Cartoon: by R May
"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts." - Bertrand Russell
It’s always amusing to hear politicians lauding the Australian economy over its AAA credit rating.
While its nice to think it hasn’t dropped below that, it needs to be remembered that this rating is awarded by the same agencies that gave AAA ratings to mortgage backed securities in the US and look how that worked out. These agencies cannot even be held responsible for their screw-ups, owing to a court decision that their advice is only expression of an opinion and therefore protected under the First Amendment.
Nonetheless, Clive Palmer seems to swallow the Kool-Aid in an interview with Chris Uhlmann on AM:
… CLIVE PALMER: …third best and we've already got a Triple A credit rating and there's only 13 countries in the world that have got a Triple A credit rating. I think all the other countries of the world would be envious of that position.
CHRIS UHLMANN: Would you like Australia's debt to GDP ratio to rise to 70 per cent?
CLIVE PALMER: I think we have to, you know, if you look historically it goes up and down and moves within a particular band. And certainly it's never been higher than 20 per cent and that's well below any other country.
CHRIS UHLMANN: Well, without repair of the budget it will rise and continue to rise, so at what point do you think it should be fixed, how many deficits should Australia run in a row?
CLIVE PALMER: Well, first of all the United States has only had 12 surpluses in 50 years. They're the preeminent power on the planet.
CHRIS UHLMANN: And France has run deficits since 1974 and all those nations are actually in huge financial strife at the moment, so should Australia try and keep this position or improve it?
CLIVE PALMER: No, they say that but I don't think that's true. You know, if we look at our unemployment rate in Australia of course we're around 5 per cent and the OECD average is 8 per cent. If we look at the amount of public spending that we spend on public expenditure, we're about half of what's spent in other countries. So already we're on a very tight budget. And I think really what you've got to look at is stimulating the economy, creating more growth.
CHRIS UHLMANN: And how would you do that?
CLIVE PALMER: Well, certainly I'd do that personally if I was prime minister by moving the reporting date for provisional tax from the start of the year and stopping companies having to pay their tax before they've made the profit, to the end of the year. Now the forward estimates said that would raise $70 billion be released into the economy. CHRIS UHLMANN: In one year. It's a once-off.
CLIVE PALMER: Yeah, and every time it circulates you get 10 per cent GST. So if it circulates say four times a year, you get $28 billion hit to the budget. Now that's similar to what…
CHRIS UHLMANN: It is a one trick pony. If what you said was true, it is a one trick pony. You can only move the date once.
CLIVE PALMER: That's right and you need once to restructure the economy and to stimulate things. Look what president Obama's done in the United States. He's no fool. He's injected $85 billion a month into the US economy, created enormous growth and made America much more competitive.
CHRIS UHLMANN: And the United States will never pay off its debt in its lifetime, in his lifetime.
CLIVE PALMER: But it'll be the preeminent economic power in the world and…
CHRIS UHLMANN: That won't be by 2020 when China will pass it.
CLIVE PALMER: Well, I don't know, you know. The situation, China is not in the OECD so we can only look about comparative countries and we don't have a transparent system in China to compare us with. …
… CHRIS UHLMANN: It certainly is but as you know without money you can't do the things that you want to do and if you are spending money now that you don't have then you are going to have to pay for it sometime and you're going to have to pay for it with interest and that will be paid for by a future generation. Is that fair?
CLIVE PALMER: That's just propaganda.
CHRIS UHLMANN: Well, no, that's absolutely true. The smiles on the faces of those children are going to be working for a lot longer and the aged population is getting larger.
CLIVE PALMER: We've got to ask you, we've got to ask you, our gross domestic product is about $1.5 trillion a year. Our debt at the moment is probably around about $300 billion so that's…
CHRIS UHLMANN: Rising to $600 billion if nothing is done.
CLIVE PALMER: Let me finish. That's about two months of our activity. Is your personal debts less than two months of your activity? That's what we are as a nation. You know, we've got debts which are less than one year of our total activity. I mean that's not difficult.
CHRIS UHLMANN: Big difference between the size of the economy and the Government's finances though, as you would know.
CLIVE PALMER: Well, not really. The Government can manipulate the economy in any way it wants to. …
Clive has no understanding of economics but knows the art of using romantic imagery such as putting smiles on children’s faces being more important than keeping the nation solvent. The grim reality is, that if we don’t stop pissing our prosperity up against the wall we will be up shit creek without a paddle and those children’s futures will be bleak in twenty years time when our debt is totally unsustainable.
His assertions on the US economy are dubious at best. More than 20% of the population there is on food stamps, employment growth is mainly in part time low paid jobs and government ones, and any fall in the unemployment rate is mainly due to drops in the workforce participation rate.
Anyone who believes that the way to prosperity is more debt will believe in the tooth fairy or the magic pudding.