Monday 9 September 2019

ScoMo does not understand basic economics

Leigh Sales asked Scott Morrison a good question. He clearly did not understand it.

On a very basic level the government now has a surplus. It is taking money out of the economy. In very good times this is good as Keynes said in 1936 as it is offset by the private sector. however this is not occurring at present.

The RBA is doing as much as it can but cutting rates when they are already low aint going to do much. Phillip Lowe has repeatedly called for more Infrastructure spending.

Now we know here it is not the overall deficit/surplus that makes a difference to changing the economy but the Structural deficit/surplus. Se Here and Here for example.

Lowe is implying the changing in the structural budget deficit is not enough to boost the economy.

Interestingly Chritoph Boehm has written a very interesting article where he n makes the point public consumption not investment has a greater multiplier effect.  I leave that for the moment although one would expect greater economic benefits if the infrastructure projects were on the list of Infrastructure Australia's list of priorities which only TWO are..

I have said previously also the government is hoping It can retain its surplus ( most economists would say it is merely balanced being less than 1% of GDP)  and somehow the economy recovers.  This might happen but then again the recovery could well be tepid.

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