A world in economic crisis

A good reason to suspect that Australia will face stagflation again

Posted in ALP, attempted flood levy, Australia by Aussie on April 20, 2011

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:

  1. Socialist government – check.
  2. Out of control spending – check.
  3. Increasing inflation – check.
  4. Oil shock – check.
  5. 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.


Comments Off on A good reason to suspect that Australia will face stagflation again

Never let a crisis go to waste

Posted in attempted flood levy, Australia, Cap and Tax by Aussie on February 2, 2011

This post is not directly about the economic crisis, but indirectly will have a link to a growing world wide situation. No I am not talking about Egypt. I will attempt to cover that situation when I learn more facts (without anything from Al Jazzera).  This is about the economic consequences of the floods in Queensland.

I have covered the floods in posts on my other blogs, so I am not talking about the stupidity of the watermelons or that of the SEQ water authority. The purpose of this post is to discuss the daring of Julia-the-Marxist Gillard to push up taxes and implement wealth distribution by stealth.

I have written elsewhere about how the KRUDD-Gillard the Marxist Government is the worst since Gough Whitlam came to power. In fact with Gillard in control it is much worse than the Whitlam government. I have also written elsewhere that I believe that we are heading towards a period of Stagflation, just like we experienced in the 1970s. Not all of the indicators are in place at this present time, but there is a feel about what is happening that is so reminiscent of the 1970s.

My research into the 1970s, which is really a refresher for me, has shown me that there is good reason to believe that high government spending has consequences and that one particular reason that we had prolonged Stagflation was the prolifigate spending over a very short period of time that took place after Whitlam won the election in December 1972.  Since KRUDD became Prime Minister and Gillard his Deputy and then after stabbing KRUDD in the back, Gillard as Prime Minister the Australian Government has been at the forefront of wasteful spending.

Australia was relatively unaffected by the Global Financial Crisis. There was no need to send out $900 cheques to taxpayers on low incomes (no one in a higher bracket received the $900). Besides the money was wasted on items that are imported from overseas.  This action depleted the budget surplus that had been set in place by the outgoing Howard Government. However, the waste did not stop there because Australia then had its own version of Porkulus complete with wasteful pork projects in ALP and marginal electorates that was supposed to shore up the government. It did not really work, yet we are stuck with Gillard as Prime Minister.

The wasteful programs set in place included the solar hot water subsidies, the pink batts debacle (this caused house fires and several deaths), as well as the extremely wasteful BER (Building Education Reform?) which has led to overpriced buildings that have feathered the nests of the builders involved in the program. Australia was also set to have its version of cash for clunkers but thankfully that program has been scrapped. Then there is the white elephant NBN roll out which is estimated to cost more than $40 billion for fibre optics to go to every house even though this is old technology and there are better Internet options available.

This brings me to the floods that have been experienced throughout most of Australia – Queensland, NSW, Victoria and Tasmania. The most devasting floods have been in Queensland, where there was extensive damage in Brisbane because of the incompetence of the South East Queensland Water Authority. The cost or rebuilding will be billions of dollars. This will hit the insurance industry.

However, the Federal Government believes it is necessary to get in on the act, to provide funds for the rebuilding that is required in Queensland. There is no mention of helping anyone in Tasmania or Victoria. This is where Gillard has been extremely devious. Instead of delaying the white elephant NBN in order to provide the necessary funds, Gillard has proposed a levy that will be placed on top of the Medicare levy. However, unlike the Medicare levy, anyone earning more than $50k will be the ones paying and if you earn more than $100k then you will pay double.

This levy is not equitable. Gillard calls it progressive. I would dare to state that rather than progressive this is very much a regressive tax because it takes a larger slice of income away from households already struggling with mortgages, high utility costs, high food prices and high land taxes plus water and council rates. It is like the straw that breaks the camel’s back and it is very much an unnecessary tax.

So let’s look at some factors as to why Gillard the Marxist was leaping for joy when these floods struck:

1. Gillard promised to bring the budget back to surplus, but by continuing with the white elephant NBN this goal was not going to be met.

2. The floods have provided an opportunity to slug “the rich” who are not in fact rich, but the envious Marxist believe that anyone earning more than $50k deserve to be slugged.

3. Gillard saw this as an opportunity for wealth redistribution by stealth.

We do not know, as yet, the impact of this proposal. What is most likely is that this proposed tax will impact in such a way that when the Stagflation hits, it will be prolonged, just like in the 1970s when Stagflation was identified for the first time, and then it was prolonged well into the 1980s.

What can we expect in the future? First of all, we will probably continue to see the rise in interest rates. Second, as interest rates rise, there will be less money available for investment. Third, as investment dries up then employment opportunities will also dry up. Fourth, we can expect higher supermarket commodity prices for fresh meat and vegetables. Fifth as a result of the crisis in Egypt we can expect higher fuel prices. Sixth, if the watermelons continue to hold sway we can expect further increases in our utility bills. Seventh, with this kind of pressure, there will be an increased demand for higher wages to cover the impact of the higher commodity prices. Eight, we will see cost-push inflation start to spiral… Then we will head into Stagflation once again.