Well said Mr Stevens

I don't disagree with you but imagine the world of hurt we would be in if the attitude in Canberra was "moooaaarrrrr debt" rather than scare tactics. Do you really trust those jokers with an open cheque book? At least the scare tactics are keeping a lid on it somewhat for now.

 

Imagine how much better the situation would be if everyone wasn't so childish and adversarial? We criticise their behaviour but is the general public all that much better? Do most people even consider what's better for the country or society vs a pure selfish look at everything? Anyone doing the latter while whinging about politicians with the snouts in the trough etc needs a good long hard look in the mirror and maybe a slap
.

 

I like where you are going with that. Personally I am all for dictatorships!

 

Largely true, but as interest rates fall people may be willing to buy IPs on lower and lower yields - if you're prepared to take a $10K NG hit, as interest rates fall you can afford to pay more. Given MT's enthusiasm for people buying IPs that are NG at today's rate, if rates ever get back to what we have always considered to be normal, there's a fiscal time bomb waiting for the government as NG claims explode.

 

I'm in agreement with Mr Stevens.

 

Doesnt matter how low rates get - you cant borrow more because of lower rates. I wish readers of the forum would get this into their heads - there is a floor under assessment rates now. Lower rates do not equate to improved borrowing power at 99% of lenders

 

Yep. I never understood why any person would bother to become a member of a political party. No political party has all the right answers, and I definitely do not agree with all policies of any one party.

For me, supporting a party in voice or money is silly. Support lobby groups - then your voice and money are not compromised. They only need to focus on one thing, and don't need to come up with a BS platform on a range of topics.

Cheers,
Inertia.

 

NG is not the problem you make it out to be.

The problems have been accurately described, look at the census, the media and the government are engaged in a 2 day circus of punch and judy, they all just cannot get on with things. This is the problem, all hot air and stymied action at every turn.

It is almost like they all invite the sideshow so as to stall having to do anything real, and for the easily predictable point scoring childish bickering.

 

That would be good if it wasn't all the Labor legacy policy that had caused that. Labor's parting blow to the country was to pass a whole bunch of wasteful legislation that basically cooked the next government.

I say that as someone with zero time for Turnbull or this Liberal party but the facts are the facts.

As for the original post... there is one massively glaring difference between household and corporate debt and the government debt and that is the incredible difference in waste.

A household takes on their absurd debt levels to buy a house to live in. A capital investment in their future.

Corporate debt is used to grow their business, again a capital investment in their future.

Compare that to government spending... 34.4% goes on welfare, a monstrous blackhole that continues to grow because gutless government after gutless government hasn't got the integrity or the balls to stop it. 7% on goes on public services. 6.5% goes on Defence wasting, sorry I mean spending.

0.3% goes on capital investment. 4% goes on community infrastructure. 24% at least goes on health and education, though 16% of that is absurdly on health so even that is an incredibly wasteful area.

I'd be all for a competent government that I had any faith in borrowing in the current economic environment to fund genuinely good investments. We don't have a remotely competent government in place and their intentions so far have been to basically increase the above waste with no intention to actually increase the areas that would create economic growth.

When the government shows a clear intention to massively reduce welfare spending, then we can justify the idea that they should borrow money at any higher rate than they already are...

The government is the equivalent of that Gen Y kid everyone on here wants to complain about maxing out a credit card and spending their house deposit on travel and alcohol. They have no self control, no care for the future and just waste money. Sure it would be nice if they'd get their **** together and save for a deposit and buy a good investment but after 10 years of proven growing incompetence, do we really want to encourage them to take out more loans to dig the hole deeper?

I also agree fully that monetary policy has run it's race and is dusted and that good fiscal policy is the solution. Let's start with adequate fiscal policy though instead of this indulgent age of entitlement that we keep feeding by refusing to do the hard choice that might not be popular. Sick of popular politics, maybe it's time we enforce single term politicians so they aren't making their choices based on getting re-elected and instead do it for the good of the country.

 

• Nothing extra-ordinary expected with the current election outcome and the eclectic bunch in the parliament. External circuit breakers might provide some action beyond populism: Credit rating downgrade, Basel IV requirements, Trump...
  
• Monetary policy will test its fast approaching limits and fair share of contradictions:
  • Politicians vs Banks vs RBA vs APRA/Basel

 

Middle class welfare is the surprising cost, but they always screw the most vulnerable when making changes.
Should be means tested.

 

We need to use the appropriate language. Stop calling it debt and start calling it leverage - it instantly shifts thought from negative to positive.

 

Government is not there to make money. They are there to spend it.

