Still, Labor risks being un-electable unless it urgently revises its policies about the Economy

Regain Voter Trust

To quote Neil Tinnock, Leader of the British Labour Party and Leader of the Opposition from 1983 until 1992

“… Kinnock says the party needs to overhaul its governing philosophy and policies if it is to regain voter trust. “It requires fundamental, rational thinking and recognising that the world imposes limitations,” he says., “It is a matter of management, intellectual and ideological rigour, and addressing the manifest needs of the people.”  See The Australian 11 Sept 20

Labor risks being left behind and unelectable unless it urgently revises its policy positions about the Economy, Budget Surpluses and Social and Environmental consequences of its Policy options.

The Media, most of which is very Neoliberal, has in recent months included articles about Modern Monetary Theory. This suggests to me that the Liberal/National mob are about to ditch their ‘ balance the budget’ fetish and wrong-foot Labor.

“Today, the Federal Treasurer is unveiling his fiscal update. Already the Opposition Labor treasury spokesperson has been on TV all morning embarrassing himself and effectively demonstrating why the Labor Party are unelectable.” He was raving on about the government ‘crashing’ through some debt ceiling (“half-a-trillion dollars”) and “racking up debt” and all the rest of his ridiculous ranting. Who is advising this guy? Neoliberal central! “

“Already, the Labor party are making political points out of the rising public debt, which just makes them unelectable really, rather than savvy.See Professor Bill Mitchell’s Blog July 23, 2020

Labor’s Fair Go seeks to deliver a decent pension, Medicare, the National Disability Insurance Scheme, high-quality aged care, schools, skills, TAFE and university access, care for the environment, address Indigenous disadvantage and much more.

It seems impossible to deliver a Fair Go (or indeed form a government) unless it works out money, taxes, debt etc and then re-educates its members and the community at large.

Labor can’t deliver a fair go unless it first re-examine its views about how a modern economy works and ditches ideas hanging over from the Gold Standard and the Bretton Woods era.

This post draws attention to how a modern economy really works. It seeks to make these points:-

  1. A Sovereign Currency Country’s government issues its own currency and can therefore purchase anything that is available for sale in that currency.
  2. Taxes should be levied to advance  public purpose and not about raising revenue.
  3. Because Australia issues its own currency, $A. It can run a deficit without borrowing.

Modern Monetary Theory gives government the power to govern in the everybody’s interest. When it spends money, it enables jobs to be created. When it adjusts taxes on incomes it controls inflation.  MMT allows full employment and inflation to be balanced, making a fairer society. See Professor Bill Mitchell’s Blog

A ‘fair go’ will require a Job Guarantee (JG): an economic policy proposal to solve inflation and unemployment. Its aim is to create full employment and price stability. The state hires the unemployed as an employer of last resort. See Blog JG and a Fair Go for our Society and its Economy

Taxes

The Australian Government requires that its taxes are paid only in $A, ensuring acceptance of its currency. Taxes can be levied to curb inflation or to advance economic issues or social issues, stimulate research and local manufacture and much more. All taxation should be regarded from the point of view of social and economic consequences.

More detail see Blog –Taxes and their Economic, Social and Political Issues in the light of the Coronavirus Epidemic  and my Facebook Page https://www.facebook.com/Kevin-Moran-113755396717132

Taxes should be all about public purpose and should never be about raising revenue.

State taxes are mostly inequitable and counter-productive – eg , stamp duties, rates, fees, poker machine taxes, payroll tax/ etc. Benefits from gaming taxes are far outweighed by the cost of trying to repair the damage they cause. Those who can least afford it are most affected.

The States should receive funding from the Australian Government, not by blighting the poor and gullible.

Deficits and Budget Surpluses

Australia issues its own currency, $A. It can run a pure deficit, without borrowings. Instead, it has been decided (politically) that … fund any budget deficit by issues of securities .. not borrow.  (See RBA website).The government can simply instruct the central bank to purchase its debt at whatever yield it chooses: the same effect as just crediting bank accounts on the government’s behalf.

A Budget Surplus is essentially meaningless – it is just the amount by which the proposed receipts – taxes, excise etc – will exceed proposed expenditure in a particular year or time scale. A budget deficit is the amount by which proposed expenditure will exceed proposed receipts. See Emergencies and epidemics – understand modern financial systems  and https://poiiticsand.wordpress.com/2020/04/27/we-must-understand-how-modern-financial-systems-really-work-to-deal-with-emergencies-like-coronavirus/

Debt is the amount owed at any point in time—what has been borrowed and not paid back.Assessing future obsolescence, technologies and relevance should guide government infrastructure investment – not pointless obsession with surpluses and financial ratios that are irrelevant to a government that has a Sovereign Currency.

Inflation, Hyperinflation, Currency Debasement in a Modern Economy

Modern Economies – Australia’s Monetary Sovereign Currency Government

The Australian Government uses its own currency. Modern monetary economies use fiat currencies – money declared by a government to be legal tender. Not convertible by law to something  else; not fixed in value against Gold, for example. Latin word fiat, meaning “let it be done”.

Australia has a monetary sovereign government, as do most others. The Eurozone countries are not monetary sovereigns: each of them use the Euro instead.

State and Local Governments cannot issue currency and rely on transfer payments from the Australian Federal Government and State and local taxes, stamp duties etc.

The Australian Government spends by crediting the reserves of a commercial bank which are held at the Reserve Bank and having the commercial bank credit the bank account of whoever is to be paid. Money enters the system when the government spends – by using its computers’ programs and keyboards.

A monetary sovereign government has a floating exchange rate, and no significant foreign currency debt.

Taxation

The Australian Government’s capacity to spend is independent of taxation revenue.. Tax revenue cannot fund spending. Governments spend first and tax afterwards.

Tax is all about the social consequences – the total impact of each tax on the real economy and on people’s well-being. In a modern economy, spending and taxing are economically separate activities

You can’t pay your tax bill in the currency the government issues until it has been previously spent into existence by the government  and a Sovereign Currency Government requires payment in its own currency.

Taxes exist to limit inflation. It’s necessary for us to pay taxes to keep total spending – government and private – at a level which will not be inflationary.

Taxes can be used to advance economic issues or address social issues, stimulate research and local manufacture and much more. All taxation should be regarded from the point of view of social and economic consequence.

Borrowing and Debt

The Australian government is a currency-issuing central government. It cannot run out of Australian dollars. It’s never forced to borrow  Australian dollars, although it choose to borrow. It’s Bonds  are a useful part of our financial system. A currency-issuer has no financial constraint, it never has to ‘finance’ the spending of the currency only it can issue. It can run a pure deficit, without borrowings. 

