Gina Rinehart wrote an important piece, published in Australian Resources & Investment, last week addressing the huge difficulties Australia faces to emerge from a cycle of budget deficits and growing debt:
Australia likewise has a lot to learn from Europe and our European migrants. Why did they come here? Why did they pick Australia? And how did many of their countries end up in such a mess? We must learn how big overspending governments, and giant consequent debts, started to dampen or control their future — and most importantly, how we can avoid the same fate.
The Australian newspaper reported recently that an official Government analysis revealed more than five million citizens received income support from the taxpayer. That works out to be more than one in five getting federal welfare in some form. And that’s not in decline — nor is the cost, $130 billion annually from taxpayers.
Australians have to work hard or actually harder and smarter to create the revenue to be able to pay that bill. That’s in addition to things we have to have. The essentials like healthcare, defence, police, aged care, roads — the list rolls on — and still pay off our record debt. Something has to give, we can’t do all.
Put simply, we are not earning enough revenue for all we are spending. We are living beyond our means. But dare say that and you are condemned. The left don’t want to address the issue. Instead they get hysterical and personal about who speaks out — in this case, sometimes me. But many Australians are wide awake to where we are going wrong and they want to hear people speaking up. And they want leadership to address in the interests of Australia.
This ‘Age of Entitlement’ and its consequences, is creating problems for all of us, our children and grandchildren. Strong leadership will be the key. Fixing this is not rocket science. Acting on Government overspending has long been the challenge, and, harder and smarter work to build revenue in the interests of maintaining Aussies’ standard of living.
Mrs Rinehart’s comments follow a dire warning from Treasury earlier this year that back loaded costs associated with the previous government’s policies are likely to make the Coalition’s planned budget surplus in 2018 unlikely. Having already endured six successive budget deficits under Labor, this forecast is concerning for our ever-growing national debt.
Welfare payments make up the single largest category of government expenditure, taking up nearly one-third of the Commonwealth Budget. Mrs Rinehart’s article in Australian Resources & Investment did not, as some have suggested, recommend cutting assistance to those in greatest need within our society, particularly the elderly. It did suggest that the current state of the nation’s finances necessitates a rational discussion about our growing hand-out mentality.
Successfully addressing growing government expenditure will have a huge impact on Australia’s future prosperity. And Mrs Rinehart is right to point to the significant supply-side reforms instituted by Thatcher as a clear example of what can be achieved with strong political will and sound economic management. As she notes:
Margaret Thatcher became Prime Minister and the changes started. Expenditure was drastically cut. The stretch of ‘the state’ — or government — into people’s lives was wound back. In Britain then, much like in Australia today, welfare dependence and Government overspending had been growing.
Prime Minister Thatcher was a rare kind of politician. She was a true leader. She didn’t just say it: she acted on her belief in the need to rein in spending taxpayer’s money, and instead encourage the entrepreneurial spirit and investment.
She understood that letting ‘risk-takers’ succeed was a way out of the economic dilemmas her country faced. Without enterprising people paying tax, governments had no money to provide — including what a country needed to do — pay for healthcare, police, defence, caring for senior citizens, roads and helping those truly unable to help themselves.
The Australian Prime Minister and Treasurer could learn from Baroness Thatcher and Keith Joseph whose policies so successfully turned Britain around from economic despair – as outlined in Richard Allsop’s fantastic tribute to her in the IPA Review.
Both Joseph and Thatcher were aware that entrepreneurs were the driving force behind economic growth and prosperity. By lowering taxes and getting government out of the market, they were able to encourage the creation of a society more conducive to their success.
Thatcher’s reforms were not completed without significant resistance. However, driven by her conviction and determination she overcame all opposition. A piece by IPA Executive Director John Roskam for the Australian Financial Review illustrates this:
In March 1981, 364 economists signed a letter to The Times. They were the luminaries of the British economic establishment. The previous year the inflation rate in the United Kingdom reached 18 per cent and Margaret Thatcher, elected prime minister in 1979, was determined to reduce inflation through higher taxes and government spending cuts.
The economists protested there was “no basis in economic theory or supporting evidence” for such a policy in the middle of a recession and the country’s social and political stability was threatened.
In question time in the House of Commons, the leader of the Labour Party, Michael Foot, asked Thatcher to name two economists who agreed with her. She named Alan Walters and Patrick Minford. Walters was her economic adviser and Minford a professor at the University of Liverpool. After question time on her way back to her office, Thatcher apparently told an aide: “It’s a good job he didn’t ask for three.”
By 1983, the UK inflation rate fell to less than 5 per cent. Most of those 364 economists are now long forgotten. They’re famous only for being so wrong.