Victorians went to the polls on Saturday and promptly threw out a Liberal state government after just a single term in office. Many saw this as a referendum on Tony Abbott 's policies in Canberra and it will certainly give encouragement to opposition leader Bill Shorten. The Federal government is clearly in trouble and needs to review it's agenda because it is unlikely that the Senate will pass the majority of the unpopular measures waiting in the pipeline.
Unfortunately, party politics is all about gaining political advantage with the national interest coming a long way second. We need to bring the budget into balance and end deficit spending and doing that will mean inevitable pain for taxpayers. The Abbott government decided to implement savage cuts early in it's term and did a poor job of explaining both the rationale and the focus. There has been an ongoing air of indecision - with a consequent drop in public confidence. Abbott needs to clear the decks - and make a new start.
It is an inescapable fact that world finance is balanced on a very sharp edge. China's growth rate is slowing and all the BRIC countries have lost their former expansion. The European Union and it's common currency is not out of the woods and Germany, the engine that has held it together in past crisis times is experiencing an alarming decline in exports. The formation of Islamic State in the Middle East has sent millions of refugees across national borders and Europe is struggling to house, feed and find jobs for these added numbers - at a time when the ghost of the 08 recession still lingers.
Africa is beset with an outbreak of Ebola and at the same time it's history of civil war over it's trove of rich resources is fast morphing into a religious war. The drums of war are beating in Asia with contested claims over islands and patches of rock in both the South and East China seas - and in Europe Russia is seeking expansion by fomenting war under cover of a civil uprising on it's border with Ukraine.
Surprisingly, the world is awash with oil, the commodity once thought to be fast declining. The price has dropped below eighty dollars a barrel and cheaper energy would be expected to revive many economies, but it is also impoverishing the finances of many oil producing countries - with consequent anger and dismay from their citizens. At the same time, a rising world population is putting pressure on food supplies.
We experienced a recession that shook the world in 08 - and the recovery has been tenuous. If we slip into a new recession Australia will not ride it out with the ease that made us a shining example exemplified by other nations. There is no twenty billion dollars sitting in kitty to tide us over - and it is essential that we reduce our debts and get our finances on an even keel.
Interest rates are at an all time low, and if we cut them further in a recession it will will damage the vast numbers of self financed retirees who need investment income to fund their retirement. When that dwindles, they are forced to bite into their capital - and when that erodes they become eligible for a part aged pension. Just using the printing presses to create more dollars will inevitably create a surge of inflation - and exacerbate the problem.
Clearly, the present budget strategy is not working. The voters in Victoria sent a message - and the government would be wise to heed it. The principle that all governments automatically get a second term is now dead and buried. The voting public is a lot wiser than the politicians give them credit for - and the Senate will suffer electoral punishment it it blocks sensible legislation for purely political reasons.
Getting the budget right - and getting the measures in place to achieve that aim - will take a degree of compromise. The government needs to rethink what is possible - and fully explain the how and why of what it is trying to achieve. Unless we put our house in order, the citizens of this country will pay a terrible price if the world order once again suffers a reverse similar to 08 !
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