For every lender, there must be a borrower. That means that across our financial system, surpluses and deficits always add up to zero. The government’s deficit is the private sector’s surplus. A budget surplus drains savings from the private sector and that leads to loss of jobs and less work done.

Australia’s Sovereign currency-issuing Government can issue debt-free money – and it does this already see RBA has purchased a total of $A40,250 million worth of Australian government bonds

Inflation 

Inflation is the continuous rise in the price level for goods and services. If the price level starts to continuously fall, that is a deflation.

All spending carries an inflation risk. If nominal spending growth outstrips productive capacity, then inflationary pressures emerge.

Government spending can always bring idle resources back into use, without generating inflation. At full employment, a government wishing to increase its resource use has to reduce non-government usage. By curtailing private purchasing power, taxation, while not required to fund spending, can reduce inflationary pressures

Governments can cause inflation if they spend too much or not tax enough when it is needed. If this happens, the total level of spending in the economy exceeds what can be produced by all the available  resources – labour, skills, physical capital, technology and natural resources.

Governments can control inflation by spending less or withdrawing money from the economy by increasing taxes when that is required.

Money creation only produces inflation when the economy is at full capacity.

The only serious inflation in the post Second World War period that was global had nothing much to do with fiscal policy behaviour.The 1970s inflation was driven by the politically-motivated supply-shock (oil price hikes by the Arab OPEC nations).

Hyperinflation – massive  inflation levels – currency  debasement from governments massively increasing money supply (“printing money“).

“The empirical reality, … of what actually happens in hyperinflations shows that they are not the results of well-governed states abusing the money creation process. Rather, hyperinflation is typically a symptom of some underlying economic collapse, as happened in Zimbabwe and Weimar Republic Germany.” See Blog Positive Money

In addition to those Countries discussed briefly below, several others suffered hyperinflation in the 20th Century including Yugoslavia,  Mexico and Armenia.  Each of them suffered some underlying economic collapse first.

Wiemar Republic

  • Armistice ending fighting in 1918. Allied forces occupied the Rhineland. Treaty of Versailles imposed an enormous debt on Germany that could be paid only in gold or foreign currency. 
  • Gold depleted;  German government attempted to buy foreign currency with German currency,
  • Quantity of German marks on the market caused the currency to fall rapidly in value, which greatly increased the number of marks needed to buy more foreign currency.
  • Caused prices of goods to rise rapidly, increasing the cost of operating the German government, which could not be financed by raising taxes because those taxes would be payable in the ever-falling German currency. 
  • Deficit  financed by issuing bonds and simply creating more money, both increasing supply of  financial assets on the market, further reducing the currency’s price. 
  • German people realized that their money was rapidly losing value,and spent it quickly  – ever-faster increase in prices.

The government and the banks had unacceptable alternatives. If they stopped inflation, there would be immediate bankruptcies, collapse of civil order, insurrection and possibly even revolution. If they continued the inflation, they would default on foreign debt. Attempting to avoid both unemployment and insolvency ultimately failed when Germany had both.

John Maynard Keynes, principal representative of the British Treasury at the Paris Peace Conference’ –  

“I believe that the campaign for securing out of Germany the general costs of the war was one of the most serious acts of political unwisdom for which our statesmen have ever been responsible.See for example Wikipedia.

“Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of polities, of electoral chicane, from every point of view except that of the economic future of the States whose destiny they were handling.” (Keynes 1919)

Venezuela

Corrales, Javier (7 March 2013). “The House That Chavez Built”. Foreign Policy…. excessive dependence on commodity exports can distort an economy in fundamental ways. Occurs when a country that is excessively dependent on commodity exports experiences a price boom. The sudden inflow of foreign currency raises the demand for local currency, yielding an uncompetitive exchange rate. This overvalued exchange rate, if unaddressed, can kill the country’s other exports as well as stimulating an avalanche of imports, which can hurt domestic producers. “

Most critics cite anti-democratic governance, corruption and mismanagement of the economy as causes of the crisis. See Wikipedia

The causes of Zimbabwe’s hyperinflation are essentially these-

  1. Takeover  of productive, white-owned commercial farms. Unskilled and inept management, by those who had no earlier chance to learn, saw a collapse of food production. Unemployment  around 80 per cent.
  2. Infrastructure decaying and ruined by turmoil. Railways could no longer work properly. About 60%  decline in export mineral shipments in 2007.
  3. Manufacturing collapsed.. Raw material shortages. Manufacturers saw the  central bank stuff-up access to foreign exchange, required to buy imported raw materials.
  4. The Reserve Bank of Zimbabwe used foreign reserves to import food because the domestic food supply collapsed. Importers of raw materials cannot get access to foreign exchange..
  5. Government feather-bedding supporters, rorting – falling  productive capacity. Result  inflation and then hyperinflation. 
  6. Even if the government had have been running fiscal surpluses, the hyperinflation would have occurred such was the depth of the supply contraction. See  – Zimbabwe for hyper ventilators 101

Some Conclusions

  1. There remains a widespread  inaccurate and obsolete understanding about  how a modern economy actually works. The ALP and the Liberal/Nationals have shared  this unfortunate view at least until recently, apparently. The Government, ominously for Labor, has shown  signs that it is beginning to  wake up – see all manner of economic stimulus in response to COVID-19.
  2. Liberal/National Govt ‘bending’ stimulus measures to suit their neoliberlal philosophy -See  The JobKeeper Payment is a scheme to support businesses and not-for-profit organisations significantly affected by COVID-19, to help keep more Australians in jobs. ​
  3. Governments can control inflation by spending less or withdrawing money from the economy by increasing taxes when that is required. Concerned that the politicians we elect  have the flexibility to advance our well-being versus pork-barrels and popularity. – “because we don’t trust politicians”.
  4. Hyperinflation  does not  result from well-governed states abusing the money creation process – it is a symptom of  underlying economic collapse. We are oil imports dependent and weak on refining  capacity Agriculture Transport Defence Supply? This holds the seeds of economic collapse in the future?  

Subsequent Blog Posts are intended, seeking to offer further discussion and to seek comment and improvements.

ALP Nov 2020 Submission

This Submission relates to Chapter 1: Building Australia’s Prosperity – Prudent fiscal and monetary policy

12. Labor will deliver sound public finances by adhering to a fiscal strategy that achieves a balanced  budget on average over the economic cycle. Labor will take a responsible approach that  supports growth, jobs and invests in future prosperity while strengthening public finances.

13. Labor will deliver a progressive and sustainable tax system... guaranteeing adequate  revenue to fund quality public services, bring about a more equal distribution of income and  wealth … (etc).

