What the Conservatives and also the Labor Party fail to realise is that ongoing government deficit spending can create employment, expand the economy and generate more tax revenue.
The business sector also cannot increase production and investment if wages and consumer demand are static or falling. A growing money supply is needed to harness the labour and talent of the unemployed and the underemployed and to activate dormant economic capacity.
Such deficit spending doesn’t need to be funded by issuing more treasury bonds but should preferably be funded by ‘printing’ or creating money out of thin air in which case interest payments are not needed nor does this money need to be repaid.
If the money is utilised for economic expansion it won’t be inflationary either. Such deficit spending is not black magic and could be thought of as the purchase by the government of shares in the national economy.
The current approach of the banks introducing new money into the economy by providing low interest loans for speculative investment in existing properties and the share market actually harms the economy and increases wealth disparity.
Worthy areas of government expenditure are infrastructure such as public transport, interstate and regional railways, cycle paths, public housing, some roads, redevelopment of cities to reduce energy and water use and renewable energy generation.
Low interest loans and other incentives can also be provided to industry and consumers to improve energy, water and raw material efficiency.
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