For some time I have been saying that the Government’s economic stimulus spending spree will be wasteful, poorly directed and do little to make Australia a more competitive economy. If this is not bad enough the chances are the reckless spending by the Rudd Government may also stir inflation again and cause more problems for the Australian economy than the global financial crisis ever did.
Finally a number of newspapers are now putting the spotlight on how the Government is spending tax payers money with The Australian even having a section called Stimulus Watch so readers can see how their money is being spent. At present there is a lot of focus on the cash being tossed at schools (even if they are scheduled to be closed) but I can assure you that money is being wasted across all areas of Rudd’s multi billion dollar, debt fuelled, vote buying, spending extravaganza. (see my earlier blog Rudd Economics 101 – When in doubt spend like crazy to see where $800 million dollars of your money will also be mostly wasted)
It was popular some months ago to bash capitalists especially if you were a left leaning politician and it seems the Australian public enjoyed Rudd’s verbal bashing of bankers and company CEO’s. But now we are are seeing something less productive and more costly than any version of capitalism (extreme or otherwise)….extreme socialism.
Extreme socialists believe that the Government should jump in and help us through the bad times, distribute wealth so that we all can live in harmony and that they know how best to manage our schools, hospitals and utilities. Of course extreme socialists need a lot of money to create their fantasy-land but no problem, they simply raise taxes for those greedy free market companies and for people whom they decide are wealthy.
The main problem is that extreme socialists only know how to spend as the concept of making a profit or seeking an economic return is something that only those evil neo-liberals would think of. So in their view of the world when a government funds a project there should be no detailed objectives, just some high level vague statements of what they they hope will be achieved.
Sure some money is wasted, but the government will always have new money coming in via taxes so there will always be funds to spend or if needed, money can be borrowed. If the budget deficit starts to become a problem then extreme socialists reckon they can overcome this by simply raising taxes again for people who will probably not vote for them anyway.
If you think what I am saying is fiction then just reflect on where we are now. The Rudd Government has turned a budget surplus into a deficit, is slowly chipping away at those who it feels are wealthy and plans to introduce an Emissions Trading Scheme which is nothing more than an extra tax on companies. This is just the beginning, because sooner or later someone is going to have to pay back the $300 billion or so the Government is spending.
In addition the Government has committed taxpayers money to building and operating a national broadband network without any business planning, has sent stimulus money payments to people not even living in Australia and has not defined in clear terms what will be achieved as a result of spending a huge amount of taxpayers money.
The big problem we have now is that people have been duped into believing that big spending governments are good for them no matter how the government spends. I have no problem with any government bringing forward spending on critical infrastructure or supporting pensioners and those in real need when times are tough, but any spending should be carefully planned.
In addition there should be some level of expected return for each dollar spent. For example after billions of extra dollars are pumped into the health system then we should be able to see a reduction in waiting times for operations, a decrease in avoidable deaths and improvements in hospital management. Have you seen the details of what improvements will be achieved in clear measurable terms as a result of the extra money being thrown at the health system? No of course not, because no concrete objectives have been set.
It has also been widely reported that much of the funding for Gillard’s “Education Revolution” is in fact being used to pay for much needed maintenance at schools across the nation. This means that even in the boom years the State Governments were unable to maintain existing facilities, so how exactly are they going to keep these and any new facilities and equipment maintained in the future once the stimulus money runs out?
This leads us to a problem that the Government is not telling you about, and that is the more they build the more it will cost to maintain. Yes a new bridge will initially cost little to maintain, but eventually it will need attention and that will cost money. So as a nation’s installed base of infrastructure, schools libraries, hospitals, community centres etc. grows so does it’s long term maintenance cost. Don’t bother looking in the budget papers for any maintenance estimates for all these new facilities and associated equipment because it isn’t there.
Do you think the Treasury has included maintenance costs in their long term planning? Of course not, and I doubt the various State and Local Governments have either. So out there somewhere is hundreds of millions of dollars in annual maintenance costs not factored into anyone’s planning. In 10 years time we will still be paying for buildings and facilities that we probably did not need while a lack of funds will see much of this infrastructure gradually fall into disrepair.
This already happens today. In Sydney the rail network is poorly maintained and in the CBD there have been number of blackouts because of a lack of investment in the power grid. In other words, our existing infrastructure is not maintained properly and many of our utilities have been mismanaged, yet the Federal Government will throw more money in the same direction and seems to be expecting miraculous (though not defined) outcomes.
At some point in the not too distant future all levels of government across the land are going to be looking for money. Already in NSW water and electricity prices are on the way up and you can be sure this is just the beginning. As prices creep up this will fuel inflation and if oil prices take off again our old friend the inflation genie will be out of the bottle once more.
If this happens then that freshly painted bingo hall or new school library is not going to look like such a wise investment. Maybe we should be fixing all those cracked water mains that leak millions of litres of water every year, or upgrading existing rail networks so trains run on time and millions of hours of productivity are not lost because of stranded commuters?
Perhaps those who are overseeing the spending on infrastructure should have first done a detailed audit on what already exists and what condition it is in? What is the point of building a lot of new infrastructure when we cannot even maintain and and manage what already exists?
Instead of careful planning and targeted spending we have been sold the extreme socialist view of the world. In the twisted world of Rudd, Swan and Gillard if you just toss around enough money then magically everything becomes groovy. School children they hope, will remember it was them that made their new school library possible, but when these children grow up they may not be too thankful when they realise that they will be working until 67 and paying higher taxes for something that they probably spent little time in anyway.