The Dead Roo

The stand-out economic metric of the Howard years is the dramatic increase in the ratio of current account to trade deficits: something exhibited by no other economy in the league tables of The Economist, yet nobody talks about this.

Avoiding budget deficit, touted by Howard supporters as evidence of economic genius, is something any idiot can achieve: cut services, run down infrastructure, and increase the tax take.  Current account and trade deficits, and the alarming ratio between them, offer simple proof of economic incompetence.

Traditionally, trade and current accounts rise and fall with each other.  Import more than you export, and money goes overseas.  A few years ago, trade and current accounts were in near lock-step, give or take a mere billion, but the current account deficit is now over four times the size of the trade deficit.

It’s far worse when you consider the cumulative impact, not just the rolling twelve month figures.  Money rushes overseas, and we aren’t getting anything to show for it!

It’s like going shopping with $4000 (borrowed) in your wallet, spending $1000 on a plasma TV (you don’t need), and arriving home with empty pockets.  Where did the money go?  Would your spouse think you had been responsible, or blew it at the casino and brothel?

Perhaps some of the missing money went to consultants who you paid to help you make "good" decisions (you’re better off without them), perhaps some went to loan sharks (so you shouldn’t be buying stuff), but still, what happened to the rest?

With the advantage of near-record terms of trade and record minerals prices, how come Howard and Costello have led us to the longest run of trade deficits in history?  Even though bouyed up by raw materials prices, we are still sinking fast.

Under Howard and Costello, over 5% of every transaction leaves the country for good: by contrast, at least the GST goes to Canberra and returns via the states!

The economics and finance journalists are still to explain why the current account deficit balloons relative to trade, where that money is going, how this leads us to economic disaster, and expose Howard and Costello as economic charlatans.

Have they ever been so gentle with left-wing governments?

The Australian electorate is like someone who is falling off a skyscraper saying "I’ve dropped 20 floors so far and haven’t got a scratch".  Don’t worry, just enjoy the rush.

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