In the UK at the moment, there’s skyrocketing food poverty. And in the US, more than one in five American kids live in a ‘food insecure’ household. In both cases, inadequate low-income wages, high unemployment, and inadequate welfare are all significant contributors. And this is exactly where Australia is heading…

14.4% of Australians already live in poverty, well above the OECD average of 11.3%. And it’s on the rise. Yet our government is waging an outright war on social services, long-term infrastructure and low income earners, which will only make things worse. Here’s just a taste of what they’ve done (with a few at the end that they’ll probably do):

What he’s already done

What he’ll probably do soon

Yet in all of this talk about ‘austerity politics’, I’m yet to hear a single politician suggest pay-cuts for politicians or a reduction in their pensions. Funny, that…

And no need for any of it

The crazy thing about all of the above, is that there’s simply no need for it. Our politicians are talking about austerity, and Joe Hockey says we all have to help with the heavy lifting, but we have one of the healthiest economies in the world.

We’re one of only 13 AAA-rated economies, worldwide…

We have the third-lowest debt in the OECD…

It’s been consistently low and isn’t spiralling out of control…

(Unfortunately, I haven’t been able to find a more recent graph. Australia’s debt has increased since 2010 from about 11% to 11.7%. But during the same period, the OECD average has increased to around 70%!)

And it’s ALWAYS been way below the OECD average…

At least in the modern ear…

Perhaps more importantly, our ability to service that debt is good…

Our inflation rate is low and stable…

Our unemployment rate is low and stable…

Our GDP per capita ranks 4th among OECD countries and is steadily growing…

And our Gross National Income (GNI) per capita is also well above the OECD average. (GNI measures the total income from production and services, by Australians, here at home or abroad, and discounts income from foreign-owned companies operating in Australia (e.g. 83% of our mining industry).)

In fact, Independent Australia ranks our economy as the best in the world…

We spend less on welfare than all but 4 countries…

And less on unemployment benefits than any developed country…

We’ve done so for years. Below is our public spending since 1990, compared to other OECD countries…

And Treasury says our total welfare spending (as a percentage of GDP) will be the same in 35 years as it is now.

Only 7 OECD countries spend less than us on pensioners (2010 total social expenditure, not just cash benefits)…

And we have more pensioners living in poverty than any country except Korea…

Although we spend slightly more per capita on healthcare than OECD average, we spend less as a share of GDP (p.157):

And importantly, despite the manufactured claims of ‘exploding healthcare costs’, we’re not increasing our spending at all per capita (p.155):

Australia’s chief economists agree

CommSec chief economist Craig James:

Any Reserve Bank minutes show it becomes very clear the Australian economy is in good shape.”

AMP Capital economist Shane Oliver:

I don’t believe the debt is at a level that it poses a risk to Australia. It’s a million miles away from Greece, Italy, Spain, if we think we’ve got problems we’re kidding ourselves.”

HSBC chief economist Paul Bloxham:

I don’t think you could make the case that there is a budget crisis… because I don’t think we need to urgently get the budget back to surplus. It needs to be done in the medium term [with structural changes].”

Bank of America Merrill Lynch chief economist Saul Eslake:

The economy is still fairly soft. Growth is below trend. I don’t question for a moment the seriousness of the long-term problem. But I don’t see any particular urgency about 2014-15 or 2015-16.”

Barclays Australia chief economist Kieran Davies:

Most countries would be envious of Australia’s public finances as they currently stand.”

Deloitte Access Economics economist and partner, Chris Richardson:

We don’t need a surplus tomorrow. We don’t even necessarily need it in five years time. I’m more than happy with us getting back to sustainable fiscal finances over the long term. The politics would tend to suggest moving earlier rather than later but on the economics there’s no rush.”

BT Financial chief economist Chris Caton said the suggestion that Australia has too much government debt is:

Simply absurd.”