 

Makes me sick - middle class families getting more than disability.

 

Great idea - policymakers on a high level have been talking about since the beginning of the decade. Read any G20 statement over the last 5 years and they'll have some reference to this idea.

Practically speaking - there has to be a greater sense of realism in this and making it less pie in the sky stuff. Some of this is very much happening - go for a drive around NSW and you'll notice a massive infrastructure investment is happening.

If valuable, economically efficient projects are available to be completed in a practical way, its usually not 'funding and finance' as what stops it from happening. Politics/degree of difficulty is one large impediment getting in the way, particularly given its vested interests and incentive structure, but its usually other reasons than purely finance.

Simply, the return on any investment needs to outweigh the cost of doing it. For businesses, for individuals and for governments. As an example - building a mega rail system from Brisbane to Melbourne sounds amazing, but with a massive cost of doing it your going to have $1000+ tickets to make it viable, while flights go for $99. Doesn't make much sense.

 

Stevens made it pretty clear he was talking about money being borrowed for infrastructure exclusively, not to fund pensions etc... That's what we are talking about here. Perhaps all funds raised could be quarantined in a fund such as the future fund, call it the infrastructure fund if you prefer .

So it comes down to this. Should the Govt issue 20 and 30 year bonds where they can raise debt at mid 2% , for the funding of large infrastructure projects which over the next decades will allow Australia to grow new industries, grow its population and therefore its tax base, etc? ?

 

In theory, I absolutely support this.

Under our current government though, no, we shouldn't be because even when they spend on infrastructure they completely waste and mess it up.

Look at the NBN, probably the single most important piece of future infrastructure in the countries history and our current government has butchered, chopped, and ****** all over it and turned it into the worlds most expensive 3rd world internet network by planning. The amazing part is that they've managed to completely blow out the cost of the thing with woeful planning AND outdate it before it's even half finished. Like normally at least when you overspend you end up with a better product at the end, this government has managed to double whammy of extreme waste and inadequate technology, a pretty awesome effort.

NBN is just one of many different projects that have been ruined by our governments of late. Heck the high speed rail that @Redom mentioned above is another perfect example. The Australian version that has been planned is budgeted at 200 billion and 30 years to build. India is building a similar rail for $18 billion in 7 years. Thailand is doing similar for $8 billion. Vietnam is building nearly twice as much rail for $56 billion. There is just no excuse for us to be planning to take 4-5 times longer at 20x the cost, it's just pure ruthless inefficiency and waste at play.

I'd love if we had a government where I thought expanding fiscal policy was a good idea, it would be so nice but we've got governments more interested in buying votes and lining pockets of themselves and their cronies than the good of the country and I don't see how borrowing from our future to further that cause is a responsible recommendation right now. Until we fix the government we should be focusing on reducing the expenditure and fixing the debt problem. The positive is that until we fix this ******** of a governmental system we won't have to worry about rates going up because they'll keep the economy in the doldrums.

 

How can you compare asian countries spend with that of ours, are you volunteering to work for ten bucks a day for example ?

They could go back to what they did in the Snowy hydro, take in migrants that will work (not go straight on welfare) to work on these projects for x years.

Anyway, all academic, our system won't change till there is crisis, most people vote for handouts and self wants, not for national interest.

 

And 10 lives per 100 km. OH&S isn't a priority. People talk about being competitive with Asia, but there is a human price to pay.

 

It shouldn't be the same, obviously, but it should be far more comparable than it is.

Take the Indian one, let's assume they pay literally zero for the labour to produce it, slaves so to speak. Basically given that we are building the same amount of rail and using the same trains what it comes down to is that it will cost us 180 billion in labour and an extra 25 years to do it and again, that assumes that India is using slaves.

We are buying the same product from the same supplier and due to the way we do things, aka greasing those pockets, it's going to cost $180 billion more than the finished product is in another country and it's taking nearly 5 times as long.

I see a major disconnect there and no amount of OHS or higher wages should justify that kind of difference. It's quite literally inefficiency and excess (the bad kind) on display. Even if the project cost 5x as much to do in Australia you'd still be expecting to get it done in the same time and that's still $100 billion less than the budgeted costs.

Hell, we can compare to France, an expensive country by any measure, and they've managed to build parts of their network that are about 40% of our network for $10b, that includes extensive use of tunnels and bridges that would just flat out not be necessary in Australia and it's still taking a reasonable ~5 years to do it or the USA which is building a network that is almost a third longer for ~$60 billion and will be done in 9 years. Once again, Australia is $140 billion more and 20 years longer in comparison to a country that is similarly expensive.