These policy statements reflect Labor’s adherence to what is a widespread  inaccurate and obsolete understanding about  how a modern economy actually works. Most of us still have a near superstitious view of economics.  The ALP and the Liberal/National neoliberal mob  have shared  this unfortunate view at least until recently, apparently.

The Government, ominously for Labor, has shown  signs that it is beginning to  wake up. The Media, most of which is very Liberal/National in orientation, has in recent months included articles about Modern Monetary Theory. Are the Liberal/National mob about to ditch their ‘ balance the budget’ fetish and wrong-foot Labor?

Labor’s Fair Go seeks to deliver a decent pension, Medicare, a proper dealing with National Disability, high-quality aged care, schools, skills, TAFE and university access, care for the environment, address Indigenous disadvantage and much more.

Delivering a Fair Go or indeed being elected to Government is improbable while adhering to an economic agenda that is seriously out of date.

“…. Labor had decided well before the election to commit large amounts of taxpayers’ money to new spending initiatives. ….more than $100 billion. Having decided to spend this much more than the Coalition, Labor faced two choices: increase the budget deficit and public debt by the same amount or announce new revenue-raising measures to cover the cost.” Review of Labor’s 2019 Federal Election Campaign Page 17

About this submission

The following discussion is a summary of the basis and principles of a modern economy and how it works since the Gold Standard was abandoned in the 1970’s. Modern Monetary Theory provides a very detailed description of its workings.

A complete description and analysis is not possible in the space afforded to a submission like this. An internet search will provide full details and discussions. I have used bold type and italics to suggest where to search rather than providing links.

Australia is a Sovereign Currency Nation

The Australian Government uses its own currency. Much of the World does this too. European Union Countries – 28 of them, use the Euro. State and Local Governments cannot issue currency and rely on transfer payments from the Australian Federal Government, State and local taxes, stamp duties, rates, etc.

Australian Government spends by crediting the reserves of a commercial bank which are held at the RBA (Australia’s central bank), and having the commercial bank credit the bank account of the beneficiary of that spending. Money enters the system when the government spends it into existence. ‘A central bank simply creates new money at the stroke of a computer key’.

A Sovereign Currency country doesn’t borrow in foreign currencies or peg its currency to any other, spends and taxes only in its own currency, which floats against other currencies: and the central bank sets policy interest rates.

Government spending is not constrained by inflation. It is constrained by the capacity of the real economy. When spending (either by the private sector and/or the government sector) exceeds the capacity of the real economy, inflation increases. The real economy is the output of the underlying economy itself. Real wealth is assets, savings, goods and services. The only constraints that a currency-issuing government, such as the Australian government faces, are how many real goods and services are available for sale in $A.

Taxation supports demand for the currency

The Australian Government requires that its taxes are paid only in $A, ensuring acceptance of its currency.

A Sovereign Currency Government issues the currency and it must first spend it by crediting private bank accounts before it can tax – by debiting bank accounts. Sovereign Currency Governments spend first and tax afterwards. The Australian Government’s capacity to spend is independent of taxation.

Taxes should be all about public purpose and should never be about raising revenue.

Tax is all about the social consequences – the total impact of each tax on the real economy and on people’s well-being. In a modern economy, spending and taxing are economically separate activities.

Taxes can be levied to curb inflation or to advance economic issues or address social issues, stimulate research and local manufacture and much more. All taxation should be regarded from the point of view of social and economic consequences.

A core principle of tax design is neutrality: ensuring that taxes depend on behaviour as little as possible. Keeping tax as low as is necessary mitigates tax dodging. When the cost to avoid a big tax bill involves mobs of records, tax accountants, lawyers and even off-shore havens, then it will often be a better choice is to pay it, not dodge it.

Keep it simple and as small as necessary to achieve its fundamental purposes, which have nothing to do with raising revenue to spend.

As long as the 1940’s or earlier, society’s myths about money and taxes were beginning to be challenged. An excellent ‘wake up’ was given in a speech given to the American Bar Association in 1943 by The Federal Reserve Bank of New York chair, Beardsley Ruml:-Taxes for Revenue are Obsolete. Australia and much of the rest of the world needs to get up-to-date (or at least into the 21st century).

Debt and ‘Balanced Budgets’

Australia issues its own currency, $A. It can run a pure deficit, without borrowings. Instead, it has been decided (politically) that … fund any budget deficit by issues of securities .. A Budget Surplus is essentially meaningless – it is just the amount by which the proposed receipts – taxes, excise etc – will exceed proposed expenditure in a particular year or time scale.

Debt is the amount owed at any point in time—what has been borrowed and not paid back. Australia issues its own currency, $A. It can run a pure deficit, without borrowings – so there is no “debt’. Bonds issued in the past are repayable only in $A and this is done at the stroke of a computer key,

A Sovereign Currency Nation’s government like Australia’s primary purpose is to improve the well-being of its population. Balancing budgets is an irrelevant and destructive blind alley. The real economy is what is relevant to well-being, care for the environment, defence, research education, aged-care and employment (and so much m​ore).

Growth in the money supply is critical for economic growth, and there are only two ways that the money supply can grow in a fiat currency system – Government spends more than it collects – runs a deficit or by private credit growth.

Australia’s Sovereign currency-issuing Government can issue debt-free money – and in reality it does this already. The RBA has purchased a total of $A40,250 million worth of Australian government bonds already and it proposes to purchase $100 billion more in the near future.

“The Reserve Bank has been injecting substantial extra liquidity into the financial system through its daily market operations. In March 2020, the Bank announced it would conduct regular one-month, three-month and six-month maturity repurchase operations as long as market conditions warranted…

….our plan to buy $100 billion of government bonds over the next six months will help people get jobs and support the recovery of the Australian economy. Philip Lowe Governor  Reserve Bank of Australia Sydney – 3 November 2020.

If the Government’s own Reserve Bank can conduct maturity repurchase operations to buy back the government bonds it has itself issued, it makes no sense to fund any budget deficit by issues of securities. Bonds issued in the past are repayable only in $A and this is done at the stroke of a computer key

Since 1971 when Bretton Woods and gold convertibility was abandoned, currency issuing Governments do not need to borrow the fiat currency their central bank creates by normal balance sheet operations. This means that taxes and bond sales do not fund government spending.

A Job Guarantee (JG)

A ‘fair go’ will require a Job Guarantee (JG): an economic policy proposal to solve inflation and unemployment. Its aim is to create full employment and price stability. The state hires the unemployed if there is no other work available or they choose to take a JG job instead.