Honorary professor at the Australian School of Business, UNSW, Raja Junankar:

There isn’t a crisis. If you compare Australia to other OECD countries, we’re doing fantastically well… The government has come out screaming about debt. Everyone has debt, all major corporations, all major households have debt, as long as unemployment remains relatively low we’re OK, we’re not in for a crisis… And yet if you listen to some politicians they believe that Australia is in debt crisis — but actually, Australia is in a far better situation than pretty much every other country. Until the population start listening to some of the facts, rather than myths about the economy, the negative stories will dominate rather than reality.”

In a 2013 research paper, Raja Junankar also said:

if we listen to the politicians it appears that the Australian economy is suffering from a major crisis of ballooning government debt and an impending crash… in fact, Australia has a “miracle economy”.”

According to the Sydney Morning Herald, Bloxham, Eslake, Davies and Richardson believe long-term structural changes are necessary, not a risky short-term fix:

Ideas floated by the economists included abolishing negative gearing, taxing trusts like companies, broadening or raising the GST, reducing the capital gains tax discount and tightening tax breaks for high income earners’ superannuation. There was no budget urgency that would justify temporary ‘debt tax’ rises, they said.”

Early in April 2014, Reserve Bank governor, Glenn Stevens said much the same thing:

Put simply, there are things we want to do as a society, and have voted for, that are not fully funded by taxes over the medium term, as is starting to become clear in the lead up to the May budget. Our situation is not dire by the standards of other countries but neither are the issues trivial. A conversation needs to be had about this.”

Oh, and there’s also this statement from 63 of Australia’s leading economists, including former treasury secretary Bernie Fraser, former trade minister Craig Emerson, and various academics from the University of Sydney, University of Adelaide and University of Melbourne. Here’s part of it:

The austere measures contained in the proposed Commonwealth budget have been justified by fears that Australia’s public debt is expanding rapidly and dangerously, and must be arrested through a dramatic change in fiscal policy. These fears are misplaced. Australia does not face any present or imminent debt crisis… The most effective route to restored fiscal balance is to help more Australians find work, earn incomes, and pay taxes. But major and unnecessary reductions in government program spending and public sector employment would have the opposite effect… Major spending reductions by the Commonwealth government are economically unnecessary and socially damaging. The first priority of Australian fiscal policy should be to strengthen investment, employment, and growth. Government can and should pursue this priority without jeopardizing its long-run fiscal strength and stability.”

Even the people who wrote the Commission of Audit agree

Commission of Audit Chairman, Tony Shepherd:

We don’t have an immediate budget emergency.”

Commission of Audit member & former Howard government minister, Amanda Vanstone:

We’re doing OK at the moment.”

And the OECD has warned against a harsh budget

The OECD, responsible for promoting policies that will improve economic and social well-being, warns against cutting public spending:

heavy front loading of fiscal consolidation should be avoided“

But isn’t ANY debt bad?

NO! In fact, many economists argue that a government should ALWAYS run at a deficit. Running a country’s budget isn’t like running a household budget. Most household expenditure is a cost, whereas most government expenditure is an investment. Here’s how Richard Holden, Professor of Economics at Australian School of Business puts it:

As Nobel Laureate and New York Times columnist Paul Krugman has pointed out repeatedly: government finances are fundamentally not like personal finances, for multiple reasons. One of them is the huge payback that social investments can deliver. Government debt levels should typically not be zero. The Commonwealth government can borrow long term at around 5%. The social returns on wise social and infrastructure investments are often more than 15%. Not borrowing at 5% and lending at 15% is to miss huge opportunities. Governments can invest in projects that we never can as individuals: health care, schools, major infrastructure, national defence — and that’s what makes the large returns possible. It is just very different than thinking about maxing out your Visa card to go skiing.”

Specific to the current Australian situation, here’s what CPA Australia chief Alex Malley says:

Cutting spending in and of itself to meet an ambitious surplus target, conditional on implementing all the [Commission of Audit] report’s recommendations in their entirety, will not provide a roadmap for long-term success and could even exacerbate the problem.”

So why the war?

This is the question we should all be asking. Can you answer it?