The falling global stock markets are sending a very clear message that the global economy is still at risk of more economic pressures ahead. Despite the unprecedented efforts of governments everywhere to ameliorate the global financial crisis through proliferate spending, the forward-looking stock markets are letting everyone know that you cannot prevent a crisis that was caused by too much debt by accumulating even more debt.
As logical as that premise is, it has been wilfully ignored by successive governments because they are more intent on delaying today’s problems in exchange for greater problems in the future. Regretfully, most governments fail to look past the next election and anything they can do to make the process of getting re-elected easier is deemed to be good policy.
Unfortunately it is this type of decision-making that often brings with it devastating consequences.
If we apply the simple choices facing governments to our own families, the economic madness of recent government decisions becomes evident.
Imagine your family is struggling under an excessive debt burden. You have two choices. Firstly, you can tighten your belt, spend a little less and apply all excess funds to reducing your debt. Sure, you’ll go without a movie or two, perhaps spend less on clothes or forgo a new car but after a year or more you should be in a better financial position.
The alternative is to borrow more money in the hope that something will change. Perhaps you hope business will pick up or you’ll get a new job. Or perhaps it won’t and you’ll be in even more debt or possibly go broke.
That’s exactly what has happened in Greece and looks likely to occur in a number of other European nations. The day of reckoning was delayed by ever larger debt binges which ultimately came to a shuddering halt.
In Australia, our government has pursued the same flawed path. They have borrowed and spent over $150 billion in the past two years on cash handouts and dodgy programs that have sought to transfer last year’s economic slowdown onto future generations. The result has been grotesque waste, demonstrable incompetence and the largest debt level that we have experienced in modern times.
The problem we now face is that if the future-oriented stock exchange indices are accurate and the world is looking at a further economic slowdown, Australia will now be facing it with a poorer starting position. Sure, our national debt is not as high as some of the near economic basket cases in Europe, but it will make dealing with future shocks more expensive, more difficult and less effective.
The Rudd Government have been warned about this repeatedly over the past two years. They have been counselled about their spendthrift ways and lack of consideration for the long-term consequences of their stimulus spending. However, just like the many other warnings about the pink batts fiasco, the school building rorts, their Fuel Watch and Grocery Choice follies and the myriad of other failures, our government has ignored that advice.
Unfortunately, the potential consequences of their arrogance and imprudence are likely to be felt most in the years ahead. That’s why Australia cannot afford another term of the Rudd Labor Government.
Cory Bernardi is the author of seven books and has been a member of the Australian rowing team, a publican, an investment portfolio manager and spent nearly 14 years as an Australian Senator.
