Various recent comments to the effect that putative changes mooted concerning Australia’s current mix of revenue arrangements with respect to the Mining sector grossly threaten its Sovereign Risk standing strike me as hyperbolic and potentially misinformed. Over at least the past couple of centuries, Australian governments have had access to a remarkable pool of economic advice precisely calibrated to minimise investment uncertainty. This advice has generally been heeded by successive governments of disparate political complexion which, combined with other factors conducive to civil tranquility (take Australia’s consistently high ranking in the UN’s Human Development Index, for instance) have left it in a position whereby relative complacency on the question of Sovereign Risk therein seems prudent.
Mutatis mutandis, Australia isn’t entirely immune from Sovereign Risk concerns. Given that the above conditions of relatively high civil tranquility with governments being amenable to sage counsel while keeping an eye on constraints of commonsense emerged under its current system of government, it would seem that proposals to alter said system of government ought partly be assessed on whether such proposal/s are conducive to maintaining that enviable cocktail of conditions described above.
As a long-term recipient on psychiatric grounds of the Australian Disability Support Pension, I have a direct pecuniary interest in seeing its plausible maintenance and increase. Nonetheless, it seems worth bearing in mind a few factors which could militate against excessive recourse to the begging-bowl at present.
All else being equal, in fairly stable countries times of relative economic declension tend to affect long-term pensioners less negatively (or even positively in some cases) than others in the community. Since our income is fixed, deflation in commodities, rent and consumer goods allows it to go further in such times.
While our continued spending may serve to some extent as a demand-sink for the economy, governments may find themselves constrained by reduced revenue from precipitately increasing individual pension payments to those whose position remains stable, especially since more volatile sectors such as Construction or Commodities tend to disproportionately be adversely affected by recessions.
Contrariwise, we would tend to be at greater need of assistance when the economy is booming. Incidentally, I’d say the same of responsible landlords since rental yields tend to decline disproportionately compared to other asset classes in such fecund times.
Headlines such as this strike me as potentially rather misleading.
While things are quite bad economically at the moment, it nonetheless seems dubious to lump figures from seperate years into some purported “gross” revenue shortfall when most readers would be more attuned to thinking in terms of single-year increments.
More broadly, while I generally support much of the Rudd Government’s economic stimulus packages so-far , I do think that some alarmist rhetoric which has eminated from it has been irresponsible. When “animal spirits” are at stake, governments generally ought do what they can to soothe market sentiment.
Depression 2009: What would it look like?
Lines at the ER, a television boom, emptying suburbs. A catastrophic economic downturn would feel nothing like the last one.
– Boston Globe