We need a strong economy and balanced budgets to pay for the high standard of living, public services and social benefits we all enjoy.
The unprecedented fiscal stimulus response to COVID let the financial genie out of the bottle though, and there seems little interest in stuffing it back in again to get us back on track.
Our national debt will soon balloon past 1 Trillion AUD, with interest payments becoming one of our major budget items, projected above $25 Billion a year. Financial experts are starting to consider the risk that this will continue spiralling higher, with talk of losing our AAA credit rating. This would cause a further negative impulse on the economy.
“this reckless spending must stop” (said many people, including Labor’s Kevin Rudd, 2007)
Politicians love spending — splashing cash around makes them popular, gets things done, cements their legacy, and then… paying the bill later can be someone else’s problem. Wiser politicians know there are always trade-offs involved.
Past governments fought hard to be fiscally responsible, to balance the budget and live within our means. The current government doesn’t even consider this a priority, and they plan to keep us underwater for the next decade:
Anyone running a business knows how to fit expenses to a budget: e.g. cut spending, increase income or get better pricing from your suppliers. It is irresponsible to just stretch the budget to include everything you want.
Australia’s productivity (i.e. “work smarter, not harder”) has traditionally been pretty high. But has been dropping quite significantly the past decade:
You can see below a clear split between government and the private sector in recent decades, presumably as business embraces digital tools, automation and modern ways of working, while the government hires ever-more people to man the fax machines and shuffle paper forms:
Reform is needed to boost productivity across the economy, but the good news is that much of what is currently holding back our productivity can be achieved via deregulation and right-sizing the public sector. We should also incentivise high-achievers cross over and inject talent and more efficient processes into the public sector.
Part of Argentina’s remarkable economic turnaround included President Milei’s proposal to prevent politicians from referring to anything taxpayer-funded as “free”