Distinguished British economist John Maynard Keynes, as long ago as the 1930’s wrote : ‘… outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.’ https://www.investopedia.com/terms/k/keynesianeconomics.asp

A Job Guarantee would be an automatic stabiliser that ensures that the Government is doing the necessary amount of spending where it is needed in the right places and right time to achieve full employment with stable prices. When the private sector is recovering, federal government spending would automatically fall as people leave the Job Guarantee for higher paid jobs elsewhere. When the private sector experienced a downturn, federal government spending would automatically increase as people lose their private sector jobs and enter the Job Guarantee.

The Australian Government should fund and control the JG program with on-going engagement and participation by Australia’s State and Local Governments and Community Councils

Australia’s Job Guarantee Program should be managed at local area or even neighbourhood levels and administered by an Australian Government Department, the culture and emphasis of which would focus on its reason for existence – to serve the needs of the environment, community, and people and to enhance the public good.

Each area’s Program must be managed and supervised by appropriately qualified people – a well paid, sought-after job.

A Job Guarantee’s management and some of its day to day work allocation and supervision would require additional staffing at Local levels with staff engaged by the State, Local or Community Council or perhaps also by a Statutory Authority on an on-going basis. This funding should also be funded by the Australian Federal Government.

The JG should be integrated into a coherent training framework.TAFE and perhaps less often University training along with private enterprise business offering specialist courses in, e.g. truck and plant driving and operation need to be provided with the JG framework.

Examples of Job Guarantee projects and jobs

  • Fire load reduction to mitigate bushfire risk, including indigenous Fire Management practices – ( On-going management permanent – JGs supplement and augment)
  • Noxious Weed eradication – rabbits, foxes, deer pig etc: rubbish removal on beaches and in waterways
  • Community gardens, particularly in remote areas – good tucker for kids, aged, deprived.
  • Enhanced care of National Parks, recreation areas, sporting facilities, school premises and streets and neighbourhoods generally. ( On-going management permanent – JGs supplement and augment)
  • Indigenous health, nutrition, social and other problem areas – Care for Country.- Indigenous Fire Management practices. ( On-going management permanent – JGs supplement and augment)
  • Restoration and maintenance of native grasslands, forests, streams etc

Some possibilities after adoption of the measures outlined above

  1. Provide a Job, not ‘benefits. – A JG does away with the mind-blowing and administratively wasteful and expensive Centrelink requirements …. JobKeeper Payment .. part of your taxable income … must report any JobKeeper Payment income you or your partner get. … pay you too much and you may get a Centrelink debt….. meet mutual obligation requirements if you get JobKeeper Payment and an income support payment. … supporting people while they look for work. Jobactive, is all outsourced.
  2. Get rid of sham “contracting” GIG economy: Uber Deliveries etc. JG will ensure that nobody has to work in unsafe, poorly paid and exploitative jobs.
  3. Pay the Pension, regardless of income or assets, to anyone lawfully resident in Australia- or able to return to Australia after temporary residence overseas when they reach,say, 65. The ‘cost’ of paying the well-off is largely offset by doing away with Centrelink.
  4. Pay those who are unable to work a pension similar to that suggested for Age Pensions directly by those eligible for NDIS’ pay people directly at a livable rate. Do away with NDIS contractors who manage and control the disabled and profit from them.
  5. Examine how to permit e.g. nonprofit and for-profit operators to provide age care and disability services ethically and affordably for those whose pensions are at a sufficiently high level to permit private enterprise to operate at a profit and meet mandatory quality standards.
  6. Examine the Superannuation system – adjust it to reflect everyone’s access to a Fair Go with a livable pension. Can it be better offered as an option and open a choice between satisfying current needs rather than ‘punting’ on how much a Fund will offer tears away.
  7. Examine how Taxes are to be used – low or nil taxes as we have them now. How best to tax when inflation is likely
  8. Consumption taxes, Tax the users of Natural Resources who diminish them? Tax premises used to sell junk food or have poker machines and casinos etc?
  9. Look at how best to transition to a clean economy and preserve jobs and communities whilst phasing-out fossil fuel use. Use existing mines and resources – skilled people transport and powerlines to transition and satisfy the need to have diesel fuel for agriculture, transport, defence (nearly all of which is imported).

Did Charles Dickens inspire the neoblieral delivery of social security services via Centrelink?

‘Mr Limbkins, I beg your pardon, sir! Oliver Twist has asked for more!’ ‘For MORE!’ said Mr Limbkins. ‘Compose yourself, Bumble, and answer me distinctly. Do I understand that he asked for more, after he had eaten the supper allotted by the dietary?’ ‘He did, sir,’ replied Bumble.

‘That boy will be hung,’ said the gentleman in the white waistcoat. ‘I know that boy will be hung.’…. Oliver was ordered into instant confinement; and a bill was next morning pasted on the outside of the gate, offering a reward of five pounds to anybody who would take Oliver Twist off the hands of the parish. In other words, five pounds and Oliver Twist were offered to any man or woman who wanted an apprentice to any trade, business, or calling. https://www.charlesdickenspage.com/twist-more.html

Recommendations

  1. Labor should quickly begin an ongoing review of its mind-set about a modern economy, aimed at ditching ideas hanging over from the Gold Standard and the Bretton Woods era. Monetary policy and Fiscal policy are now the tools by which a modern economy adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
  2. Labor should widely seek on-going informed input from Economists, Academics, and other relevantly trained and competent persons as well as the broader community. Those with a clear, balanced and informed view of Modern Monetary Theory must be included. (For example, Bill Mitchell a professor at University of Newcastle – also holds the position of Docent Professor in Global Political Economy, Faculty of Social Sciences,University of Helsinki. He has advised Governments in Europe,J apan and elsewhere- recently February 2020 – Presentation to the French Treasury and Presentation to French Senate Commission,)
  3. Evidenced–based recommendations from the Review should be adopted and incorporated into Labor Policy.

Apprenticeships – A Job Guarantee Program and Apprentices

Serious problems  with the current situation  –  views  offered to the Portarlington Labor Party Branch’s Think Tank  on 30th October 2020 seeking  members’ suggested solutions.

“Many young people are unsuited to a year 11 and 12 High school education and therefore join the workforce … Some of these apply for apprenticeships.To complete a successful apprenticeship some important things need to happen –

  • Further schooling in your trade is essential e.g. TAFE
  • On the job training needs to be carried out by a mentor who is good at passing on their experience therefore making it enjoyable to turn up for work.

