WHEELER'S WISDOM
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“With unemployment near a two-decade low and the budget deficit virtually eliminated, voters backed Merkel's handling of the domestic economy, Europe's largest, and her push for austerity in the euro zone ..” the Sydney Morning Herald reported on September 23rd last year, after Angela Merkel’s election triumph.
As Australian Treasurer Joe Hockey prepares what will be Australia’s defining budget this decade, he will undoubtedly be thinking how voters worldwide have rejected irresponsible governments.
I will be very disappointed if the May budget does not rein in spending, and set a very clear path for Australia’s return to the debt-free economy we enjoyed only a few years ago.
Unemployment dropped in the figures released last week. As the ABC’s Alan Kohler pointed out, manufacturing is up. Rising business optimism suggests that with the WA Senate election over, and the new senate sitting in July, Joe Hockey will be able to negotiate his way past the blocking tactics of the old Green/Labor-controlled senate that has stalled economic reform.
Why do we have to eliminate debt? The answer is simple: our standard of living will fall. Debt has to be repaid one day. Spain had one of the Eurozone’s largest deficits. Once the crunch came, paying it back generated a recession. Spain reached an unemployment figure of 26 per cent last year, with 55 per cent of young people out of work!
In contrast, Britain, which has taken positive action to control spending and reduce the former Labour Government’s deficit, has enjoyed Gross Domestic Product (GDP) growth of 2.4 per cent, and now has the strongest economy in Europe. Every day 3,100 people are finding work in Britain, a record number. In contrast, Italy, Russia, Brazil and South Africa face International Monetary Fund (IMF) downgrades.
British Labour mocked measures that would assist growth. However, Cameron’s Conservative Government has brought unemployment down from nearly eight per cent to a new low of 7.1 per cent, considered good by European standards.
The British economy still has a way to go but importantly eight out of ten new jobs are full time. Also very importantly for the task that Abbott faces in Australia, private industry absorbed public servants that were made redundant by civil service efficiencies.
British recovery is based on consumer spending and the housing market, rather than business investment and exports. I noted that the 0.3 drop in unemployment in Australia to 5.8 per cent was also attributed to housing. Undoubtedly this is why the Prime Minister has been eager to talk up new free trade deals to boost Australia’s export growth for economic recovery. We will hear a lot about trade and exports before the budget speech!
With goodwill and effort from all sections of the community we will reduce Australia’s debt and return to long term prosperity.