Australian treasurer Jim Chalmers has been fortunate to benefit from large tax revenue windfalls from the mining boom driven by China. Despite political concerns about the challenging inflationary environment, Chalmers is making a lot of money. Australia has seen its largest trade boom in over 200 years.
Australian treasurer Jim Chalmers has been fortunate to benefit from large tax revenue windfalls from the mining boom driven by China. Despite political concerns about the challenging inflationary environment, Chalmers is making a lot of money. Australia has seen its largest trade boom in over 200 years.
The economy is screwed despite this windfall. Imagine what happens when iron ore coking coal tank:
- Collapsed nominal growth,
- Collapsed budget receipts and big tax hikes,
- Slashed public services.
- No income gains for anyone, especially wages.
- Deflation makes debt burdens much worse.
The one upside will be zero interest rates (and doubtless ramped immigration), which will send house prices to Mars and direct most of the adjustment onto youth. Again.
This happens when you run structural budget deficits, when you should peg your spending to the underlying average of the terms of trade and save the rest in a sovereign wealth fund for the bad times.
Like Norway and Chile.
