In presumably his final budget as Treasurer, Joe Hockey will again be trying to sell a fat cat approved plan based on discredited 'trickle down' economics. Sydney bureau chief Ross Jones explains the 'trickle up' effect.
JUST HOW DO YOU put lipstick on a pig? Hold it down, that’s for sure. Maybe sit on it. It’ll squeal and it’s bloody hard to keep its lips still, but it can be done, just ask Joe Hockey.
Mr 2% would have it that record low interest rates are God’s – or maybe Tony Abbott’s – gift to the economy. Go forth and borrow! Invest while ye can. Fear no evil. Go to Bing Lee, frequent the Good Guys, buy a Hyundai, chase yields on real estate dumps that aren’t worth the fibro they’re made from. Interest rates will always be lower under a Coalition government.
It’s good times brother.
Just behind the lipstick is an emaciated pig wallowing in slough. Deep slough.
Agriculture? Not if there’s gas under that wheat.
Science? All mumbo-jumbo.
When it comes to fiscal settings, Hockey’s ineptitude is deep and untroubled. Rather than coax the pig from the slough and encourage it to head for the feedlot, he chose instead to leap on the stranded animal and chop its back leg off for a tribal feast.
The three-legged, ham-infested beast is then left to fend for itself in a farmyard where all animals are certainly not equal. Especially not the feral dogs salivating on the other side of the flimsy wire fence.
Neither Hockey nor the rest of the farm management team seem to have any grasp of the basic concept of comparative advantage. In their world-view, the farm is going broke because it only has three-legged pigs so we’ll shut down the barns. Save money that way.
From the elevated vantage point of the farm chateaux, management are seemingly unaware of the anguish in the now shuttered barns. The barns of science, of enterprise, of environmental and social well-being.
Australia’s natural economic advantages are obvious to all but those who choose not to see — sunlight, clean food and brains. These are advantages that could be held until the Turks launch a seaborne assault on Bondi.
Intention? Sub-divide to developers but keep the chateaux.
Chickens, goats, geese and llamas will all go with the sale. Don’t need them any more. Everything management needs will arrive via Pig-Ex.
Management also seems to have a mental block when it comes to another elementary economic concept known as the marginal propensity to consume.
This basically says that if you give an extra dollar to say, someone in a boarding house with $50 in life savings, they will spend the whole dollar. This in turn creates extra stuff like boosted sales of food which in turn creates other jobs. In the pensioner’s case, the marginal propensity to consume is 1.
If, on the other hand, you give $1 to someone with $50m in savings, then it is likely that dollar will go to investment. A rental fibro maybe. Marginal propensity to consume 0. No extra jobs.
Ergo, if you want to regrow the pig’s leg and have it running around again, the bucks are best directed at those with a higher marginal propensity to consume.
It’s called the trickle up effect.
Rudd and Swan understood this and it worked to get Australia through the GFC with all four legs intact.
Hockey, bless his banded heart, can only see the pork chops sizzling.
Read also managing editor David Donovan's series 'Why everything you thought you knew about economics is probably wrong'.
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Media should ask Hockey if staying at wife's house and claiming allowance is 'double-dipping'. I think it is. #auspol— Eddy Jokovich (@EddyJokovich) May 10, 2015