The Opposition’s accidental new best friend, Chris Richardson, economist of Deloitte Access Economics has suggested that a budget surplus may not be such a wise idea given that Europe’s economic outook is somewhat fragile, though not entirely horrific. The suggestion did not come with any criticism of Wayne Swan, in fact, the contrary.
Access said it did not expect a disaster in Europe, but if there was one the government should be prepared to spend to stimulate the economy as it did during the global financial crisis. “For all the unpopularity of the stimulus spending, it did its job very well. Please don’t let populism derail a new stimulus if we need it.”
This followed his earlier point that:
. . . the economy has already weakened and events in Europe hold out the prospect of it weakening further. I don’t think that tightening into that fragility would help the economy.
In other words, interpret it as this: forget about the suplus.
The Opposition interprets things a little different (with a large dose of derailing populism). This proves beyond doubt that this Government has no intention of ever returning to a surplus. Let’s hear what Joe has to say.
“Labor can’t deliver surpluses, it’s not in their DNA,” he told ABC Radio, pointing out the last surplus delivered by a Labor government was in 1989/90.
“Whilst they lecture the rest of the world about fiscal austerity, they fail to undertake it themselves,” he said.
I don’t think that’s what Chris Richardson was suggesting, but it’s easy to see the Opposition’s reasoning. Europe is in trouble, stimulous spending at home is not to be ruled out according to an independent source, therefore Labor is bad.
With Wayne Swan being equally as adamant that there won’t be a deficit as Joe Hockey is in his huffing and puffing that there will be, I like what Richardson had to say about the politics of the issue.
Mr and Mrs Suburbs think a dollar in surplus means you’re a genius, and a dollar in deficit means you’re a dunce. Politicians of both sides have played to that. They should back off.
And that’s what we’ve been drip fed. A surplus is good, a deficit is evil.
One of our contributors, Mangrove Jack commented on our recent Tax Forum thread that:
- a deficit is a totally imaginary boogey man that neo-liberal economics uses to frighten people. It wasn’t all that hard to do as we’ve been culturally primed to shiver at the very word. But at the end of the day it’s just a number. If the government chooses to issue “debt” in the form of bonds to equal the deficit, fine, that’s just an asset swap for the private sector, and the stream of dividends further stimulus, but operationally, it doesn’t have to. But everywhere we have conservative governments pushing this surplus nonsense. They seem determined to push their economies to the edge of the 1930′s precipice.
- when the economy has spare capacity . . . it is absolutely essential for the government to keep injecting money into the economy to keep the ship afloat.
Following the ‘reassuring’ announcements from all sides of politics today, I think Mangrove Jack offers a bit of sanity to the topic. Chris Richardson would agree. How do you see it?