There have been well over 100,000 apprenticeships lost during the pandemic. Many apprenticeships are also not completed for some of the following reasons –

  • The employer churns the apprenticeships so they continually get the first 9 months 50% subsidy.
  • If the employment is not a satisfactory experience they should be able to take the subsidy with them to the next attempt.
  • The tasks they are given are sometimes difficult, exhaustive labour, poor working conditions. Unsafe and dangerous work.
  • They hear from their friends that they get paid much more for less demanding work such as Supermarkets etc – so have to make a decision when they compare jobs is it all worth it. A Job Guarantee Program and Apprentices
  • On the Bellarine only around 40% of young people get their driver’s licence making it difficult to get to work and training. 
  • It is also important that apprentices know their rights.

Some courses are more expensive. Depending on which State you are in this is even more so depending on the traineeship. The current budget gives 50% to the employer for the first 9 months. Labor needs to look at extending this with a percentage for each year of the up to 4 year apprenticeship. Being that some apprenticeships have a success rate around 40% the apprentice would need to take the money to their next employer and the employers gaming the system to be weeded out.

You are extremely lucky  if you have a mentor that is competent at passing on their knowledge during your training.”

This Blog Post offers the view that  a Job Guarantee Program (JG) would address all the issues raised and do much more good as well. It suggest too that the Coalition mob’s Neoliberal bias precludes it introducing a JG, preferring austerity and ‘smoke and mirrors”.

A Job Guarantee’s purpose is to find a mechanism for anyone who wants to work to be able to succeed in and benefit from the JG job, while doing something useful for the community as a whole.

The government should introduce a Job Guarantee that offers a job at a living (minimum) wage to anyone who wants to work but cannot find employment. See:- Particularly, Bill Mitchell – Professor in Economics – University of Newcastle, NSW And Here

What is a Job Guarantee (JG)?

A Job Guarantee Program (JG) is … a sustainable solution to the dual problems of inflation and unemployment. … create full employment and price stability, by having the state promise to hire unemployed workers … based on a buffer stock principle whereby the public sector offers a fixed wage job to anyone willing and able to work thereby establishing and maintaining a buffer stock of employed workers. This buffer stock expands when private sector activity declines, and declines when private sector activity expands…’ See Wikipedia

A Job Guarantee Program and Apprentices

A Job Guarantee Program  provides a far better option –

“Alternative to bad jobs: It displaces “bad” labor practices and helps to eliminate “bad” jobs. If the public employment option offers a decent job at decent pay, employers who pay poverty wages with difficult working conditions would have to match the JG pay and conditions to retain workers.  Establishes a “labor standard” for the economy as a whole: Because it guarantees that every person who wishes to work can find a public-option job with a living wagebenefit package, the JG establishes the labor standard that must be met by all employers in the private, public, or nonprofit sectors. 

The job guarantee placements should therefore include a training or learning element appropriate to the person’s and industry’s needs. For the individual, the job guarantee needs to come with an entitlement to government funded learning with all participating workers taking an initial assessment to explore where their specific upskilling needs are. The job guarantee scheme could also be built into a kick-start to apprenticeships… Apprenticeships offer jobs on all levels from entry to higher level. “

See Trades Union Congress post

Each local  JG  JobBank would need  to transport its workers to a number of work-sites and to centres offering job training. Several small buses would be needed to be available at each  local JG Depot. Transporting  young people to work and training would be integrated with the local JG’s works program.

Australia’s Job Guarantee Program should be funded, managed at local area or even neighbourhood levels, and administered by an Australian Government Department, the culture and emphasis of which would focus on its reason for existence – to serve the needs of the environment, community, and people and to enhance  the public good.

“One option, together with bringing forward infrastructure spending, is a Job Guarantee Program. Such a Program would expand and contract with the economy and could create a fully employed workforce in targeted age groups. Jobs would be provided through NGOs, local government and the public sector – jobs that provide socially useful work for real wages, rather than simply paying the dole. These jobs could be part-time and be combined with skills training. ” 

See Libby Coker’ s Maiden Speech.
 
 
Please see below highlighted in blue – click on any of them eg Job Guarantee for more Posts and Links

Australia’s Sovereign Currency and Taxes, Balanced Budgets and Debt

 

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Introduction

Politicians of all kinds, Media, many Academics and those of us who have neither the time, backgrounds or knowledge to challenge the prevailing superstitions are still trapped in a commodity money mindset.

If the Community and Governments understood what a currency issuing country was able to really fund, there is prospect for an Australia with a vibrant economy, affordable tertiary and vocational education, research, equitable pensions, health care, jobs, respect for the natural environment, addressing indigenous disadvantage and much more.

Australia is a Sovereign Currency Nation 

The Australian Government uses its own currency, issued by the Reserve Bank of Australia (RBA). China, USA, Japan, United Kingdom and New Zealand and many others do the same. State and Local Governments cannot issue currency and rely on transfer payments from the Australian Federal Government, State and local taxes, stamp duties, rates, fines and fees, poker machine taxes etc (blighting our less fortunate).

When the Australian Government spends, it does so by crediting the reserves of a commercial bank which are held at the RBA (Australia’s central bank), and having the commercial bank credit the bank account of whoever has been the beneficiary of that spending. Money enters the system when the government spends it into existence.

A central bank simply creates new money at the stroke of a computer key, in effect increasing the credit in its own bank account. It can then use this new money to buy whatever assets it likes’. Bank of England publication ( Quarterly Bulletin 2014):-

Federal Reserve Bank Chair Ben Bernanke – “The banks have accounts with the Fed, much the same way that you have an account with a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.”

A Sovereign Currency country doesn’t borrow in foreign currencies or peg its currency to any other, spends and taxes only in its own currency, which floats against other currencies: and the central bank sets policy interest rate.

Government spending is not constrained by inflation. It is constrained by the capacity of the real economy. When spending (either by the private sector and/or the government sector) exceeds the capacity of the real economy, inflation increases. The real economy is the output of the underlying economy itself. Real wealth is assets, savings, goods and services

A Sovereign Currency Government issues the currency and it must first spend it by crediting private bank accounts before it can tax – by debiting bank accounts. The claim that governments must tax or borrow to ‘finance’ its spending is false under a fiat-currency system. 

The restrictions on government spending are the quantity of real goods and services available for sale in its own currency, including all the unemployed labour. The only constraints that a currency-issuing government, such as the Australian government faces, are how many real goods and services are available for sale in $A.

Taxation supports demand for the currency

The Government has to spend money into existence. Without that there can be no tax. The Australian Government requires that its taxes are paid only in $A, ensuring acceptance of its currency. Taxation supports demand for the currency. The Australian Government’s capacity to spend is independent of taxation revenue.

Sovereign Currency Governments spend first and tax afterwards. Tax is all about the social consequences – the total impact of each tax on the real economy and on people’s well-being. In a modern economy, spending and taxing are economically separate activities.

