A good reason to suspect that Australia will face stagflation again
Prior to the election of the Rudd Government and the usurping of the Gillard government, the Australian economy was doing reasonably ok. The Howard government had delivered a budget surplus. It has taken a very short time to see a complete reversal of this situation. Specifically, Andrew Robb points to the billions that have been wasted on a “stimulus” that was not needed in the Australian economy.
Andrew Robb, the Opposition Finance spokesman predicts that the budget deficit will be a lot higher than suggested by the incumbent ALP government Treasurer, Wayne Swan. From Swan we can expect to hear the tired old and lame excuses as to why it is necessary to impose a draconian budget. From Robb, you will hear that it is the government waste that is the cause of the problem, and not the excuses offered by Wayne Swan.
My point however, is that given the state of the economy when the Howard government was defeated, any downturn is the responsibility of the treasurer Wayne Swan, as well as Kevin Rudd and the Marxist Julia Gillard. The money that has been wasted on the school hall BER is staggering, as is the money that has been wasted on a number of other projects that were nominated in the name looking like a green frog.
When I began this blog, it was with the purpose of looking at world-wide situations that was leading me to the conclusion that what we are witnessing is a repeat of the conditions that led to the prolongation of the stagflation that hit in the 1970s. I have been looking at the prevailing conditions, and attempting to compare these conditions with those that existed just prior to the period when stagflation was initially recognized by economists in the 1970s. There are many similarities that can be considered in this comparison. In particular I am concentrating on the impact of government spending wastage upon the economy as a whole. I have looked the ongoing crises in a number of countries in Europe. The most moribund of those countries is Greece, where the people have a very real attitude problem and seem unwilling to accept the necessity of austerity measures. I have not covered the problems in the USA, and have touched on a few of the problems in Australia. My perspective is actually an Australian one, and I am specifically wanting to compare the spending excesses of the Whitlam government to that of the KRUDD/Gillard governments. At the same I want to recognize that these difficulties are indeed world-wide, just as they were in the 1970s.
At this point in time there is still one indicator that is missing when it comes to comparing the situation that existed in the 1970s to situation that we are experiencing right now – it is high wages driven by inflation. Otherwise, there are similar indicators in 2011 that we had in the 1970s. Here is a little bit of a checklist:
Socialist government – check.
Out of control spending – check.
Increasing inflation – check.
Oil shock – check.
Increasing interest rates – check.
The uncertainty that is being experienced by business at the current time is based upon things like the threat of a mining tax as well as a most unnecessary carbon tax. Fancy having to pay a tax on breathing!! The uncertainty has led to a downturn in the economy.
Australia has experienced a very difficult year with all of the flood disasters around the country. In fact the last time that Brisbane was flooded as severly as this year was in the 1970s!! All the same we Australians should not be hit by an extra tax to pay for the Queensland government not having insurance for flood and cyclone hit regions. The Federal government should have been able to find the funds via what is collected from the GST. The funds should have been found by diverting away from the expensive and wasteful NBN project.
It is my contention that the reason that the stagflation of the 1970s was prolonged was the wastage of government expenditure at that time. It is also my contention that should Australia slip into a situation of stagflation again, then it will be the same kind of government expenditure wastage that will be responsible.