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The kind of austerity budget championed by zealots like Ruthenasia Richardson is the economic equivalent of extracting blood from a hemorrhaging patient. Fiscal bloodletting can only make the situation worse. As I thought we learned from the Great Depression.
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Adequate social welfare benefits are not a drain on the economy. They are an investment, on many levels. Eg;
* They keep workers lives stable during times when businesses can't afford to deploy their labour
* They build a sense of belonging to society and wanting to support others in kind
* They subsidise businesses offering the essentials of life, and to a lesser extent hospitality and entertainment, without the government getting to pick and choose who gets the subsidy (so less nepotism)
An important corollary to my post yesterday about the societal benefits of providing unemployment benefits.
In a society that has a shortage of goods to be purchased, someone is going to miss out, regardless of how much money is available to pay for things. In these circumstances, lifting incomes is likely to be inflationary.
But that's not our situation in Aotearoa these days.
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On the contrary, we have businesses going to the wall because not enough people can afford to pay for what they offer. The only essential we're genuinely short of is affordable housing.
Under these circumstances - unlike when there's shortages - lifting incomes enables more goods to be purchased instead of wasted. It helps small businesses to survive, even expand. Growing the productive economy and further increasing incomes and spending power.
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Done right, this creates a virtuous cycle, where more people can earn a living, and fewer unemployment benefits need to be paid. Not only that, but the tax take increases, from higher businesses earnings and more workers paying tax on wages and salaries, without putting up tax rates (although there are good economic arguments for doing that too in some cases).
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The kind of austerity budget championed by zealots like Ruthenasia Richardson is the economic equivalent of extracting blood from a hemorrhaging patient. Fiscal bloodletting can only make the situation worse. As I thought we learned from the Great Depression.
(4/4)
"Ocean Yu, director of popular Cantonese outlet Star Cafe Seafood Restaurant, said he had made the painful decision to close his restaurant on the North Shore on 30 September after six years of business.
Yu said the end of the lease and a sharp decline in customers from 2023 were key reasons behind the closure."
#DuoyaLu, 2025
https://www.rnz.co.nz/news/chinese/575852/auckland-s-yum-cha-restaurants-running-out-of-steam
For reasons given in my economics rant yesterday, I doubt it's a coincidence that this downturn coincides with the new government's first term.
@strypey
Absolutely agree. It's so obvious putting money in everyone's pocket - except the very rich - pushes economic growth. That's why *generally* GDP is higher under progressive governments. GFC taught us this. Interestingly even then the Key government didn't go for austerity while the UK did. That and Brexit totally stuffed the UK economy.
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