Taxes can be levied to curb inflation or to advance economic issues or address social issues, stimulate research and local manufacture and much more. All taxation should be regarded from the point of view of social and economic consequences.

As long as the 1940’s or earlier, society’s myths about money and taxes were beginning to be challenged. An excellent ‘wake up’ was given in a speech given to the American Bar Association in 1943 by The Federal Reserve Bank of New York chair, Beardsley Ruml:-Taxes for Revenue are Obsolete. Australia and much of the rest of the world needs to get up-to-date (or at least into the 21st century). 

Debt and ‘Balanced Budgets’

Australia issues its own currency, $A. It can run a pure deficit, without borrowings. Instead, it has been decided (politically) that … fund any budget deficit by issues of securities .. A Budget Surplus is essentially meaningless – it is just the amount by which the proposed receipts – taxes, excise etc – will exceed proposed expenditure in a particular year or time scale.

Debt is the amount owed at any point in time—what has been borrowed and not paid back. Australia issues its own currency, $A. It can run a pure deficit, without borrowings – so there is no “debt’. Bonds issued in the past are repayable only in $A and this is done at the stroke of a computer key,

A Sovereign Currency Nation’s government like Australia’s primary purpose is to improve the well-being of its population. Balancing budgets is an irrelevant and destructive blind alley. The real economy is what is relevant to well-being, care for the environment, defence, research education, aged-care and employment (and so much m​ore).

Growth in the money supply is critical for economic growth, and there are only two ways that the money supply can grow in a fiat currency system – Government spends more than it collects – runs a deficit or by private credit growth.

Australia’s Sovereign currency-issuing Government can issue debt-free money – and it does this already see RBA has purchased a total of $A40,250 million worth of Australian government bonds

The Reserve Bank has been injecting substantial extra liquidity into the financial system through its daily market operations. In March 2020, the Bank announced it would conduct regular one-month, three-month and six-month maturity repurchase operations as long as market conditions warranted…”

Since 1971 when Bretton Woods & gold convertibility was abandoned, currency issuing Governments do not need to borrow the fiat currency their central bank create by normal balance sheet operations. This means that taxes and bond sales do not fund government spending. See – http://bilbo.economicoutlook.net/blog/?p=45106
http://bilbo.economicoutlook.net/blog/?p=45108

 

 

Use low emissions electricity from coal and biomass to facilitate transition towards 100% renewable energy

 Summary and a conclusion

  • Population growth automatically increases energy consumption: reducing  growth is complex and long-term.
  • Australia depends almost completely on oil imports for its liquid fuel.
  • Hydrogen energy powered by renewable energy, has zero emissions. If produced from fossil fuels by  more usual methods it takes  more energy ore energy to transform the fossil fuels into hydrogen than if they were just burnt.
  • Without ‘carbon capture and storage’—CCS the carbon footprint is higher than that of conventional petrol/diesel production. Carbon capture and storage has its problems.
  • Can’t shut down our coal and gas-fired power plants industries overnight,  In transition, reduce these emissions quickly. 
  • Direct Injection Carbon Engine – DICE  the most immediately  available option
  • Thermal blocks developed at Newcastle University could convert coal-fired power stations to run fossil-fuel free.

CSIRO’s statements and “A Swiss commercial partner, E2S Power AG, plans to use MGA Thermal brick” highlight the need for the Australian  Government to fund CSIRO and other research institutions adequately and to ensure that Australian industry and the community benefit – not just see the $$$$$s go offshore. 

We must reduce net greenhouse gas emissions

Greenhouse gas emissions from energy use respond almost proportionately to changes in population size. Population growth automatically increases energy consumption – Overpopulation. See also United Nations Report   and The Lancet from 2012.

Reducing the World’s population growth towards a sustainable level  is a challenging, complex and long-term task. It is essential that we focus  now on renewable energy, phasing out the use of coal and other fossil fuels, electric vehicles and clean energy technologies.

We must stop using non-renewable energy as quickly as possible. However, we’re not able to shut down our coal and gas-fired power plants and polluting industries overnight, and while we continue to transition to a clean energy system, anything we can do to get those emissions down is vital.

Right now and for some time to come, Australia’s society and its economy depends on liquid fuel

Australia depends almost completely on oil imports for its the liquid fuel. We do not refine or store  enough – even using the USA to store some, in case of  global  strife (Incredibly).  See -Deal-of-the-century-or-dud

Without imported liquid hydrocarbons the Economy would stop and our Society collapse within  weeks. No oil, no gas, electricity, water, sewage,hospitals prisons. Defence? Agriculture? Food transport and distribution? Cars, trains buses?

Moving towards hydrogen

  1. Hydrogen can be used as a fuel to power our homes, transport and major industries, although this is still some years away and will require the right infrastructure.
  2. At present,  more than 95% of hydrogen is produced from fossil fuels by steam reforming or partial oxidation of methane and coal gasification 11
  3. Both these methods are high in emissions – it takes more energy to transform the fossil fuels into hydrogen than if they were just burnt.
  4. Emissions used to create this hydrogen are trapped and stored underground  – carbon capture and storage, or CCS).  This too has its problems.
  5. Hydrogen energy that has zero emissions uses electricity to split the hydrogen from water. If this is powered by renewable energy, it has zero emissions.

Coal to liquid fuel

Coal to liquid fuel is a proven if expensive technology – Australia and Germany did it in WWII, and South Africa did it during Apartheid.

Without ‘carbon capture and storage’—CCS the carbon footprint 150–175 per cent higher than that of conventional petrol/diesel production from oil.[9] )..

South Africa’s CTL plants  do not incorporate CCS, as described above. Indeed, Sasol’s three plant complex has been identified as the world’s largest single emitter of CO2   See

Direct Injection Carbon Engine – DICE  the most immediately  available option

To quote CSIRO

A man standing beside a DICE engine (a large piece of metal machinery).

While various actions can be taken to reduce greenhouse gas emissions, the size of the problem is so large that a mix of approaches is necessary.

Coal-based electricity provides about 80 per cent of Australia’s National Electricity Market (NEM) supply.

The major challenge for coal-fired power generation is to reduce its COemissions.

Cleaner coal technologies

In collaboration with industry partners CSIRO has been developing an alternative pathway to low emissions electricity from coal and waste biomass through the Direct Injection Carbon Engine (DICE). DICE is a modified diesel engine running on a mix of coal and water.

This advanced coal technology involves converting coal or biomass into a water-bimmediaterlyased slurry- a fuel called micronised refined carbon (MRC) that is directly injected into a large, specially adapted diesel engine. The fuel burns to produce intense temperature and pressure in the engine, which provides highly efficient power to turn electrical generators.

