Prime Minister Malcolm Turnbull might as well be talking to a brick wall as he rails against spending.
In recent days, Turnbull has been running hard with the well-worn cliché that “every Australian needs to live within their means”.
It is a political tactic designed to belt the Labor Party on its spending proposals, even though as we saw in the budget last month, the Turnbull government is planning to boost spending and run budget deficits for the next five years.
Let’s take a step back. Australians living within their means?
What a load of poppycock!
According to data from the Reserve Bank of Australia, since the September 2013 election the household has been borrowing money like a proverbial drunken sailor.
Household debt has risen debt by $247 billion in less than three years. That’s a rise in household debt of 17 per cent in total or an extra $8 billion a month, every month, since the election.
For the business sector, it is similar story. Business debt with the banks has increased by 15 per cent or $114 billion since the election and it is on track to reach $1 trillion during 2017.
But even the Liberal Government itself has been running budget deficits and borrowing like crazy.
Government debt is now $430 billion, which is up a thumping 58 per cent or $153 billion since the election.
What is this Mr Turnbull about ‘living within out means’?
The household sector isn’t doing it, nor is business and nor is the government.
Record low interest rates are facilitating borrowing – not living within our means, in other words.
Households and businesses alike are investing in the future for their house or business expansion.
The curious thing about the four word slogan, “living within our means” is that the household sector has not in fact done it for at least 35 years.
The RBA data base on household debt shows that in every month since the 1980s, household credit has grown in annual terms. Every month of escalating household debt.
Average annual growth in household debt the past 35 years has been a staggering 10 per cent.
Again, living within our means?
All of this makes the claims about needing to live within our means pompous, self-serving clap-trap.
It is rhetoric without foundation. It ignores the fact that debt can be a driver of investment decisions for households, the business sector and government alike.
It ignores that borrowing has helped Australia to grow, to flourish and as last week’s GDP figures confirmed, it has been 25 years since the last recession.
While borrowing must always be prudent and well directed and the level of debt accumulated must be serviced with interest and principle repayments, to suggest that the economy must live within its means is to deny an ability to invest, expand and raise living standards for all Australians.
But it does reflect how poorly the debate of economic management is in Australia.
There is a perception that it is virtuous to have no debt. It will be a bad day if this mantra ever gained traction or widespread acceptance as it would, almost inevitably, trigger the next recession.
Stephen Koukoulas is a Yahoo7 Finance expert with
more than 25 years experience as an economist in government, as Global Head of economic and market research, as Chief Economist for two major banks, and as economic advisor to the Prime Minister of Australia.