See how the government may be forced to act in your best interest
Downloads
Irrespective of political persuasion, we believe most of Macks Advisory newsletter readers will concede there’s a good chance they could soon be beneficiaries of significant economic reform.
Why have they had to wait so long to even dream of such a thing?
Governments have so far been able to retain office by, in effect buying votes. In other words, by spending money to give people what they’re demanding – particularly voters in strategically important electorates -- governments have been able to retain office.
Till now, it’s generally been the bi-partisan view that populist politics involving endless deficits, is okay, even though voters’ acceptance of endless deficits also tends to increase demand endlessly -- all of which makes inflation difficult to curb.
Still, we have a Reserve Bank of Australia (RBA) to adjust interest rates, that allied with a properly constructed Federal Budget equipped with so-called “automatic stabilisers”, can keep inflation in check and take care of the economy – well, haven’t we?
That’s the theory of course, but all is not being taken care of properly, and both the government and the RBA are claiming or implying the other isn’t doing enough of what needs to be done in the right way to balance the economy.
Automatic stabilisers in the Budget are supposed to add to demand when it’s needed (for example, welfare spending is expanded when the economy contracts). But when it’s expanding, tax revenues can rise as company profits boom and unemployment falls.
Thus, when a government sees need to add to demand it appropriately runs a deficit. However, trouble arises when, instead of doing some of the unpopular things necessary for the good of the nation that will keep supply and demand in balance, governments opt to run ever increasing deficits.
When politicians sense people have become used to Budget deficits, they can’t resist the temptation to spend a bit more on what voters are demanding and so increase chances of retaining office?
It’s critical Budgets are in structural balance, so that automatic stabilisers can work and the economy is in the best shape in can be to handle the next external shock – be it another pandemic or something Donald Trump might do.
But that’s a tough truth to sell to voters interested only in their tunnel vision of self-interest, so no wonder Australia’s politicians don’t want to attempt it, even when the nation’s debt is a mind-boggling $1.03 trillion their grandchildren will still be struggling to pay off.
So, how might change occur?
We sense there’s a growing belief that budgetary reform could soon be forced on the current government. Obviously, voters across the political spectrum aren’t happy about the mounting cost of living and are angry that wages continue to lag behind lingering inflation.
Furthermore, increasing numbers of people are questioning why deep-rooted change that can permanently fix most of their problems, can’t be made – because it can.
Fact is, belief is becoming increasingly widespread that Anthony Albanese, and indeed all federal government politicians,, have run out of excuses for not undertaking immediate economic reform -- excuses based on ideology and/or perceived political impracticality.
For unquestionably the Prime Minister has the numbers in both the House of Representatives and the Senate to ensure essential reforms to taxation, immigration and regulations are politically practicable.
Macks Advisory cares nought for your political inclination, but we believe it’s likely you may well be one of those people fed up with being taken for a fool by policy makers who inflict on you and fellow taxpayers so- called “fixes” that not only fail to do any fixing, but actually make things worse.
For example, does any newsletter reader seriously believe Prime Minister Albanese and Treasurer Jim Chalmers didn’t know perfectly well they weren’t really fixing the housing crisis with concessions they insisted would make it easier for people to buy homes?
Clearly, they gambled that policies said to boost home affordability, would make enough gullible voters happy to solve a major political problem for the government.
Yet surely, both men must have known all they were doing was increasing demand for critically few houses, thus increasing prices and making them ever more expensive and therefore increasingly unaffordable.
There could scarcely be a worse time to do this when, only a quarter of the way through the National Housing Accord aiming to build 2m affordable homes in five years, the project is already 80,000 homes behind schedule.
In short, we foresee a groundswell of public opinion that may soon force the Albanese government to undertake significant reform that benefits the nation’s economy -- or risk serious punishment politically.
Why we are as we are
Politics have always been ideological, and people sharing a common view of how to better the world, have always tended to stand together – which generates problems for governments because:
- Ideology tends to override pragmatism and evidence when it prevents people from seeing only one solution to an issue, thus obscuring their view of superior options.
- Too often policy becomes the servant of politics, and politicians will promote bad policy confident it’ll be popular yet knowing it won’t be good long-term. (While the government was saying housing affordability would be boosted with its First Home Buyers Deposit Guarantee, the Coalition was urging people to access their superannuation to buy a home – both obviously bad policies because both would increase prices, making houses less affordable, particularly for people most in need.
We don’t think pessimists can justifiably dismiss our optimism about change as sounding too much like Pollyanna, because history shows us that while politicians can fool some of the people some of the time, they can’t fool all of the people all of the time.
We therefore wonder how many Australians for how much longer can be fooled into accepting that a growing national debt, now at a staggering $1.03 trillion, can be a good thing for a country of only 27.49m people. Macks Advisory is even optimistic enough to believe we may all see, for reasons we’ve canvassed, some of the changes referred to above, delivered in the next Budget.
