Witness the businomics ideology go to work. At The Australian:
Debt across Australia’s states will explode by more than $100 billion, as governments boost spending on infrastructure and public servants at the same time their budgets are being sideswiped by weak GST revenue, slowing economic growth and plunging stamp duty revenue.
An analysis of this year’s budget papers by The Australian reveals combined government sector net debt across the eight states and territories will more than double from $81bn this financial year to more than $184bn by the 2023 financial year.
The country’s three largest economies — NSW, Victoria and Queensland — are responsible for most of the increase in debt, with NSW leading the way, yesterday unveiling a rise of almost $50bn.
And the AFR has the identical story under the same title:
States infrastructure booms are putting pressure on governments to sell more assets, with the release of the NSW and South Australian budgets showing unexpected increases in debt to fund capital spending.
The five mainland states’ budgets reveal that they will end up with a tripling of debt to $170 billion within four years to fund their infrastructure splurges.
The NSW budget revealed on Tuesday that the Berejiklian government’s net debt is set to balloon to $38.6 billion over the next four years, from negative $8.8 billion, while South Australia will more than double its debt to $13.2 billion to fund its own ambitious infrastructure agenda.
One is entitled to ask, given these same businomics entities have been demanding ever more people and ever more infrastructure, where do they get off complaining about the debt?
But that would be to miss a crucial step in the businomics model. The rentiers do want the governments to borrow and invest. But what they also want is the state government to then sell the assets back to them. This will reduce the public debt but it will also hand any decent assets to monopoly owners who can then charge rentier usage charges for running them.
This has nothing whatsoever to do with efficiency or rising living standards. On the contrary. It is a rentier system designed to make a few corporations richer while living standards fall. Consider the daisy chain:
- federal government force feeds population growth via mass immigration but refuses to invest in infrastructure so that it can maintain its surplus. Wages fall;
- state government must pick up the tab with debt-funded building because they do not have the taxation powers to pay for it any other way;
- this is called the “horizontal fiscal imbalance”, a diffused responsibility void that enables the federal government to dodge the real issues;
- states then sell the assets to the private sector which charge economic rents for their use, adding further income drains to households which are already struggling with falling wages;
- the answer? Bring in more people to prop up weak demand and create new infrastrcuture bottlenecks. Rinse and repeat.
Broader living standards keep on falling as services are endlessly crush-loaded, wages can’t lift and user charges mount. But the rentier corporations make out like bandits and government get to meet fictitious benchmarks of good economic management.
In short, it is a massive class war.
There are three fatal flaws in the system and both are widening into fissures. The first is that the polity gets more and more restive and start throwing out political parties. Politics becomes more volatile and lunatic fringes push towards the centre.
Second, the mass immigration model relies upon smooth globalisation. You can’t have the US and China at each other’s throats if you’re going to keep bringing in Asian (read Chinese migrants). It exposes Australia’s geo-political straddle of economic support from one and security support from the other. At a certain point it may become necessary to either cut immigration to protect the democracy or turn to discriminatory immigration, which starts to tear apart the social fabric.
Third, all of those people drive up property prices and parents start to worry that their kids will be forced to live in “tiny houses” even as household debt rises to astronomical levels.
How long this crazed system of rentier exploitation can run is anybody’s guess. At times MB has made deep dents in the debate around it. But it has always been swept back under the carpet quick smart. There are alternative economic models that will lift broader living standards, such as competing in the global economy:
- cut immigration;
- cut tax concessions;
- reform horizontal fiscal imbalances;
- boost innovation and competitiveness and other productivity reform;
- force a low dollar policy on the central bank.
But, you may have noticed, we have just rejected large swathes of such reform. Ironically because Labor did not go far enough and it kept the mass immigration feature of the system, triggering revolt in the Quixiteers of QLD and suburban Melbourne and Sydney. So, right now, the system is enjoying a new flush of confidence.
I suspect that the businomics system will have to break of its own accord. The degeneration of US/China relations offers the best hope in this regard, though it comes with some pretty scary wider risks.
The most likely outcome is the death of a thousand cuts as governments keep turning over while living standards fall, we run out of headroom for private debt and fiscal deficits return as China goes ex-growth. At certain point these mounting pressures have to tell on immigration too.
But even then the system has one more ace to play. The central bank will step in and start directly funding infrastructure through “helicopter money”. Though, if that accompanies some of the wider reforms including lower immigration, then that would be no bad thing.
In the meantime you’ll just has to sit there and take in the team.
Unless you revolt.