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NSW set to recover ahead of the pack

Discussion in 'The Economy' started by Billv, 22nd Jan, 2009.

  1. Billv

    Billv Getting there

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    NSW is already in recession, and the rest of Australia is hot on its heels, a new forecast to be published today says.

    But while collapsing commodity export income would cripple the sun-belt states of Western Australia and Queensland, the worse could soon be over for NSW, which stands to benefit the most from interest rate cuts and a lower dollar.

    Access Economics, in its latest quarterly forecasts, predicts Australia will enter a technical recession by the end of March, chalking up back-to-back quarters of negative economic growth. This is expected to slow the annual growth rate from 3.7 per cent last financial year to just 0.8 per cent this financial year, and then rise to 2.4 per cent the following year.

    "This is not just a recession. It will be the sharpest deceleration Australia's economy has ever seen," said a director at Access Economics, Chris Richardson.

    With spot market prices for most commodities already depressed to 2004 levels and Chinese growth slowing markedly, Australia had been left with little support for this year, Mr Richardson said.

    "Profits might have doubled in the last four years, but we see them halving again over the next two years."

    The current account deficit is predicted to rise, from $65 billion this financial year to $100 billion next year, as exports fall faster than imports. With the international spotlight back on debt, Mr Richardson said a large current account deficit could leave Australia exposed, should other countries prove unwilling to continue lending us the money needed to finance the deficit.

    At the same time the federal budget was also in "dire straits", already in deficit and set to go even deeper in the red. But the biggest budget risk was of "chicken-hearted policymaking" from the Federal Government, if important reforms on education, water and infrastructure were cancelled due to lack of funds, Mr Richardson said.

    The good news for NSW residents was that their days at the bottom of the economy heap might be numbered, as weakness infected the rest of Australia.


    more here
    NSW set to recover ahead of the pack - National - smh.com.au
     
  2. Chris C

    Chris C Well-Known Member

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    Hmmm those current account deficit figures are starting to get ugly. Hopefully the AUD can remain suppressed for awhile to allow us to chip away at it when commodity prices rebound.

    That or we could actually start exporting something other than commodities and teachers or stop buying rubbish consumer item imports.
     
    Last edited by a moderator: 22nd Jan, 2009
  3. Billv

    Billv Getting there

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    I wouldn't be surprised if they tell us to forget the tax cuts or to even increase income taxes....
     
  4. Chris C

    Chris C Well-Known Member

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    What would be even better is if they gave us the income tax cuts, then downsized the size of government, upped the GST to put downward pressure on consumption (which would include consumption of imports) as well as generating more taxes to create governmental budget surpluses (though maybe not in 2009 given the recession) then up the complusory super contributions from 9% to something like 12% to increase the savings rate within the country as well increase the likelihood that our population will be able to fund its own retirement. Throw in some extra perks like concessions for small business as well as getting rid of stupid government handouts like FHOGs and I'd be a happy man.

    I wonder if I'm a good boy all year if Santa will give me what I'm wishing for...

    :rolleyes:
     
  5. Jacque

    Jacque Team InvestEd

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    Ditto ditching the handouts. I think they've been a waste of taxpayer funds, especially the "save the economy" payments just prior to Christmas.

    Any increase in income tax rates would almost cause WW3, I'm sure, and the mere thought of upping the GST (remember NZ?) would send most Aussies into a state of solid apoplexy. Surely not good for our already overburdened health system? ;)
     
  6. Billv

    Billv Getting there

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    Jacque

    I agree, with your first sentence, what a waste of money that was.

    However, increasing income taxes and especially on the higher incomes will not hurt their voters so I am sure they will be considering it.

    After all, it's common knowledge that higher income eaners can afford to pay more...;)

    cheers
     
  7. Chris C

    Chris C Well-Known Member

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    In one sense I can appreciate the merit of raising taxes, albeit counter intuitive, but given we are in a credit crisis and everyone is saving their money or paying off debt, you could argue the point that if government increased taxes at least that increased tax revenues would be re-injected into the economy rather than saved.

    That said, I'm very much against upping income taxes, I have already consider moving to Vanuatu because I think the tax we pay is too high, and unlike to get lower given the baby boomers are about to move in to the heavy mooching stage of their life cycle.

    I'd hate to be the politician proposing the idea, but to be honest I don't see a way around it in the future. We can't have a massive segment of our population, retirees, bludging off the welfare of government and its services. The present working generation will need to accept that if you opt to retire, don't think that means you are getting out of paying taxes.

    Shock and Awe! I don't even know how to respond to that! Blasphemy!

