I skimmed through the budget on the weekend, and I feel “used”. That is my usual feeling when dealing with the government (any government for that matter) but his time it was aggravated by pervasive action and brutal assault on common sense.
The take-away from this brilliant budget is that the government want to fight price inflation with … printing more money? Really? Moreover, they seriously suggested that fiscally stimulating (giving that printed money away) extra spending on those inflated goods and services will alleviate the inflation pressure?
I naively thought that one would NEVER want to fight inflation with printing even more money. Also, giving free money to those would have a higher propensity to spend it will 100% guarantee even HIGHER inflation.
As a country, we have just thrown another ~10 billion into a large inflation bonfire with more to come. Here is how I think it will develop if that continues:
1. At some point, the change in prices will become unsustainable for some businesses to function and they will fold.
2. This folding, funnily enough, will INCREASE rate of inflation due to less remaining supply and still functioning businesses and individuals COMPETING for a lesser size of a pie.
3. Which in turn will create a domino effect for any price-sensitive business out there which will coincide with a massive demand destruction and massive lay-offs and businesses going bust one after another
4. At this point we are deep in a DEPRESSION with no jobs and people bartering for food and essentials
5. Inflation solved, good government
Wild imagination, you say? Not so wild if you know what is happening in Aussie construction industry – 2 major companies folded and who knows how many minor have gone bust (I know of 4).
What are your thoughts guys?
If RBA won’t start rising rates and , I reckon we are heading for a recession and ASX is heading south.
Be the first to comment