Deficits

A special question was inserted in the latest Newspoll. It found that 56% of voters would be concerned if the federal budget were to go into deficit, as a result of further government spending in the new year. Women (64%) were the most skeptical about deficits, while men (50% for deficits versus 47% against) were less skeptical.

Its all in the wording of the special question about Newspolls finding.

I wonder what the communitys degree of concern would have been if they were told that the Governments failure to run a sustained deficit in at least one or two years, while still running a healthy surplus over the economic cycle, would have dire consequences for the unemployed.

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Ken Lovell
Ken Lovell
13 years ago

Fred by the time the neanderthals in the populist media have finished with it – possibly urged on by an opportunist opposition – 56% of people will agree that running a deficit somehow caused the unemployment.

After all, no less an authority than the NSW premier already seems to believe that running a deficit will cause a recession.

John Greenfield
John Greenfield
13 years ago

This poll should make us all feel proud to be Australian. It shows a highly literate and educated electorate that knows deficits must be paid back in the future. So before a government goes vote-buying, it knows that even though the electorate might not be aware of all the pork-barelling (a la the breeders bonus), but once the D word is mentioned, all those Howard Battlers who voted for Rudd will be far better equipped than their Useful Idiot parents were in Whitlam’s day.

Michael Kalecki
Michael Kalecki
13 years ago

JG’s comment is nonsense.

A budget can go into deficit simply because of automatic stabilisers if economic growth slows. This is what is going to happen next budget.
This is entirely different to a Government increasing spending to boost the economy.
Howard had a structural deficit of $8b in a commodity boom so we have a good guess of how big the cyclical surplus was.

IT is entirely ironic that Keynes in the General theory only said to use Fiscal policy ( ie a structural deficit) hen there was a liquidity trap as monetary policy then became impotent.

John Greenfield
John Greenfield
13 years ago

The chances of any comment I make being nonsense are precisely zero, res ipsa loquitur.

My dear, you would do well to consider the subject of my comment. And that subject was the Australian people who respond to the type of survey, which is the subject of this thread.

I hope this helps.

Michael Kalecki
Michael Kalecki
13 years ago

yes the comment shows a complete lack of understanding of how a budget gets into deficit.

It helped.

John Greenfield
John Greenfield
13 years ago

Perhaps. OR it might say – as is my position – “OK, we’re sceptical, so sell it to us and see if we buy.”

Patrick
Patrick(@patrick)
13 years ago

I think the Cth should run a deficit to bail out the States – in exchange for making them scrap, as of 31 December 08, all the ‘nuisance’ taxes.

+ special condition for NSW to toe the line on the Murray-Darling.

Carpe diem, as it were.

John Greenfield
John Greenfield
13 years ago

Patrick

As a deficit-sceptic I would buy that argument.

Fred

Australia does have a few “only(ish) country” cards up its sleeve at the moment, which must be irresistible for Rudd to play as he jets hither and thither. But Swan’s case is different. At present all he is doing is highlighting Howard/Costello’s ‘achievements’ without leveraging them to his own political advantage.

If Swan is being disingenuous in his ‘No D-Word’ rhetoric, then he is a tool and a fool. If he thinks deficits are inevitable and/or a good thing he should either say so right up front or resrve judgement NOW!, not come out swinging with ‘Never Ever’ nonsense.

With this unbelievable political capital they have, squandering it on lies and consequently flip-flopping and/or dithering is a really bad look and just plain dumb.

Mr Denmore
Mr Denmore
13 years ago

It is patently obvious that the media – The Australian in particular – is exploiting popular misconceptions about the budget to play political mischief.

Most market economists, the Reserve Bank and outside observors have said that it would be entirely proper for the federal government budget position to move into deficit given the unfavourable economic circumstances.

Yet it became an article of faith in Australia under the Howard government that budget surpluses somehow were a cause of our economic strength, not a result.

Now we have this silly nonsense where the press gallery, in its usual transparently stupid attempts to get a ‘backflip’, ‘gaffe’ or ‘gotcha’ headline, is trying to get Swan to admit a deficit is likely.

And Swan, knowing he is on a hiding to nothing and that an army of spotty opposition nerds are on his case, is forced to play along with this charade.

The mainstream media in Australia is a disgrace.

Francis Xavier Holden
13 years ago

Stupid question.

I’ll be concerned if the govn. runs a deficit.
I’ll be concerned if they run a balanced budget.
I’ll be very concerned if they run a surplus in the current climate.

I’m nearly agreeing with homer.

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Nicholas Gruen
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Nicholas Gruen(@nicholas-gruen)
13 years ago

Fred,

That’s why I’ve been advocating more independence in fiscal policy for over a decade now. But you want more democratic fiscal policy. Why complain when you get it?

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
13 years ago

Fred,

I’m not sure why the bank would have to pick a suitable fiscal policy once a year. It doesn’t do that with monetary policy.

The problem with not trying to build institutions to mediate democratic fiscal policy making is that the political incentives around fiscal policy are perverse because of long lead times (same story as monetary policy). Thus Jeff Kennett built a large surplus which was of benefit to his successors. And John Howard sought to learn the political lessons from that – which involved spending as much of the surplus as seemed possible without triggering inflation and associated rises in monetary policy. In fact he took too much of a risk on that side – and landed his successor government into what looked like a nasty period of inflationary pressure. Then the global economy collapsed and the problems are all different. But Howard’s fiscal policy managed to pass significant problems onto his successor.

Of course you may be right that the RBA did the wrong thing in raising rates (ex ante that is, obviously it did ex-post). But such mistakes get made. Generally they’ve done a damn good job since the recession we had to have.

Niall
Niall
13 years ago

I never cease to be astounded by the apathetic ignorance of the general public on issues of importance.

Tel_
Tel_
13 years ago

A budget can go into deficit simply because of automatic stabilisers if economic growth slows. This is what is going to happen next budget.

Given Rudd and Swan’s recent comments, looks like the correct prediction prize is hereby awarded. I was expecting them to take maybe a year or so longer to go into deficit. Not that I really believed Labor’s election hype, but I thought they had managed to convince themselves it was true.

And John Howard sought to learn the political lessons from that – which involved spending as much of the surplus as seemed possible without triggering inflation and associated rises in monetary policy.

He did trigger inflation, but was canny enough to hide it under bubbling asset prices, especially houses which are slow to convert into cash.

+ special condition for NSW to toe the line on the Murray-Darling.

Why stress about NSW? It’s Queensland who have all the water. Then again, they also have most of the rainfall so it a way it is rightfully their water to begin with.