The SA Politics Thread

[Aidan]

Why are you referring to debt to GDP?

And since this is the SA Politics Thread, is it GDP or GSP?

Gross domestic product, I dont think it matters, I didn't say gross National product

Given our pretty crap growth trajectory I rant don't think such a high ratio is sustainable.

GSP = economic activity that occurs in the state.
GDP = economic activity that occurs in all states and territories
GNP is similar to GDP but depends on ownership rather than actual location.

Worrying too much about the state debt to GSP ratio is a recipe for economic decline, as the measures that politicians take to get it down are usually false economies. Still it's better than worrying about national debt to GDP ratio (as the Federal government has unlimited credit from the Reserve Bank).

The problem isn't the amount of money spent, it's the amount of money wasted. We can see the way the current state government's wasting money, and now the Libs plan to waste a huge amount of money moving the high school start to year 7.

[Waewick]

Why are you referring to debt to GDP?

And since this is the SA Politics Thread, is it GDP or GSP?

Gross domestic product, I dont think it matters, I didn't say gross National product

Given our pretty crap growth trajectory I rant don't think such a high ratio is sustainable.

GSP = economic activity that occurs in the state.
GDP = economic activity that occurs in all states and territories
GNP is similar to GDP but depends on ownership rather than actual location.

Worrying too much about the state debt to GSP ratio is a recipe for economic decline, as the measures that politicians take to get it down are usually false economies. Still it's better than worrying about national debt to GDP ratio (as the Federal government has unlimited credit from the Reserve Bank).

The problem isn't the amount of money spent, it's the amount of money wasted. We can see the way the current state government's wasting money, and now the Libs plan to waste a huge amount of money moving the high school start to year 7.

honestly, everyone knew what I meant, which is all that matters.

whilst the debt ratio isn't the be all and end all, it is still an important thing to keep an eye on because it is a at worst a good guide to gauge your position against peers. And I am fairly certain that both rating agencies use it when rating (not that ratings are the be all and end all of things, but when you have a high debt level you want those yield rates nice and low)

I'm curious, why do you think it is a waste? I don't really know, I can see QLD are doing it (that sets off warning bells) and so are WA (similar warning bells), NSW and Vic apparently already do it.

[Aidan]

whilst the debt ratio isn't the be all and end all, it is still an important thing to keep an eye on because it is a at worst a good guide to gauge your position against peers. And I am fairly certain that both rating agencies use it when rating (not that ratings are the be all and end all of things, but when you have a high debt level you want those yield rates nice and low)

I'm curious, why do you think it is a waste? I don't really know, I can see QLD are doing it (that sets off warning bells) and so are WA (similar warning bells), NSW and Vic apparently already do it.

We don't need that sort of guide to tell us we're inn a bad position. But there's a very real danger that politicians will concentrate on getting that figure down instead of doing what's really needed, and you only have to look at what happened last time the state Liberals were in power to see how disastrous that can be. Privatization brings the figure down but doesn't always make us better off, and the way the electricity generators were sold off led to rampant profiteering at the expense of reliability of supply (as well as higher electricity bills). Even most of the State Bank assets would be worth more if we'd hung on to them.

Also, an easy way to get the figure down is to neglect infrastructure spending. And again, that's what the state Libs did last time. Apart from a one way expressway (not even making the relatively cheap provision for duplication at bridges) what infrastructure did they build? And no, the answer's not the Heysen Tunnels - those were entirely Federally funded.

[Waewick]

whilst the debt ratio isn't the be all and end all, it is still an important thing to keep an eye on because it is a at worst a good guide to gauge your position against peers. And I am fairly certain that both rating agencies use it when rating (not that ratings are the be all and end all of things, but when you have a high debt level you want those yield rates nice and low)

I'm curious, why do you think it is a waste? I don't really know, I can see QLD are doing it (that sets off warning bells) and so are WA (similar warning bells), NSW and Vic apparently already do it.

We don't need that sort of guide to tell us we're inn a bad position. But there's a very real danger that politicians will concentrate on getting that figure down instead of doing what's really needed, and you only have to look at what happened last time the state Liberals were in power to see how disastrous that can be. Privatization brings the figure down but doesn't always make us better off, and the way the electricity generators were sold off led to rampant profiteering at the expense of reliability of supply (as well as higher electricity bills). Even most of the State Bank assets would be worth more if we'd hung on to them.

Also, an easy way to get the figure down is to neglect infrastructure spending. And again, that's what the state Libs did last time. Apart from a one way expressway (not even making the relatively cheap provision for duplication at bridges) what infrastructure did they build? And no, the answer's not the Heysen Tunnels - those were entirely Federally funded.

