AT LAST, a tomahawk is being taken to the defence budget. Pity it wasn’t an axe. If we can save $1.3 billion by delaying the purchase of the joint strike fighter and a few other things, think how much more could be saved by not buying them at all.
The US is spending (wasting would be a better verb) an astonishing $400 billion on 2500 of these aircraft. And it will cost nearly three times that to fly the things during their 20-year lifespan.
Originally, the aircraft were due next year, but it now looks like 2019 will be closer.
If we can do without them for seven years, as we must, why do we need them at all? We don’t. Who are we going to use them against?
Perhaps the defence-policy people know we don’t need the aircraft, but they still think we need the US alliance and we need to be seen to be pulling our weight. On that theory we are condemned to buy whatever the latest toy the Americans are producing. And we are condemned to having military hardware way beyond what we need. Hence the Collins class submarines and 49 Abrams tanks at $10 million a pop.
A wise economics writer once told me when he bought my old computer: “I always stay at the cutting edge of technology – that is at the cutting edge two years ago. If people managed with it two years ago, I can manage now and I’ll get to today’s cutting edge in two years time.”
It would be a great strategy for the Australian military. Indeed, we have already tried it. Last year we bought the amphibious ship Largs Bay from Britain.
You can save a lot of money not buying the latest most expensive car and still get from A to B satisfactorily.
If we did this with military hardware, we could still be seen as pulling our weight with our allies because we would be taking stuff off their hands that they no longer need.
Even with the so-called fifth generation strike fighter, the smarter thing to do would not to have signed on at the beginning when it was still a fantasy on a designer’s desk.
Instead of salivating at the prospect of a new toy and signing on to the equivalent of a lending shark’s hire-purchase contract, we should have waited until a couple of years after first production.
This Budget should provide a lesson to the military to get smaller, smarter and effective at things we need closer to home. We have spent far too much blood and treasure slavishly following America in matters military over the past 60 years.
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As it happens, Treasurer Wayne Swan’s tomahawk attack on defence has enabled him to apply better economic theory to the Australian economy. Wayne might get the best of both worlds. He has achieved an on-paper surplus, thus satisfying a political necessity, and has also provided an expansionary Budget, which is what good economics demands.
Good economic theory says governments should run deficits when the economy is doing badly to stimulate demand and get the economy moving again. And in boom times governments should run surpluses to hold back inflation and avoid asset bubbles.
We have known this since the 1950s. The trouble has been that governments have been too busy buying votes in the boom times and not running surpluses. Then the virtue of surpluses is seen too late and applied precisely when they should not be – like now, both here and in Europe.
The Howard Government sensibly ran surpluses in the boom, perhaps not big enough, but big enough to allow the Rudd Government to run a couple of deficits when tough times came.
But classic Keynesian economics is not just down to surplus in boom, deficit in bust. The nature of the surplus or boom is also important. You need expansionary spending in a bust and contractionary revenue-taking in a boom.
This is what Swan has done. Maybe not for the right reason, but his surplus is in fact expansionary. He has diverted non-expansionary spending on military hardware and converted it to expansionary spending on welfare and middle-income tax cuts.
He probably has not done enough of it to be fully effective for most Keynesians, but his hands were tied.
Since Milton Friedman, Thatcher, Reagan and Malcolm Fraser, the Australian populace has been duped into believing that public finance must work like household finance: savings (a surplus) or at least balanced books are good. Deficit is bad. So any government running a deficit must be a poor economic manager.
If Swan had not produced a balanced Budget he would have been branded a poor economic manager. Faced with that imperative, he at least made it a mildly expansionary balanced Budget – except for in Canberra.
In doing so he did what politics demanded. He hit the rich who either never vote Labor or if they do are conscience voters not driven by how a government taxes them. He ignored the very poor who will vote Labor anyway. And he gave bucks to the undeserving middle classes whose vote makes and unmakes governments.
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The Australian Rugby League Commission has neatly turned Voltaire on his head.
Its message to Canberra Raiders coach Don Furner was: “We may agree with what you say, but we will prosecute and fine you and declare you have no right to say it.”
To be honest, I don’t care two hoots about rugby league, but I do care about freedom of speech.
Furner, by the way, had the temerity to suggest the referees were biased against Canberra and backed it up with an analysis of their decisions.
Free speech improves the world. The debate of ideas, the interpretation of facts, and the postulation of what might have been challenge those in power.
But the big business which calls itself sport wants to maintain the façade that refereeing is perfect; that competition is fair; that the players can be looked up to; and that teams have a geographic base which should command loyalty.
This article first appeared in The Canberra Times on 12 May 2012.