rebuilding

Economics is not a zero sum game. The beauty of it, in my mind, is that if you do things well you can create value out of nothing; labour transforms into useful products which in turn can be used to created more useful things. Productivity is compounding; creating useful things today doesn't just benefit you today, it puts you in a better position to be even more productive tomorrow.

This "compounding effect" is something of a two edged sword; if you do things well you can compound your blessings. However, it means that if you don't maximise your opportunities you not only don't progress as fast as you could in absolute terms, you can also end up a long way behind your more productive neighbours in relative terms.

Basically, building an economy is kind of like raising a child; if you nurture it, teach it and guide it with love and care it will grow into a functional member of society that loves and trusts you and will care for you in old age. If you don't it will eventually start shooting up drugs and wind up stealing your plasma telly and your grandmothers wedding rings and all manner of other things which will travel holusbolus down the gullet of the nearest pawn shop to exchange for a 24 hour reprieve from the DTs.

Progressing at an above-average rate of economic development is not about brilliance. It's about consistently not screwing up and occasionally being a little better than average.

Australia has an annual GDP of around $1 trillion, so the forecast $20 billion rebuilding effort in Queensland is looking like costing around 2% of annual GDP. There's no problem, per se, with a levy to cover the costs of paying for this. Costs will be paid from either a levy, higher taxes or lower social spending; there's no "free money".

The issue is that there are ways of tackling the problem that translate to "a little better than average" at economic management and there are other ways that sound a little too much like "Queensland is a swing state and we know it".

A comprehensive list of measures involving the trimming of "lower priority" and "low return" projects (National Broadband Network, anyone?) would probably be the best way to go about funding reconstruction. Not only would this provide funding, it would provides an opportunity to back down on a bunch of policy initiatives that were probably pretty batty in the first place.

The other point that seems to have been lost is that by funding massive amounts of government spending concurrently in an otherwise healthy economy you fuel inflation. Which fuels interest rates. Which is going to cost me a whole lot more than a flood levy.

So why have a levy? As alluded to earlier - Queensland is a swing state. My bet is there are a good many polical wonks out there in the Labor offices pointing out the policial merit of a large symbolic gesture.

I'm feeling a bit like we've just found a small white plastic zip lock bag in the back pocket of our kid's jeans.

Oh, and welcome back for 2011.