Friday, May 17, 2013

Surely PM is having a lend of us

Prime Minister Julia Gillard, in promoting the case for Budget deficits, says, ''Imagine a wage earner, John, employed in the same job throughout the last 20 years''.  She reckons that, if faced with reduced income this year but hopeful of future increases, John should cover his expenditure by borrowing.

There you have the Government's spending strategy.  This does not work for individuals.  Still less can firms follow her advice and, faced with losses, keep chugging along as before on borrowed money.

For a start, a firm's management would need to persuade banks to pony up the loans.  They are unlikely to do this for a business that had a similar record to the ALP Government, which for each of the past six years has forecast Budget surpluses and delivered deficits.

Even one year of losses brings a prudent business's management to revise its corporate plan.  It would start looking at its product range and whether lines could be rationalised.

It would re-examine its suppliers and see if it could make savings in its wages bill, in consumables and by deferring investment.

Thus, facing difficult circumstances, this week BHP Billiton announced $4 billion in cost cuts.  Similarly, Discount Superstores reduced staff, renegotiated rents and closed outlets.

The Gillard Government rejects such approaches.

I have identified more than $22 billion in excessive federal spending, without even addressing the sensitive areas of health, education and welfare.

The Government dismissed making such savings and instead embarked upon vast new spending programs for the disabled and in education.  Its response to difficult circumstances is to continue outspending the rest of the economy.

Moreover, with the world recession delivering blows to local firms' competitiveness, instead of trying to reduce cost burdens on producers the Government has introduced impositions like the mining tax, the carbon tax and costly renewable energy requirements.

The Government has also revitalised a union-dominated ''Fair Work'' Commission (FWC), forcing up costs particularly through penalty rates and permitting union coercion.

Wage cost increases required by the FWC have forced 1900 restaurants across Australia to close their doors over the past five years and 1000 more are expected this year.

The FWC's government-appointed bureaucrats can stipulate the wages of every employee.  Insanely, they require penalty loadings for catering staff during public holidays when consumers most want to use restaurants.

Politicians advising people and firms to continue as usual when confronted with less income have clearly gained their experience from the welfare sector and not the workfare.

A government piling increased impositions on to a beleaguered business sector is a government with no understanding of how wealth is generated.

Business owners confront much stronger cost disciplines than government, which is why they are far more efficient.

Businesses need to entice money from customers by constantly offering value.  But the only money the Government has, it takes from taxpayers or raises in loans to be paid off long after its leaders are retired.

The economy's increased wealth is dependent on continuing advances in business productivity.  Politicians need to understand that this is the only way that social programs can be funded and that productivity is undermined by regulations and uncontrolled spending.

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