Re the two letters below published today, the second speaks for itself. The first attempts to provide an interpretation of both the short and longer term implications of the budget.
Please note that, while I support the move to a surplus, I do so not for short term Keynesian reasons but for the longer term commitment by Labor and the Coalition. I note, however, that in his address yesterday to business economists Treasury Secretary Parkinson argues that Keynesian action in 2008-09 was appropriate because Australia had low debt. He also acknowledges that the forecasts for 2012-13 include some allowance for a contractionary effect on activity from the budget, but does not say how much.
Des
Swan’s most contractionary budget ever
letter published in The Australian Financial Review, 16 May 2012
A lot has been said about Treasurer Wayne Swan’s “Labor budget” and Coalition Leader Tony Abbott’s reply. But writing as a former deputy secretary of the Treasury, at least two important aspects have been missed.
First, while there is disagreement about budgetary components, both sides seemingly accept budgeting for a surplus in 2012-13 that in Keynesian terms reduces the federal government’s net contribution to demand by over $40 bn, equivalent to an enormous three percent of GDP.
Measured as such, this is the most contractionary budget ever and the 4.3% reduction in real expenditure is also the largest ever.
A comparison is with Labor’s claim that the “stimulus” equivalent to four percent of GDP in the 2008-09 budget “saved” Australia from the global financial crisis. But GDP per head then fell and perhaps that failure of Keynesianism persuaded officials compiling GDP forecasts that they ignore the current contraction and forecast growth at a fractionally faster rate in 2012-13.
Even so, the recent poor forecasting record adds to doubts about whether that forecast’s strength has taken sufficient account of the relatively low levels of business and consumer confidence, the associated uncertain effects of various government policies and of continued turmoil overseas.
Second, Swan’s promise to budget over the next four years for a surplus and to limit real spending growth to 2 per cent a year (on average) is an important commitment by Labor. With the Coalition also promising surpluses and small government it indicates that under either major party government spending would fall slightly (relative to the rest of the economy).
Potentially this also suggests a more stable role for government in Australia and, consistent with the increase in average real incomes per head of about 90 per cent since the mid-1970s, a move to greater individual self-reliance and less dependence on government.
Des Moore
Institute for Private Enterprise South Yarra Vic
Predictions of climate doom have been heard before
letter published in The Australian, 16 May 2012.
(Heading applied to 4 letters.)
[Square brackets are changes by Ed]
Your report on the Climate Commission’s astonishing report on temperatures in NSW raises further serious questions about the credibility of believers in the dangerous warming thesis (“Only two sets of data does not a hot summer make”, 15/4) [While those who are sceptics would welcome more such reports,] the time has surely come to wind down this body.
Your editorial claims “a majority of scientific opinion says human-induced carbon emissions are contributing to a warming trend”. That is true but misses the point. The question is whether a majority believe action needs to be taken by governments to reduce emissions of greenhouse gases.
Since the 2007 report of the Intergovernmental Panel on Climate Change [and Climategate] it is quite likely that the majority of scientists would now reject the dangerous warming thesis. In the US 31,487 scientists, [including over 9,000 with PhDs,] have now signed the Petition Project which rejects it specifically, and increasing numbers of peer-reviewed papers either do so or seriously question it. [The time has surely come to expose such analyses to a wider audience.]
Des Moore,
South Yarra Vic