7 May

Budget day tomorrow. Know how they say governments should ‘balance their books’ and not have debts and should aim for surpluses? It seems right, because it’s how we as individuals and families have to manage budgets. But government budgets have nothing - literally nothing - in common with household budgets. Look at the graph of Australian government debt over more than a century. If you see the massive debts piled up in WW1 and WW2, and then see them disappear soon after you might think, “we must have paid off the debt”. We never did. Government ran deficits in those times too. And yet government debt all but evaporated. Most developed countries have run deficits pretty much non-stop for more than 300 years. If that seems counter-intuitive it’s because what we hear about government debt and surpluses and deficits is total, utter, crap.