Monday, April 16, 2012

Austerity measures - digging out of the fiscal hole

Governments constantly tell us of the need to cut costs. Fair enough that it is important not to waste money - spending should be stripped back wherever we can identify how to stop wasting it. But usually cutting costs is more about struggling with too much worthy* stuff to spend it on, and just not enough dollars to do so.

At the moment, the need to be frugal - or austere - is particularly pertinent. Ministers are stressed about debt levels and retaining surpluses - as always. Commissions and taskforces (like the Victorian IRSF) are modeling future expenditure and telling us we need to find ways to reduce it, particularly given pessimistic income forecasts.

One thing no government taskforce will bother doing is looking at the past and identifying what spending paradigm put us in this position, or what we should have been doing a decade ago to have a more financially sustainable public sector.

Just imagine if they did - the conclusion would probably be that we needed to devote resources to investing in and adapting for the future. You know what that would mean? More spending. It's not really ironic, unless you think the most important fiscal imperative is austerity, cutbacks, and forcing 'efficiency' by limiting funding (rather than identifying waste). But it is incredibly important.

Einstein said - apparently - that you don't get out of a hole with the same thinking that got you in there. But that's exactly what governments around the world are attempting to do.

1 comment:

  1. Couldn't agree with you more. There is another saying that seems to be forgotten in this polarised debate: 'investing in our future'. If we look at our system as a pantry cupboard, someone in the kitchen hasn't invested in the recipes, fridge, basic essentials and fed the vege beds out the back. All of the sudden the pennies are a little tight and the only thinking I hear is lets cut the flour from our budget despite us needing to make bread to eat. Nat