Power privatization was all the rage when that happened, and of all the items to be privatized that item really doesn't phase me. I would also add that when the Libs last got it, the state was again near backruptcy (not that we are now) so there was little of no choice in the matter.

all it did was remove the ability of the Government to subsidies electricity costs, which I think is a good thing. Unfortunately we haven't learnt our lessons have allowed significant urban sprawl which has directly impacted the cost of electricity via increase infrastructure.

I agree that you don't focus soley on it, but keeping it in check is important, and if you are going to go even further than 75% of GSP then you are going to want to have a pretty damned good plan on how to get it back otherwise you are going to get belted by the rating agencies, which will drive the cost of debt.

I really liked Marshalls regional focus, I believe there is unlocked potential in this state, similar to what has happened in Victoria and NSW, albiet we have a lot more land that is better for broad acre/grazing than concentrated farming.

Infrastructure investment is going to be interesting, both parties are reliant on federal funding (Wetherill indicated as much when talking about electrifying to Gawler), I don't know Abbotts taste for Rail, but at least both State Parties are focused on fixing up South Road, then who knows.

My biggest problem is neither leader appears to be an advocate for this state, they appear to be yet more apologists who aren't going to be screaming the house down to get SA moving forward.

[Aidan]

Power privatization was all the rage when that happened, and of all the items to be privatized that item really doesn't phase me

Whether it phases you isn't the point - the point was that it was bad for consumers and extremely bad for business (a reliable electricity supply is absolutely essential for many businesses, and millions of dollars had to be wasted on backup generators because the government couldn't provide one).

I would also add that when the Libs last got it, the state was again near backruptcy (not that we are now) so there was little of no choice in the matter.

No it wasn't. That claim was Liberal Party propaganda. 'Twas a vicious lie that helped them get elected and to implement their program of cuts, but at the expense of our state's good reputation.

all it did was remove the ability of the Government to subsidies electricity costs, which I think is a good thing.

If you think that's the only effect then there's a serious problem with your comprehension. Also our government wasn't subsidizing electricity costs. Also IMO subsidizing electricity costs (in the form of solar panel installation) directly would've been better than the system we had where cross subsidies made SA's electricity the most expensive in the nation before the bulk of the benefits kicked in.

Unfortunately we haven't learnt our lessons have allowed significant urban sprawl which has directly impacted the cost of electricity via increase infrastructure.

The development levy means that sprawl does not have that effect.

I agree that you don't focus soley on it, but keeping it in check is important, and if you are going to go even further than 75% of GSP then you are going to want to have a pretty damned good plan on how to get it back otherwise you are going to get belted by the rating agencies, which will drive the cost of debt.

While a long term plan to get the debt to GSP ratio down is important, we should try to bypass the ratings agencies instead of trying to suck up to them.

[Waewick]

it isn't a matter of not sucking up to them, they virtually control to cost of our debt. That isn't sucking up it is being prudent.

We were subsiding our electricity costs, any mechanism which sees electricity costs the same regardless is being subsidized and we were and we still in the form of solar panels (argh!), Also we do have reliable power, some of the most reliable in the world.

I notice there is now a large focus on the cost of renewable energy on the cost of the end users electricity - the question is, do we have the highest cost of electricity because we also use the most renewable? I guess that is going to be answered fairly shortly.

[Aidan]

it isn't a matter of not sucking up to them, they virtually control to cost of our debt. That isn't sucking up it is being prudent.

They have much less control than they used to, as they lost a lot of credibility with bond holders. It is the buyers of bonds, not the rating agencies, who we should be convincing of our creditworthiness. But we should also investigate (and lobby for) the possibility of bypassing the bond market and borrowing directly from the RBA.

We were subsiding our electricity costs, any mechanism which sees electricity costs the same regardless is being subsidized and we were and we still in the form of solar panels (argh!),

Regardless of what?

Also we do have reliable power, some of the most reliable in the world.

Yes we do. But 13 years ago we didn't. Since then we changed the electricity market regulations to stop prices from being manipulated, we installed lots of wind turbines and solar panels (and I think a few gas turbines too), built a HVDC connection to northern Victoria (albeit an inferior one to what Nick Xenophon was pushing for) and upgraded the electricity distribution network.

I notice there is now a large focus on the cost of renewable energy on the cost of the end users electricity - the question is, do we have the highest cost of electricity because we also use the most renewable? I guess that is going to be answered fairly shortly.

Because we generate so much renewable energy, we no longer have the most expensive electricity in Australia. But renewable energy infrastructure is expensive to install, and users were effectively being charged for too much of it straight away, resulting in the most expensive electricity in Australia at a time when all Australia's electricity was expensive by world standards.

[rev]

Rev, give the Liberals the benefit of the doubt. They'll eventually reveal things as the election date gets closer. Remember this is politics. It's a game of cat and mouse and timing is also important when it comes to releasing details etc.

