Wednesday 14 March 2012

The easy days of economic management are over

Annabel Crabb looks at how economic policy is now much harder for the Government in End times for the addictive politics of easy money. She concludes with:

Now that the easy money is over, the responsibility returns to leaders to make difficult decisions either – as Mr Parkinson reports with the beguiling blandness of the bureaucrat – "to significantly increase revenue or reduce expenditure". Can they handle it? Can we? It remains to be seen.
My opinion. The Australian Government experienced a significant, and temporary, boost in revenue during the second half of the last decade. Both the Howard and Rudd Governments gave too much of this boost away in the form of personal tax cuts. That's put the Federal budget into structural deficit. Right now, as a modern economy, I think we're probably under taxed. As neither party seems keen on the idea of increasing income taxes we might well have to hope that bracket creep finally solves the problem. Unfortunately, I don't think that's likely in the medium term. In the long term the budget also faces issues of an aging workforce.

I have the feeling that future economists might well see the mining boom as a wasted opportunity.

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