The myth that Labor saved Australia from a Recession and the Global Credit Crisis

The myth that Labor saved Australia from a Recession and the Global Credit Crisis

0 Reads  By: Jamie McIntyre

_________________________________________________________________________________________jamie-news-profileJamie McIntyre

CEO of 21st Century Education

Read more articles by Jamie McIntyre _________________________________________________________________________________________money-waste-300x214There is still a small percentage of Australian voters who believe the nonsense spread by the former Rudd/Gillard Government stating that Labor leaders including ex-Treasurer Wayne Swan saved Australia from the GFC thus saving us from a recession.

This story is peddled by economic incompetents who will use any excuse to justify sheer wastage of taxpayers’ money.

Firstly, is it true that Wayne Swan solely saved Australia from a recession during the GFC, as he and other Labor spruikers like to portray?

Perhaps if we ignore the world’s most populated nation called China. However, lets be honest here- Wayne Swan had little to do with it.

The credit should go to China for causing the commodities boom, which ensured that Australia sailed through the GFC in good condition. Taking credit from them is to some extent selfish and ungrateful.

It isn’t Australia, but China’s good economic management that primarily saved our country.

We should also consider the fact that the GFC was mainly a problem created by the US and was actually a crisis in the US, rather than a global one. 

It spread to Europe as well, but it was never going to effect us like the US and Europe because we had sound economic management up until 2007. Moreover, China couldn’t buy enough of our minerals.

However, we should have put aside more during the Howard years and spent less on middle class welfare. But once again, even as the opposition at the time, Labor was advocating more spending.

On the other hand, what did Labor do when in office ?

It was reported widely in the media last month that according to leading experts, Labor squandered 96 per cent of the $190 billion in extra tax revenue earned from the commodities boom. 

Howard and Costello squandered some of it, but not the way the Labor government did.

After stealing credit from China for saving us from a recession, Labor went about trying to create a recession by increasing taxes including the flawed mining tax and the flawed carbon tax and ending the commodities infrastructure boom much sooner than necessary.

Even though the boom will continue as volume ramps up, the investment boom from the mining investment was certainly curtailed by Swan and Co. This severely damaged our international reputation .

The myth peddled by economic incompetents is that in the event of a GFC, Keynesian modeling says you must stimulate the economy.

If we buy this theory, it maybe true, however, Keynes didn’t say stimulus money should be pure wastage squandered away as fast as possible. 

He said: stimulate, ideally into shovel ready projects to create an instant hit.

What did Labor do?

Firstly it panicked and over spent, especially when its all about confidence.

Just by saying that we are prepared to spend big to stimulate the economy if needed is often just as effective as spending, especially since the markets knew that there was low debt in 2007/08.

Following that, Labor continued to over-spend way beyond their means, even though there were clear signs that Australia wasn’t largely affected. gfc-1-300x300Labor wanted an excuse to spend and waste money, which is in their DNA, therefore the GFC was the perfect excuse to do what they wanted.

Most people including me will agree that some stimulus was needed. In hindsight it’s always easier to reflect upon matters differently.

However, Swan and Co made some serious errors.

1.    Much of the stimulus didn’t stimulate into shovel ready projects thus causing a stimulus well after the threat was over and not stimulating when actually needed.

As a result, it was a waste. For instance, how many local councils could have been funded to instantly fix local roads, thus using taxpayers’ money for its true purpose and also boosting local economies instantly.

Plus, if we had improved roads we may have been more open to Rudd and Labor’s rhetoric on their deceptive economic spin.

If I am shown any evidence, I’ll buy the theory that the Labor Government should be admired by the rest of the world and other economies. 

The only other economies that admire us are basket case economies that already had governments like Labor, spending money they didn’t have and thus digging themselves a hole.

Any aspect of the Australian economy that is admired is because of our commodities boom and not Labor’s efforts.

 2.    A lot of the stimulus was simply sheer wastage. For example, Pink Batts and the BER School Program at $16 billion.

I spoke to a local mayor in New England last week and he said there was a local school, which got a shade cloth installed from the $16 billion BER program.