Cheers

They've had 12 years to come up with an alternative to the Labor government. How much more time do they need before presenting it to the public?

I don't think it's a case of who will be better for the state, but who will do the least damage during their term.

The problems that exist under Labor are real but greatly exaggerated by the Liberals. Those problems may get worse(you guys are talking about debt now, one example)

The Liberals will cut a lot. Over 5,000 public sector jobs that they are telling us about. How bad will their cuts be?

Europe has learned that cuts and more cuts don't solve anything(unless you're a bankster who wants more money). If anything the austerity measures have made the problems there worse.
Severe cuts make matters worse. Cuts alone don't fix anything.

We all know there will be cuts.
What I want to hear is what they will do to fix our states economy. How will they create jobs, create new industries, create more wealth and prosperity for SA people.

Labor has given us some small details of how they will fix a few things, create a few jobs. But nothing significant or in great detail although the Premier has a 200 something page manifesto apparently.

The Liberals have given us nothing.

South Road and all those things are secondary issues in my opinion. We can have the worlds best infrastructure but if we have no industries and we have a net loss of population then what good is that infrastructure?

Neither party has offered anything.
But Labor has offered something, at least it's better then the Liberals nothing so far.



As for the other discussion on electricity, we pay more because of all those wind turbines.

[Waewick]

it isn't a matter of not sucking up to them, they virtually control to cost of our debt. That isn't sucking up it is being prudent.

They have much less control than they used to, as they lost a lot of credibility with bond holders. It is the buyers of bonds, not the rating agencies, who we should be convincing of our creditworthiness. But we should also investigate (and lobby for) the possibility of bypassing the bond market and borrowing directly from the RBA.

We were subsiding our electricity costs, any mechanism which sees electricity costs the same regardless is being subsidized and we were and we still in the form of solar panels (argh!),

Regardless of what?

Also we do have reliable power, some of the most reliable in the world.

Yes we do. But 13 years ago we didn't. Since then we changed the electricity market regulations to stop prices from being manipulated, we installed lots of wind turbines and solar panels (and I think a few gas turbines too), built a HVDC connection to northern Victoria (albeit an inferior one to what Nick Xenophon was pushing for) and upgraded the electricity distribution network.

I notice there is now a large focus on the cost of renewable energy on the cost of the end users electricity - the question is, do we have the highest cost of electricity because we also use the most renewable? I guess that is going to be answered fairly shortly.

Because we generate so much renewable energy, we no longer have the most expensive electricity in Australia. But renewable energy infrastructure is expensive to install, and users were effectively being charged for too much of it straight away, resulting in the most expensive electricity in Australia at a time when all Australia's electricity was expensive by world standards.

here we go with the RBA again.

you are the only person I have ever met that suggests the RBA lends money to the Banks and the States (they do lend it temporarily on an overnight basis to the feds)

Can you please, for the sake of my own education, show me how and when this works because every treasury specialist I have ever talked too laughs at me when I ask the question.

[Aidan]

you are the only person I have ever met that suggests the RBA lends money to the Banks and the States (they do lend it temporarily on an overnight basis to the feds)

They do lend to the banks as well, and not just on an overnight basis.

Can you please, for the sake of my own education, show me how and when this works because every treasury specialist I have ever talked too laughs at me when I ask the question.

How it works is straightforward enough: the money is electronically creditted, as is normal for bank transactions nowadays.

Those "treasury specialists" are probably laughing becuase they're under the delusion that there's a fixed money multiplier so that borrowing a dollar from the RBA would increase the money supply by several dollars thanks to fractional reserve banking. But in reality the money multiplier is a variable that plays no role in the money creation process because reserves are never the limiting factor of how much banks can afford to lend.

[Waewick]

where do you get this information from? It hasn't been taught in any of the course i've done nor in any of the literature I've read.

surely you have something that I can read so I can get my head around this theory.

[rev]

What does how and who the RBA lends money to got to do with the March state election fellas?

[Aidan]

where do you get this information from? It hasn't been taught in any of the course i've done nor in any of the literature I've read.

surely you have something that I can read so I can get my head around this theory.

Bill Mitchell's blog is a good place to start. He explains here what's widely believed and why it's wrong.

[Waewick]

He still talks about a depositor being required that isn't the RBA.

[Aidan]

He still talks about a depositor being required that isn't the RBA.

Required in order to do what? Really Waewick, your posts are often very frustrating, as it's often unclear what you're on about.

But in this case I think I know what you're referring to. When someone takes out a loan, they don't spend it instantaneously: the money is deposited in their account. Therefore those borrowing the money are depositors until they spend it.

This thread has drifted quite a long way, so if you want to continue the conversation I suggest we take it offline.