Home > Life in General > Out of the lockup

Out of the lockup

May 14th, 2009
.!.

I’m back on deck, sort of, after the Budget lockup in Canberra on Tuesday. The event was quite an experience, though maybe not one I’d choose to do every year. It started with a scrum in one of the big halls in Parliament House where the assembled journos +me gathered to await our chance to look at the Budget paper. Then we were sorted into committee rooms, some equipped with elaborate preinstalled computer networks (AAP for example) and some with one power cord for two computers (Crikey!).

I expected the assembled Treasury officials would provide some sort of briefing, but those looking after the lockup rooms were fairly junior people from outside the Budget branch, who had been drafted in to hand out papers, stop errant economists from drifting outside the boundaries of the lockup area and so on.

The big break in the day was Swan’s press conference, attended by lots of ministers and some senior Treasury guys and economic advisers some of whom I’ve met in various capacities over the years, and others I know only as voices on the phone or email contacts.

Then it was back to typing a bunch of analyses which went up on the Crikey website, and which I’ll repost here when I got a chance. After we were released from the lockup, a somewhat anarchic vodcast, and then it was finally time* for a drink or two in a Kingston bar I remember fondly as the old Boot and Flogger.

Since I don’t do a lot in the way of networking, I’ll namecheck some of the people I met on the day or durign the evening: Michelle Grattan, Tim Colebatch, David Gruen, Guy Rundle, Bob Ellis and Don Henry.

I got back yesterday with a significant sleep deficit and a cold, so I didn’t do much except relax. But no rest for the wicked and I’m now back to work looking at the options (lots of them unappealing) for the Queensland state budget in a month’s time.

* Careful viewers will note that Guy Rundle got in ahead of the official start on thsi.

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  1. PeterM
    May 15th, 2009 at 23:36 | #1

    To paul walter #48.

    There is a whole lot of good stuff in Wikipedia on health systems and the like. Start at the following URLs and follow the various links:

    http://en.wikipedia.org/wiki/Health_systems

    The goals of a health care system are multi-faceted but the World Health Organisation lists these as; “good health, responsiveness to the expectations of the population, and fair financial contribution.” It is interesting that the WHO have come with a couple of indexes. These are “Level of Health” and “Overall Health System Effectiveness”. The following URL ranks national health care systems on these indexes.

    http://www.who.int/whr/2000/en/annex01_en.pdf

    What is always used against USA style private medicine based health care systems is the fact that USA ranks fists in the expenditure per capita but only ranks 37th in system performance and 72nd in level of population healthiness. Ranking just ahead at 36th in system performance and 25th in population health is Costa Rica that achieves this performance with a about a twenty of the expenditure per capita. (Costa Rica expenditure ranks 50th). Australia ranks 32, 39, & 17 on system performance, population health, and cost so we not that much better than the US. (I guess this is to be expected as we have spent the last 15 years trying to replicate the USA private health system.) Commentators explain the difference in performance between USA and Costa Rica on the fact that the Costa Rica system focuses on preventive measures.

    Personally, I think we have a serious problem with the current Australian system. Given the amount of noise being generated by the current federal opposition in repose to a relative minor change to slightly reduce the inequities in the system, I don’t hold a lot of hope for any changes until the system disintegrates in crisis. (Like the USA system is about to do.)

  2. May 16th, 2009 at 02:01 | #2

    i think terje you could mount a good case that deficits in all industrialised nations in Europe, north america and japan are the faulkt of kevin rudd,

    Smiths – don’t be stupid. Governments are responsible for their own actions.

    Terje, just wondering what your views were on private debt. Most hardcore laissez faire types cannot tolerate a single cent of government debt, but aren’t the slightest bit concerned if private debt balloons to 5x GDP, and its all blown on a housing bubble. Where do you stand?

    I believe in personal responsibility. I don’t think we have enough of it. Persponal responsibility is the opposite of collective responsibility which we have too much of. People should be responsible for their own actions and should wear the consequences of their own actions. As such private debt is a private matter and should remain so. Mostly it does unless governments decide to intervene (which mostly they shouldn’t). I’m not worried by private debt, although I work hard to avoid having too much of the stuff myself.

    I think public debt is problematic because:-

    1. it distorts the democratic process by defering the cost of government action to a later regime.