    It is also common knowledge that the high income earners of Australia are the life blood of the economy, they are people that run the businesses that employ the masses, they are the educated and enlightened of Australia, they are not to be used and abuse - they should be cherished.
     
  8. Billv

    Billv Getting there

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    same here......
    I guess I am one of those who can afford to pay more tax.
    I have no doubt that mr Swan would be considering raising my tax bracket because
    a) I don't vote for him
    b)he does not have a lot of options atm
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Nope - there will be another round of personal income tax-cuts aimed squarely at the working class before mid-year, in the name of stimulating spending and bringing "relief" to stretched household budgets.

    There will be no increase in GST until inflation (and spending) starts to pick up again, but I have little doubt that it will happen within the next 5 years.
     
  10. Billv

    Billv Getting there

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    How?
    From what I hear the budget deficit is running out of control and they can't afford any tax cuts
     
  11. Chris C

    Chris C Well-Known Member

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    Pfft, since when has lack of money ever stopped a government from spending. The US owes the world $10 Trillion, which will probably double in the next 5 years alone! Anyway you want to do the maths the US ain't paying that debt back anytime soon (short of hyper inflating their way out of it) but unlike Germany in the early 1920s the US doesn't want to go to war with the entire world! Because that is what would happen this they shirk their responsibilities.


    Anyway, back on the point at hand, I think the world (probably China) will be happy to throw Ruddy a couple of billion in chump change, so we can smooth this little bump in the road. Unlike the US I reckon we are pretty good for it, plus China is going to own half this country in the next couple of decades anyway.


    The bigger question is which liberal politician has the charisma to convince Australia that paying more taxes is better in the long run. I'm assuming it will have to be a liberal because labor won't touch the policy with a ten foot pole.
     
    Last edited by a moderator: 23rd Jan, 2009
  12. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Of course they can. Budget surpluses are a bit of a novelty really. 12 years of Liberal government has seen us go a bit soft on the thought of a deficit. While I generally think that a surplus is a good thing - I think it needs to be balanced with a decent amount of spending, which is what the federal government has NOT done for quite a few years.

    The Labor government will try and spend its way out of recession and to heck with the defecit.

    I honestly don't think there's much alternative either - the govt HAS to start spending and doing so sooner rather than later. I just hope it is on meaningful national projects and not on politically driven welfare.
     
  13. Chris C

    Chris C Well-Known Member

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    LOL, no doubt the liberals will bad mouth every move they make along the way as well. Reminding Australia that a budget in deficit wouldn't have happened under them... ahhh I love politicians.

    This is the KEY point!

    There is never a problem with borrowing if you are investing in good quality projects that get a good ROI. Governments should operate just like normal business in this sense. In that they borrow when they have good projects to invest in, that are going to ultimate result in helping individuals and business achieve greater returns in which they can tax them for.

    Of course this sort of spending normally comes secondary to vote winning expenditure, ie hand outs to pensioners...

    :rolleyes:
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Actually I disagree here.

    I don't see the government's role as being responsible for making financially viable investments. I see their role as being responsible for making all the other investments which are for the good of the nation, where nobody else will spend the money exactly because they are NOT financially viable from a purely commercial point of view.

    Let private enterprise spend the money and take the risk for profit-making infrastructure (but not in the way that the NSW govt has ... where the tax payers end up paying for it all anyway :rolleyes: ).

    Roads, railways, dams, hospitals, schools, etc etc ... many of these are generally not profitable exercises, but are important to the nation as an investment in our future.

    Similarly, investments in R&D and other such activities which increase our intellectual capital and build new industries to diversify the nation's income.
     
  15. Chris C

    Chris C Well-Known Member

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    Sorry I should have clarified.

    I agree with you in that government should only be looking to undertake investments into public goods/infrastructure investments, like you mentioned, roads, rail, water, energy, etc, that the the market fails to adequately provide for yet yeilds a net benefit for society upon completion. So I see the role of governement acting like a normal business in the sense that it makes its respective investments decisions based on projects that yield a net benefit for society.

    My point being that there is no problem if the government borrows money and runs itself into deficit to build a new motorway they supposed cuts commuter travel time by 25% or something which ultimately reaps a net benefit for society and achieves a positive ROI when all things are considered.

    I do however have a major problem with giving handouts to pensioners who in turn throw the money into poker machines, drink it down at the lawn bowls club with their retiree buddies or piss it away in some other ultimately non societally beneficial expenditure.
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Being so anti-pensioner makes you sound like someone rather young.
     
  17. Chris C

    Chris C Well-Known Member

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    Whilst I definitely feel like I'm getting "old" at 23 many would argue the opposite.

    :p