Budget highlights structural woes

(Published in Crikey 31^st May 2013)

The month of May is budget time for most jurisdictions. Most attention focuses on the Federal Budget but State Budgets help complete the fiscal mosaic.

On a State by State comparison it’s pretty easy to have a cheap shot at Tasmania for being a basket case, but adjusted for scale and rural location factors Tasmania is little different from other areas in Australia.

The budgetary problems facing Tasmania throws into stark relief the problems facing all States.

A brighter future?

Will Hodgman’s Plan for a Brighter Future, includes even shonkier savings than was included in last year’s Roadmap to Recovery.

Debt deficits and the State Budget

The preoccupation with debt and deficits that afflicted much of the discussion about the Federal Budget has carried over into the discussion following the Tasmanian State Budget.

The doctrine of surpluses being good and deficits bad as adopted by both major political parties and spruiked by 95% of the main stream media means that as we are forced  from deficits to surpluses as soon as politically possible, notwithstanding any adverse economic consequences that will almost certainly widen the output gap caused by unemployed labour and capital,  each budget will be contractionary relative to its predecessor and when Government surpluses eventuate the iron law of sectoral balances means the private sector (including the overseas sector) will inevitably be in deficit.

That’s the backdrop to the Tasmanian economy as it attempts to move forward.

Austerity pitfalls and alternatives

Austerity measures are very much part of economic policy discussions around the world, more so in Euro land but also in the US as part of the recent so called fiscal cliff stand-off.

The recent uncovering of some shoddy research by two prominent Harvard economists, Reinhart and Rogoff used to justify austerity measure has also reverberated around the economics blogsphere.