    2. because it entails spending that does not need to pass a cost benefit analysis with the same rigour as private investment. You can avoid this to some extent by limiting public debt to public corporations that have a capacity to default separately to the government. This sharpens the focus of the lenders.

    3. It crowds out private borrowing.

    Having said all this I do think major government funded infrastructure, if it is to happen, should in general be debt financed. Capital expenditure should be debt financed and operational expenditure should be tax financed.

    Unlike Keynesians I don’t think government spending has merit for it’s own sake.

  3. boconnor
    May 16th, 2009 at 03:21 | #3

    TerjeP says: “it distorts the democratic process by defering the cost of government action to a later regime.”

    How specifically is the democratic process distorted? For it seems that each government knowingly takes on the consequences of the decisions of the previous government (including debt) and does their best to govern based on the policies they have enunciated to the electorate. They have strategic power to change expenditure patterns to reduce the amount of debt, or indeed increase it, if they think that is the best thing to do for the economy.

    “because it entails spending that does not need to pass a cost benefit analysis with the same rigour as private investment.”

    If your claim is that private sector managers use more rigour compared with public sector managers in the way that they take on debt then I think that claim is not true.

    The corporate world is littered with companies who have taken on too much debt to the extent that their lenders have put them into administration or liquidation. Indeed the major cause of company failure is companies that have taken on too much debt, which presumably would not occur if a proper cost benefit analysis had been undertaken with sufficient rigour.

  4. May 16th, 2009 at 04:23 | #4

    If your claim is that private sector managers use more rigour compared with public sector managers in the way that they take on debt then I think that claim is not true.

    It is more a point about those that extend credit. When you extend credit to a private business you generally want a solid business case. When you extend credit to a government you generally just want to know that their tax powers still work.

    How specifically is the democratic process distorted?

    A government that borrows and spends can hand around a lot of lolly and make us feel good. The pain (ie repayment) is deferred to a later regime. This is more a comment on the psychology of voters than on the mechanics of democracy. Everybody loves Santa.

  5. smiths
    May 16th, 2009 at 16:31 | #5

    sorry terje,
    but saying “The deficit is the ALPs fault,” is stupid, its simplistic and offers nothing constructive

  6. Alice
    May 16th, 2009 at 20:44 | #6

    55# Terje knows better than that dont you Terje? Saying “The deficit is the ALPs fault,” takes the wooden spoon stirrer award.

  7. May 17th, 2009 at 07:45 | #7

    The ALP don’t regard it as a fault. They try to blame it on a revenue slump for political reasons but in reality it is predominantly a spending hike. However they call the shots and clearly they think that now is the time to run a government deficit because they beleive that is how you motivate a sluggish economy. There is nothing simplistic or stupid in stating the truth. Rudd and Swan had a choice in how to respond to this recession and they chose deficit. To suggest that they had no choice is the position that is simplistic and stupid. You may agree with their choice but don’t pretend that it wasn’t a choice.

  8. Alice
    May 17th, 2009 at 08:09 | #8

    57# Howm many industrialised nations are now in deficit Terje? Why? Because of the GFC. Your argument the deficit is the fault of the ALP is misleading. They did have a choice and they made the right choice, as did many other industrialised nations. What would you suggest Terje? Attempt a surplus by drastically cutting expenditure to match falling tax revenues, when the unemployment rate is rising. How many more would you see thrown into the ranks of the unemployed Terje to land yourself a boutique surplus? The unemployed also pay less tax and can engage in less entrepreneurial activity, further contributing to falling tax revenues. Attempting a surplus now would not only be insane, its a “wrench the economy down” recipe for a disaster.

  9. SeanG
    May 18th, 2009 at 04:37 | #9

    Alice,

    A couple of things about what you have written.

    Firstly, many developed nations were already in deficit when the credit crunch occurred. Australia was one of the few who were running a strong surplus.

    Secondly, as countries go into deficit they have to borrow. Now in order to sell bonds we need buyers who are prepared to purchase AUD Federal Bonds. Downside risk is that because the US Treasury is issuing hundreds of billions in bonds and the same in the UK and the Eurozone, that we will move to a point that there is a buyer’s strike. Now, I doubt that will happen because our economy is relatively stronger than others but we need to recognise that this is a risk.

    But I agree that we need a deficit via automatic stabilisers but I disagree with arbitrary stimulus packages. I would prefer something which actually has a greater long-term stimulatory impact than $900.

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