Joe Hockey Says Rudd Government Needs To Re-Adjust Spending

According to Joe Hockney our federal government spending needs to be re-calibrated otherwise our future is gloomy. The multi-billion-dollar economic stimulus packet is just no longer feasible, especially since it is being financed with borrowed money.

Our economy grew by 0.6 per cent in the second quarter of this year with many factors helping to contribute to getting Australia through this downturn in good shape. Our financial system is relatively stable thanks to reforms undertaking by ex-Prime minister Howard’s government.

Hockey is worried that the Rudd government managed to turn Australia’s strong fiscal position upside-down. From the moment go, the Coalition has argued that the Government was spending too much. Described as a massive over-reaction to events offshore, rescue monies were spent as if there was no tomorrow with more than $52 billion in “stimulus” spending and at least another $50 billion increase in spending over four years.

Treasurer Wayne Swan and Prime Minister Kevin Rudd are usually quick to talk about the positive effects of their stimulus package, but while the government went bananas with their rescue mission, the RBA did the same with its monetary policy.

There is little doubt in the average observers mind that the RBA will increase interest rates soon enough if we are to believe the signals sent in recent months. Some economists predict a rate rise as early as next month.

Since the government has refused to hold back on its wild spending splurge, the burden has been resting on to the Reserve Bank. This will most likely influence higher mortgage interest rates. Some observers forecast the RBA’s cash rate to hit 5.5 per cent to 6 per cent by the end of 2011.

If rate rises are passed on by the banks, it means an interest cost increase of $9000 a year on a $300,000 mortgage – or an out-of-pocket expense of up to $175 a week for working families.

This could have serious implications on small business owners, forcing them to let staff go. It might also hinder their ability to hire staff as the economy continues to recover.

Now that we are in the process of seeing stronger economic growth the federal government spending has come to a show-down; it’s either recalibrate or experience massive debt for Australia and higher interest rates.

Source: Smh.com.au

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