Hi Dub ... Keating deregulated the financial industry here and...

Hi Dub ... Keating deregulated the financial industry here and flooded our economy with welfare deficit spending and easy money policies ... causing run-away inflation.

The question of welfare deficits is exactly the subject of an earlier post of mine today discusses at length.

Keating was forced hike interest rates as the main corrective 'lever' to head off run-away inflation and according to his 'J' curve modelling which succeeded triggering a recession and bankrupting a good share of small business and rendering 20% of home-owners homeless.

It would be another decade before Oz recovered ... we now accept that 'big spending welfare' government does not work.

Greenspan on the other hand enjoyed a unique advantage in being able to inflate without causing run-away inflation due to the globalisation/information computer era/corporate cost cutting/asian imports/outsourcing which contained inflation ... hence the jobless recovery.

Greenspan's inflating of the M3 saw 'new money' flow into capital markets instead of wages/consumer goods ... and caused the stock market/property bubbles leaving corporate America now hoplessly debt ridden and to a lesser extent here in Oz.

Despite the critisisms, Howard/Costello have done a marvelous job managing the Oz economy over the last 8 years having balanced the books (small surpluses and reduced govt debt) and contained welfare cost blow-outs.

Consequently, we enjoy a stable currency, profitable corporate sector and neutral interest rates that make offshore capital want to invest here.

Like most western economies, the only downside is our balance of trade which runs in deficit as we suck in imports and I don't know the answer to that question.

It would be interesting to do a study of our own RBA management of M3 here and how it compares with the US experience. No doubt Costello has been quietly taking advantage of increased tax receipts from our property boom.

Cheers ... tight stops.


This is only my view ... read the red stuff.