CSIRO’s research is developing processes to produce the low-mineral-matter MRC required by DICE from a range of feedstocks, including brown coal, black coal, and woody biomass. The unique test facilities allow characterisation of the injection and combustion behaviour of these MRC fuels under the intense conditions found in diesel engines.

In addition, CSIRO are partnering across the supply chain to gain valuable large-scale experience that will support the ongoing commercialisation of this technology.

Benefits of this technology include increased efficiencies in electricity generation; significant reduction in greenhouse gas emissions; delivery of power in a shorter timeframe and at a smaller scale than conventional coal technologies; and diverse fuel potential including black and brown coal, as well as biomass, tar, and plastics.

DICE technology is probably best described as in the demonstration to deployment phase of development.

On this basis, current estimates suggest that the real program expenditure of $61.8 million will lead to:Total benefits (measured as cost savings in capital/operating costs, carbon emissions, in real, present value terms) of up to $532 million, depending on the assumptions made; and a benefit cost ratio of up to 8.6:1.

Thermal blocks developed at Newcastle University could convert coal-fired power stations to run fossil-fuel free

To quote from ABC Newcastle  5 September 2020

It looks like a brick or paver, but a metal alloy developed by Australian scientists could hold the key to efficiently storing renewable power as thermal energy.

The patented Miscibility Gaps Alloy (MGA), developed over several years by the University of Newcastle, is being brought to market by MGA Technology.

Professor at the university, materials scientist and lead researcher, Erich Kisi, said the innovation will enable renewable energy to be used as reliable baseload power, a challenge that proponents of renewable energy have faced for decades

Unlike coal-fired power, which is regulated and controlled, renewable energy was a challenge because it is less predictable and inconsistent.

“We’ve made renewable energy compatible at grid-scale so that when the sun doesn’t shine, or the wind drops the grid still delivers power on demand,” Professor Kisi said.

A Swiss commercial partner, E2S Power AG, plans to use MGA Thermal bricks, made from ‘readily available and nontoxic materials, to power a 55-megawatt demonstration plant in Europe, in late 2021.

“The cost of decommissioning a power plant is incredibly high, so their life-cycle management is a huge challenge,” Professor Kisi said.

MGA blocks are an opportunity to re-deploy retired or stranded plants, turning a liability into a high value asset.”See MGA Thermal Blocks

Initiatives the government should pursue to stimulate economic activity

The following is and extract from Professor Bill Mitchell’s Blog –  See Billy Blog

My purpose in distributing this extract is to ‘stir up the possums’ in the hope that some coherent policy re-drafting will be initiated leading to  an electable Party and ultimately a Fair Go

This is what Professor Mitchell had to say-

What would I do about this situation?

I am on The Age/Sydney Morning Herald Scope Survey Panel, which comprises most of the prominent economists in Australia who on a semi-annual basis answer questions about the period ahead about likely movement in aggregates (GDP, inflation, employment, unemployment, wages, house prices etc) and other mo1. Fast track the shift to a non-carbon economy – for example, create the Hunter as a Renewable Hub Region and start investing in building that hub, which would span, research and design, innovation, manufacturing, sales, administration, technical support etcre qualitative assessments.

I completed my survey response for the next period ahead this morning and one of the questions was: -Should the federal budget contain extra measures to stimulate economic activity? What sort of measures? Should that include a bring-forward of the 2022 and 2024 tax cuts?

The current fiscal support is more than $100 billion short of what it should be. The Federal government has injected less than 9 percent of GDP and spread it out over several years.

When you think that the Japanese government’s first stimulus injection was around 21 percent of GDP and another injection of similar size is coming, the evidence is obvious.

Their unemployment rate has barely moved, our labour wastage is around 20 per cent (unemployment, underemployment, drop in labour force – hidden unemployment).

Tax cuts will not provide a spending boost – we saw that in the most recent cuts. Why? Because household debt is too high and people used the tax cuts to increase their savings and pay down their debt to make it less precarious.

You saw in the last National Accounts that the household saving ratio went from 6 percent of disposable income to 19.8 per cent as the fear of the pandemic (unemployment, income loss) saw a dramatic cut in consumption expenditure.

It would be better for the government to increase spending substantially, which will allow saving to be supported by the growth in income and will directly boost sales and jobs.

Initiatives the government should pursue:

1. Fast track the shift to a non-carbon economy – for example, create the Hunter as a Renewable Hub Region and start investing in building that hub, which would span, research and design, innovation, manufacturing, sales, administration, technical support etc. The choice of the Hunter is because it will allow local workers to see there is a pathway out of coal.

2. Fast track the design and contracts for a fast train from Brisbane to Melbourne – which should have been constructed years ago. Make it a public corporation which does not have to earn profits.

3. Reassert NBN Co as a public company and abandon its ‘cost recovery’ constraints and offer free services to retailers at fast speeds and regulate low retail charges.

4. Abandon JobKeeper and instead directly pay wages and salaries of all workers in line with their previous tax statements. Work around the edges for those without a tax record.

5. Fund TAFE properly to increase its capacity to train apprentices and fund the creation of thousands of apprenticeships across Australia.

6. Invest in manufacturing capacity to make Australia more self-reliant in a number of areas – health care, transport, renewables, etc.

7. Increase the funding to universities and regulate the salaries of the managerial class in that sector downwards as a condition for adequate funding of research and teaching. End the trend towards casualisation in the research sector.

8. Regulate the GIG economy to bring it in line with other labour market segments – that is, ensure full leave and sick entitlements are paid, no ‘independent contractor’ exceptions, superannuation contributions etc.

9. Require the Fair Work Commission to restore penalty rates to all workers who have lost them.

10. Introducing a Job Guarantee – an unconditional job offer in the public sector at a socially inclusive minimum wage, with full entitlements (holiday, sick leave, super payments etc) which allows anyone to work and choose their hours, choose training and/or formal education. This is not workfare. Abandon the unemployment benefit system. We need a wide ranging discussion about what constitutes productive work to broaden that concept and include many areas of unmet community and environmental care needs in our employment focus.

11. Introduce a state-owned bank that can provide competition to the big 4 and bring down charges, gouging etc.

12. Free child care.

13. Free public transport.

14. Enhance the career public sector in several areas – health, education, occupational planning, regional development – and end the trend to rendering the public sector a contract brokerage for outsourced private contracts for public service delivery.

15. Ensure the CSIRO, the ABC, SBS are adequately funded as public institutions.

16. Increase foreign aid substantially.

17. Abandon the Closing the Gap process, and restart it with proper targets that are properly funded – which will include many of the initiatives outlined above.

