frog12986 said:
Microeconomic reforms:
- Workplace Relations 1996 and 2005
- Tax Reform 1999
- Superannuation Reform 2006
- Continuation of the National Reform Agenda (reducing tariffs etc)
- Welfare to Work 2005
- Incentives aimed at increasing participation (and improving productive capacity), which create a short term downward trend in relation to productivity
the national reform agenda (the reduction of tariffs which keating advanced) has barely been continued, there are still high tariffs in the car industry. The rest are fairly minimal and negligible more political wankery, nothing like the floating of the dollar or anything signicant like a national broadband policy or deregulation of the health system proposed under rudd.
frog12986 said:
As for your claim that the 'RBA manages the economy', that is complete rubbish. The most important way any government can affect the economic cycle is via macroeconomic policy, as you rightfully point out. The decisions government makes in this regard are imperative in relation to the flow on effects of the economy. Monetary policy decisons byt the RBA are largely derivative of the economic indicators that are driven and affected by fiscal stimulus.
Fiscal policy has long been less important than monetary policy, whatever fiscal position the government chooses to be in, will then be examined, as one of the factors in a monetary policy decision, but economic and external indicators are usually more important in assessing monetary policy.
"Budget's role is to play second fiddle to monetary policy" - ross gittins - 11oct2003
http://www.theage.com.au/articles/2003/10/10/1065676165240.html?from=storyrhs
"Dr Henry's willing acknowledgement that the dominant instrument for the management of the economy is no longer the budget (fiscal policy) but the manipulation of the official interest rate (monetary policy)."
Therefore the RBA "manages" the economy, NOT the government, the government doesnt have a very large role to play at all. Of course the government likes to say it does because it is doing well currently
frog12986 said:
The biggest error of the Keating era was the erratic implementation of microeconomic reform without restraining the macroeconomic stance.
Prior to the election of the Howard Government, taxpayers were paying over 8 billion dollars annually on interest on government debt, that is now negligible. The Government has successfully eliminated risk from government policy and created a stable, certain situation that drives business epxansion and investment.
"Dr Henry says the two concepts are logically incompatible and debunks the twin deficits, noting that, empirically, there's an almost zero correlation between the twins." i assume you dont know what the twin deficit theory is, its basically the theory that public sector debt will automatically increase the CAD.
this stable certain situation is all well and good when we have massive external demand coming from chinas economic boom, but when that tempers out (in the 3 or 4 years) the underinvestment in infastructure, broadband and education and its detrimental effect on productivity (productivity growth in australia is amonst the worst in OECD countries) and the economy wil tank. the mining boom is all that is propping it up, look at the grwoth rates in VIC and NSW, they're minute.
There is no risk in the government borrowing money, its not like a business, it will never default on its loans, and would need a ridiculous amount of debt to eveb pay a risk premium on the money it borrows.
Debt is not necessarilly a bad thing, any public company that doesnt have debt is not realising its growth potential.
for example, if the government has to borrow 10 billion dollars to build broadband infastructure, the productivity and economic growth that would result from it would increase its revenues and the return on their investment would more than pay off the debt,
