Last week's offering listed Australia's ten unsustainable trends. As promised, today we offer a list of how to fix them. Difficult? Certainly. Impossible? Not if we wish to avoid a deep and damaging recession, which is the old-fashioned way to fix unsustainable economic trends.
1. Unsustainable growth of government debt
Implement serious program of productivity increase, using current lists provided by Productivity Commission, Harper Review and the work of Industry Group headed by Richard Morgan.
Increasing Australia's productivity will help make other issues easier to deal with. It will create a self generated boom that could rival the recent mining boom, and make the budget deficit shrink way faster than now imagined.
Turn budget deficit into a surplus by mix of spending cuts and tax increases.
2. Household debt by 2020 will be of the order of 2 times household income.
Raise GST, make it broader (eg 15%) and without exceptions.
Cancel negative gearing of investments in houses. Reduce degree of income tax discount for capital gains.
Government promote benefits of self sufficiency and saving rather than spending.
3. Falling numbers of full-time jobs and increasing numbers of people who declare themselves underemployed, with wages barely growing.
Reduce immigration, leaving more jobs for people already here. However, we must leave the door open for people with skills now available here.
Improve education system with focus on employability of graduates and certificated tradespersons.
Eliminate penalty rates. Australia needs to work 24/7 if we are to compete in a tough global marketplace.
Cut company tax, especially for small companies. (Done!)
Government promote benefits of self sufficiency and hard work.
4. Uncontrolled increases on housing prices in Sydney and Melbourne.
Impose tax on capital inflow. Or on overseas buyers of Aussie houses and other existing assets. Allow free capital inflow for projects that create jobs and exports
Reduce immigration, leaving more houses for people already here.
Cancel negative gearing of investments in houses. Reduce degree of income tax discount for capital gains.
Government to encourage Reserve Bank to raise interest rates and to discuss risks of financial instability with financial regulators.
5. No realistic prospect of reducing debt to manageable levels with existing policies.
Government to begin discussion with people about whether they should be aiming for a tiny surplus in the deficit or a substantial surplus when current crisis is over.
Keynes is frequently misquoted. Keynes recommended balancing budgets over the cycle, meaning budget surpluses in the good years
Government add plan to create a serious Sovereign Wealth Fund when its budget is next in surplus.
6. No apparent way to avoid expensive and unreliable electricity in coming 5-7 years.
A viable national plan is needed. This must allow for national or regional distribution and reliable base load capacity.
Governments to explore modern 'clean coal generating option, create new gas-fired generators and hydro plans and explore battery storage.
Federal government should plan for nuclear generation and begin dialogue with voters about this.
7. No apparent way to avoid sharply rising costs of living for ordinary Australians.
Governments should explore ways to increase competition and fix rorts in current electricity generating business and other monopoly enterprises.
See point 1 re productivity increases,
8. Rising cost of debt servicing by governments will limit necessary spending on defence, border security, welfare, education and both national and regional infrastructure.
Get serious about fixing budget mess, if necessary via a political agreement with Labor (or a coalition of cross-bench Senators) to solve a problem that must reflect different aims about the detail of budget reform.
Note in point 1 benefit of productivity increases.
9. Equity between states has become unacceptable.
Compare WA's GST rebate with that of the Northern Territory. Plus allocations of Federal handouts for infrastructure spending. Make allocations far more equal on per capita basis.
1.10. Unworkable degree of national political cohesion severely limits any government's ability to govern.
Devote serious time and energy to reaching political accord with Labor (or a coalition of cross-bench Senators) that increases productivity (see point 1) and restores a balanced budget as quickly as possible.
Comments.
This list is guaranteed to fix Australia's unsustainable trends. In the process we shall become an economy admired by policy makers everywhere.
Readers may think this set of policies would be impossible to achieve.
The alternative is a deep recession which does great damage to most Australians.
Please Mr Turnbull use the Easter break from politics as usual to think carefully about this list.
Kulture
”To truly flounce a petticoat with authenticity one needs to involve the flashing of eyes, a panting and ample cleavage and the stamping of a shapely foot.” Fiona Prior appreciates this dying art when she enjoyed Bizet’s Carmen, Handa Opera on Sydney Harbour. More here.
The Sporting life.
Great set of AFLM games this weekend, with Collingwood vrs Sydney, Adelaide vrs Port Adelaide, and Doggies vrs Freo making compelling cases for watching. Gary Abblett starred to lead the much derided Suns to a glorious victory over Hawthorn.
One hopes that today's Caaaarlton! vrs Essendon will be equally exciting and is won by the Blue boys by one point thanks to a 60 metre goal by Casboult after the final siren. (Stop press: Caaaarrlton! won in a blinding rainstorm by 2 goals and change. Wonderful, gutsy performance by a young side, including a teenager playing his first game.)
From all accounts Rugby League was equally exciting.
Henry failed to find Davis Cup on the box. Note for Fox Sport - on yer bikes, mates. (Again good stop press news - our great 4/1 win over the mighty American tennis team.)
Image of the week
Image of the week