It cost the local installer $3000 to purchase and install it. Yet the cost billed to the taxpayers was $90,000 at the time. Ultimately the funds went down the hierarchy and the union friendly mates took their dip from taxpayers’ money as a reward for supporting Gillard. The local supplier was paid $3000. Where is the rest of our money ?

Other halls built in schools were quoted at $100,000 by local builders. However, the job was given to big, union friendly companies for around $800,000. It was tendered out again and again to multiple levels of companies down the chain thus increasing the costs to eventually an additional $700,000. Unfortunately more money was eaten up than actually used for building. taxes-high-267x300These were not isolated cases .

Therefore, those who support Labor’s sheer wastage and mismanagement of our money should at least explain why any taxpayer should tolerate this. 

Of course, both sides of the Government have been guilty of wastage, however, the Rudd/Gillard Government took  it to another level.

Since 2007 we have lost $300 billion, despite a surplus of $40 billion left over from the Howard government thus resulting in a $270 billion debt now. Whilst the rest of the world is reducing their debt, ours is in the top three, fastest growing debts in the  world.

According to Labor estimates, before the increasing debt can be stopped, another $130 billion will be added to it by 2017.

That is 400 billion. However, here is the spin that Labor puts to it:

If we are so bad at managing the economy, then why do we have an AAA credit rating?

This is common nonsense spread by Labor spruikers.

I would say “Have they ever heard of extrapolation?

To extrapolate, for example, is to put on 4 kilos a year and believe that in ten years you won’t have a weight problem.

In Labor’s case, extrapolate the 2007-2017 period with $400 billion plus deficits before it can be fixed. Extrapolate another ten years and that is $800 billion.

Even if they reduce their wastage it is still a large debt that will take decades to pay off. In a decade, Labor is likely to return as the government and start spending excessively, thus running up a debt yet again.

Does any one wish to count the annual interest on that debt and show how we now have a lot less money for services each year, just because Labor’s debt has to be paid off?

Which leads me to another myth:

If the Labor Government was so inefficient, then why do we have record low interest rates?

This one is classic:

The reality is that we have record low interest rates because the Reserve Bank is trying to get our economy going, largely due to the fact that sectors outside mining have been struggling for sometime.

The record low interest rates are a sign of economic trouble and below average growth. But Labor somehow try and spin this as something positive.

Why do other economies admire us and why are our debt levels low compared to other countries, is another nonsensical myth.

If you compare yourself to basket case economies; you will look like you are doing fine.

It would be like Jenny Craig saying:

“I have the solution to the fact that you are fat and overweight and headed for a heart attack soon.

“The solution is to compare yourself to people who are fatter and in worse condition. Don’t change a thing, simply compare yourself to those fatter and unhealthier than you and in comparison, you will be in better shape “

From Kevin Rudd and Wayne Swan’s perspective, the problem would be fixed.

Instead of basket case economies, we should compare ourselves to countries like Norway and aspire for fiscal management; rather than weigh ourselves against fat, overweight, bulging, lazy, debt ridden and almost bankrupt nations (who never had a commodities boom either).

Does Norway have $270 billion in debt heading towards a $400 billion debt?

No.

They put aside their boom from commodities such as oil, as they know that it will run out at some point. It is just like putting aside 10 per cent of your income to fund your retirement, which is always a good idea.

We all know this basic financial principle is true for our households so why didn’t the Labor government follow these economic principles?

Norway has set aside $760 billion in their Sovereign Oil Fund. At just 10 per cent return, that’s an extra $76 billion a year to pump into their economy.

At 20 per cent per annum it is $150 billion extra per year. What could we do with that extra revenue on top of the $360 billion a year we collect in taxes?

We could have bought cheap assets through the credit crisis and become very rich as a nation.

A crisis could have spelt opportunity, however, Labor was too busy helping their union mates raid the till and rip off taxpayers and add layer after layer to the public sector employing lazy Government workers on high salaries to boost the unemployment figures and ensure extra votes.

But then Rudd, Swan and Gillard were also  busy writing cheques that may bounce some day.

Plus, they ignore a convenient fact-

In the last three years our debt levels have risen faster than almost any other country. At the time the rest of the world had already learnt the consequence of socialist governments spending like there is no tomorrow to buy desperately needed votes in order to stay in power.

But debt isn’t necessarily bad?

Labor spruik that there is no need to run a surplus and that debt is good.

