Australia budget deficit blows out, deposit tax unveiled

[safetyfirst]

in the end garmen wins and consumers lose, stupid policies
they are punishing savers
they should have more consumption taxes instead

I don't know whether australian policy is stupid or not.

But the way you think is not rational at all. Encouraging saving but damaging consumption is one way to hell for any meaningful economy.

Now this is a paradox... Encouraging consumption will no doubt boost the economy, however, on an individual basis, saving is the correct thing to do, and savers should channel their savings into productive assets so as to boost their future earnings.

There is no simple policy that can fulfill both objectives. However, if given a choice as to whether the government has to run a budget deficit or savers must be punished, i would go for the former. I always think the governement can afford to run a deficit, as long as it is in tandem with the other big nations (US, china, japan, europe, etc). I think it is unnecessary to run a surplus when others are running a deficit.

[specuvestor]

Paradox of thrift is well discussed and documented: http://en.wikipedia.org/wiki/Paradox_of_thrift

Countries with currencies as global reserve can run deficit as there are natural demand for their currencies. Otherwise it has to be managed prudently just as any companies manage their debt in terms of cashflow and leverage. You don't look at your neighbour and try to catch up with the Joneses.

As I posted in another thread, consumption tax unfairly taxes the low income as % of their disposable income. That is why Singapore gives rebate back to the low earners. Saving tax is not new as oversea bonds and previously interests are taxed. The rich saves a large part of their disposable income so if the aim is to have an equitable taxation system, savings has to be taxed somehow. Devil is in the detail of course. Singapore had been very preferential to the wealthy the past 2 decades.