets such as housing, contributing to a diversion away from investment in productive industries.. Especially when mining is tanking hard. In short, Australia is boned.. and good. I hope the whole fucking thing collapses. It's disgusting in this country. There's absolutely no appetite for risk. Instead, we just bid up houses hoping to get rich off passive income streams without any true innovation. Previous and current government policy is partly to blame, of course. Seeing Hockey attempt to apply austerity measures in an economy that's tanking is such a fucking joke. Renewables - trashed, NBN - trashed. I'm no economist, but god damn it's clear as day what a stupid move it is. It seems we're slowly moving toward something resembling neo-feudalism.

Fuck I sound negative -- probably from spending too much time on Macrobusiness and Zerohedge. Oh well. Anyone want to chip in and buy an island somewhere away from the mess?

Edited by goneski
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Its the amount of interest paid that gets me too. Then there is the non-essential spending that blows it out further.

I wonder when any of this will come to ahead. Been reading about no-growth economies and its refreshing to read there is people with a similar view.

Im keen on an island. Plenty of big ones out there!

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Worth mentioning although i probably have previously but most of the high bracket tax cuts, reverse negative gearing etc directly affect the career politicians, most of the lnp front bench net worth as individuals is easy over a couple million each abbot, hockey, turnbull etc - the new nobles lol definitely seems like sorta twisted form of neo-feudalism in a way and plenty of statistics to support the growth of inequality, it is worrying to think about the direction these people envision for society. England is a good indication though of this kind of ideology driven policy spewing from the tories - thatcher/cameron etc the privatization of the public sector, massive funding cuts, deregulation of education etc. The riots were generally blown off and denounced as an aberration of sorts and it certainly was a raw expression of the inequality and hopelessness young people feel towards what is perceived as unjust. Sometimes i assume thats what the association and protest laws are about preparation to stifle potential grassroots movements which could instigation reform

Isnt the idea to run a deficit especially in a recession to keep the economy chugging along? more so thinking of infrastructure investment

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http://www.dailytelegraph.com.au/news/nsw/pm-tony-abbott-orders-treasury-squad-to-force-immediate-sales-on-foreign-property-investors/story-fni0cx12-1227219181011

What a fucking joke. The FIRB have done NOTHING for years, now Abbott will make some half-arsed attempt at fixing the issue with foreign property investors and enforcing existing regulation. Why would they make any proper attempt when Chinese with funny money are fleeing the mainland in fear of a crash in China and propping up Australian housing prices? Unbelievable.

Of course they'll want to keep the property ponzi going by selling the land out from under our feet and further locking potential first home buyers out of the market. Especially when, as -YT- mentioned, politicians net worth is quite high and a lot of that seems to be tied up in property.

This country has gone completely mad. As I've said before, the nihilist in me wants the whole thing to come crashing down hard. It may be painful now, but I think better off in the long term. What's the alternative? Further inequality and the decimation of the middle class? The more the bubble inflates, the worse the end result. Everyone has this 'fuck you, I got mine' mentality and expects to make capital gains from a bad investment by being cheered along by the government through hopeless policy such as negative gearing.

BOTH major parties are responsible for this mess, so I won't unfairly target the LNP, but I'm more just speaking in context of the current party with 'news' that's coming out now and the pathetic attempt at paying lip service.

End rant, as I'm going off on a tangent again related to private debt.

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