Sunday, 2 June 2013

Is this an example of Goebbels or Forest Gump?

At Catallaxy today we have Henry Ergas ,as one might expect, attempting to portray the Structural position of the budget  as being all the ALP's fault.

Now at first glance our 'Enry does not appear to understand basic economics.

The structural deterioration started near the turn of the century. Guess who was in power. Moreover times were good and getting decidedly better as the commodities boom impacted Australia.

This meant Australia should have aimed to have larger and larger structural surpluses. Instead the government chose the latter. I did not hear Our "Enry" or any other of the other Catallaxy crowd criticising the Government back then. Indeed they didn't recognise any problem at all.

The Government allowed fiscal policy to become more expansionary each year as the output gap narrowed and then vanished. We then got the inevitable higher inflation and this higher interest rates to compensate.

Comparing average structural surpluses/deficits of respective Governments is nonsensical. It explains nothing and doesn't tell us anything.
One thing that does help us is know whether it expanded and whether it is narrowing.

We know it expanded under the previous government and is narrowing now.

We do know the major reasons for the structural deterioration. They are the decision concerning petrol excise and the biggee cutting personal income tax and relying on greater company tax ( courtesy of the commodities boom) to compensate for this.

Thus at the very time the public sector should have been attempting to detract from growth it was in fact adding to growth.

Now  if you wish to bag the ALP a quite valid criticism would be they did not attempt either in Opposition to oppose such irresponsible measures or in Government when they could have actually done something. They merely went along with all this fiscal rubbish.However Our 'Enry doesn't say this at all.

So dear Reader is his piece a masterful goebellian piece designed to stir up his fiscal ingnorami at the OZ and Catallaxy or is it he has no idea of what he is writing about and is in fact an idiot?

You decide as I couldn't possibly comment.

(He does have a delightful wife though)!