Yes, there is good debt and bad debt. Good debt is borrowing for investments that grow your future income .

Therefore, with the $300 billion spent, what have we earned since 2007?

What infrastructure have we received from it?

Will it grow our future income?

Have Labor policies encouraged businesses to employ more workers?

Has it encouraged businesses to invest more?

Has it boosted business confidence and consumer confidence ?

Have we become productive enough to compete with Asia ?

Has union power been boosted to ensure we continue to be hopelessly inefficient and unproductive? Unions ensure it takes 3-4 times longer to load and unload ships in Australia, not to mention that it costs a fortune.

Have unions jacked up wages for lazy non-performing employees when only those that perform should be rewarded ?

Back to infrastructure:

Now, you may ask: “what about the NBN and the NDIS and the Gonski reforms”?

Well, the NBN is the only decent piece of infrastructure Labor can talk about, but it isn’t counted in the approximate $300 billion debt.

Why?

Because Labor used accounting tricks to make sure that most of the $42 billion doesn’t have to be counted.

Keeping that aside for now, it will cost possibly $70 billion and take longer than necessary.

Yet China for $12 billion is delivering fast broadband to 500 million people, whilst our NBN is hopelessly behind schedule.

The $300 billion could have funded a fast train network from Melbourne to Brisbane for $100 billion or half if outsourced. Not to mention, it could have funded dual free ways pretty much from Cairns to Melbourne, unlimited new hospitals and schools and massive investment into research, development and grants to launch hundreds of thousands of new businesses that create real jobs.

NDIS

It has not yet started and has to be funded by debt. Should Labor get credit for spending other people’s money we don’t have, especially because we can’t afford such policies?

 Gonski

Surely a good way to waste billions. I support education reforms, but not by spending billions more on a school system that’s a total failure.

Once again we have to borrow the money.

How about we tell the teachers’ union and the education system hierarchy to deliver a decent education curriculum and only then will they be rewarded with billions?

How about we ask them to sack half of their management hierarchy for non-performance and recruit managers that are given a strict KPI to deliver results or be fired, just like the rest of us in the real world.

They fail students if they perform badly, well the students should fail the education hierarchy for its performance.

They should start to generate some results and only then it would be worth investing billions into an education system. At least it would prove that they are more than just an expensive baby-sitting service and can deliver a real educational revolution.

If you fail in the private sector, you get fired.

However, if you fail in the public sector, you don’t and can’t be fired in most cases.

We have such poor health and education services because of a socialist and communistic system that think the solution is just more money to be obtained by increasing taxes.

Unfortunately these are the people that teach our kids economics at school.

Our record low unemployment is another Labor myth spruiked to the Labor faithful, for them to spread to the financially ignorant.

Lets look at the reality- Labor doesn’t create jobs. They inherited a strong booming economy but went on to increase taxes to destroy it. They attacked the wealth creators. Attacked the business community. They made it difficult to employ people or fire them for non-performance. They engaged in politics of envy. They pushed extreme socialist policies.

Labor encouraged unions to rip off industries and indulge in illegal acts such as thuggery, illegal blockades and extortion.

Governments don’t create jobs, businesses do. Yet the Labor Government stifled the private sector and simply added heaps of unnecessary Government jobs to disguise the employment figures and of course, to buy votes.

They pay many fat cat managers $150,000 a year or more to slow down productivity and achieve their agenda of having a big, fat, lazy government, thus increasing people’s dependency on them to ensure long-term votes from those who think they are entitled to something they haven’t worked for.

This is Labor’s economic brilliance.

I can’t imagine why only 33 per cent of Australians voted for them.

Thankfully at least 67 per cent of Australians have basic financial understanding and don’t buy the Labor myths.

I think we need new political parties and new leaders with fresh approaches.

Labor is old and people are over it. It doesn’t mean a Tony Abbott led Government is great either. But lets wait and see before we pass judgement.

Labor has had six years to prove that they are economic incompetents. If we end up dissatisfied with the Coalition, lets not be foolish as a nation and head back to a Labor Government.

That has been tried and tested many times and the last six years are proof that we should never go back.

Lets help the emergence of new parties that balance the best of Liberal and Labor policies.

That would be a nice change.

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