18. Stop defunding public education and revise the schooling funding model in favour of public schools.

19. Invest in 400,000 or more social houses to meet the massive excess demand and make housing affordable for low-paid workers and their families. This will be a big boost to the construction sector.

20. Retrofit the existing housing stock to make it more carbon neutral. There is a massive amount that can be done in this area to invest in smart housing technology for all families to militate against the climate emergency.

And that is just for starters!

Portarlington School Community Garden – 23 September 2020

Still working from home

Still only a few of us Vegetables able to work together and masked at that.  The good news to date suggests that  COVID-19  is in retreat and that a return to a more normal work-place for the Garden is likely soon.

Sharing information about what each working party of 2 is doing is essential and this Post seeks to aid this communication process.

Briefly,  Bruce and Kevin: –

  • Pulled out some silver beet –taken to Port Foodbank.
  • Worms fed
  • Weeded  and prepared more beds for planting

Planted Midyum Berries Austromyrtus dulcis – ​ 6 Plants. An Indigenous edible used by Aboriginal people for its fruit and fibre. Tastes like a blueberry with  hint of nutmeg and whiff  of eucalyptus in the skin.

Hopefully, a nibble for the school and a useful learning/teaching resource,

Austromyrtus dulcis - Growing Native Plants

Portarlington School Community Garden -16 September 2020 -Will be Updated

Still working from home

Did not think that I would need this Blog Post but still only a few of us Vegetables able to work together and masked at that. Sharing information about what each working party of 2 is doing is essential and this Post seeks to aid this communication process.

Briefly,  Bruce and Kevin: –

  • Pulled out some silver beet in bed 15-taken to Port Foodbank.
  • Watered  seedlings in green house – none look ready yet to plant in beds, In Kevin’s opinion [?}
  • Bruce spread stuff on more paths
  • Bruce’s worms fed
  • Weeded some bits

Kevin went out and bought Midyum Berries Austromyrtus dulcis ​ 6 Plants  to go near new  path. Will plant when out of quarantine

 

 

 

 

Labor risks being unelectable unless it urgently revises its policies about the Economy

Regain Voter Trust

To quote Neil Tinnock, Leader of the British Labour Party and Leader of the Opposition from 1983 until 1992

“… Kinnock says the party needs to overhaul its governing philosophy and policies if it is to regain voter trust. “It requires fundamental, rational thinking and recognising that the world imposes limitations,” he says., “It is a matter of management, intellectual and ideological rigour, and addressing the manifest needs of the people.”  See The Australian 11 Sept 20

Labor risks being left behind and unelectable unless it urgently revises its policy positions about the Economy, Budget Surpluses and Social and Environmental consequences of its Policy options.

The Media, most of which is very Neoliberal, has in recent months included articles about Modern Monetary Theory. This suggests to me that the Liberal/National mob are about to ditch their ‘ balance the budget’ fetish and wrong-foot Labor.

“Today, the Federal Treasurer is unveiling his fiscal update. Already the Opposition Labor treasury spokesperson has been on TV all morning embarrassing himself and effectively demonstrating why the Labor Party are unelectable.” He was raving on about the government ‘crashing’ through some debt ceiling (“half-a-trillion dollars”) and “racking up debt” and all the rest of his ridiculous ranting. Who is advising this guy? Neoliberal central! “

“Already, the Labor party are making political points out of the rising public debt, which just makes them unelectable really, rather than savvy.See Professor Bill Mitchell’s Blog July 23, 2020

Labor’s Fair Go seeks to deliver a decent pension, Medicare, the National Disability Insurance Scheme, high-quality aged care, schools, skills, TAFE and university access, care for the environment, address Indigenous disadvantage and much more.

It seems impossible to deliver a Fair Go (or indeed form a government) unless it works out money, taxes, debt etc and then re-educates its members and the community at large.

Labor can’t deliver a fair go unless it first re-examine its views about how a modern economy works and ditches ideas hanging over from the Gold Standard and the Bretton Woods era.

This post draws attention to how a modern economy really works. It seeks to make these points:-

  1. A Sovereign Currency Country’s government issues its own currency and can therefore purchase anything that is available for sale in that currency.
  2. Taxes should be levied to advance  public purpose and not about raising revenue.
  3. Because Australia issues its own currency, $A. It can run a deficit without borrowing.

Modern Monetary Theory gives government the power to govern in the everybody’s interest. When it spends money, it enables jobs to be created. When it adjusts taxes on incomes it controls inflation.  MMT allows full employment and inflation to be balanced, making a fairer society. See Professor Bill Mitchell’s Blog

A ‘fair go’ will require a Job Guarantee (JG): an economic policy proposal to solve inflation and unemployment. Its aim is to create full employment and price stability. The state hires the unemployed as an employer of last resort. See Blog JG and a Fair Go for our Society and its Economy

Taxes

The Australian Government requires that its taxes are paid only in $A, ensuring acceptance of its currency. Taxes can be levied to curb inflation or to advance economic issues or social issues, stimulate research and local manufacture and much more. All taxation should be regarded from the point of view of social and economic consequences.

More detail see Blog –Taxes and their Economic, Social and Political Issues in the light of the Coronavirus Epidemic  and my Facebook Page https://www.facebook.com/Kevin-Moran-113755396717132

Taxes should be all about public purpose and should never be about raising revenue.

State taxes are mostly inequitable and counter-productive – eg , stamp duties, rates, fees, poker machine taxes, payroll tax/ etc. Benefits from gaming taxes are far outweighed by the cost of trying to repair the damage they cause. Those who can least afford it are most affected.

The States should receive funding from the Australian Government, not by blighting the poor and gullible.

Deficits and Budget Surpluses

Australia issues its own currency, $A. It can run a pure deficit, without borrowings. Instead, it has been decided (politically) that … fund any budget deficit by issues of securities .. not borrow.  (See RBA website).The government can simply instruct the central bank to purchase its debt at whatever yield it chooses: the same effect as just crediting bank accounts on the government’s behalf.

A Budget Surplus is essentially meaningless – it is just the amount by which the proposed receipts – taxes, excise etc – will exceed proposed expenditure in a particular year or time scale. A budget deficit is the amount by which proposed expenditure will exceed proposed receipts. See Emergencies and epidemics – understand modern financial systems  and https://poiiticsand.wordpress.com/2020/04/27/we-must-understand-how-modern-financial-systems-really-work-to-deal-with-emergencies-like-coronavirus/

Debt is the amount owed at any point in time—what has been borrowed and not paid back.Assessing future obsolescence, technologies and relevance should guide government infrastructure investment – not pointless obsession with surpluses and financial ratios that are irrelevant to a government that has a Sovereign Currency.