Economics is really important! The good news is, it is also a lot simpler than you have been led to believe.
The NDIS is really important as well. That’s why we think it is especially helpful to bring an understanding of the NDIS and the Australian economy more closely together.
Way back in the 1990’s, our founder Adrian McMaster studied economics at Melbourne Uni. (It is one of the reasons that he is really good at helping people manage their NDIS budgets!) Within that economics degree, little time was spent learning about how money actually worked. This is a common theme in economics training. It is also a terrible shame, as it means that generations of economics graduates – people who go on to become journalists, politicians and, of course, economists, don’t really know where money comes from. Indeed, they quite often get money almost exactly wrong. As you can imagine, this makes for some bad decisions.
The truth is, Australian Dollars are created by the Australian Government (aka ‘the Commonwealth’). The Commonwealth either creates these dollars directly by spending, indirectly through the wholly-owned RBA or by licencing private banks to create new money which they loan out to customers. The dollars created in any of these three ways are interchangeable with each other. That’s what makes them all Australian Dollars.
The key to always remember is that Australian Dollars are created by the Australian Government. This simple fact changes the whole way in which the Australian economy should be viewed – and especially that part of the Australian economy that involves Government spending. Like the NDIS.
Because Australian Dollars come from the Australian Government, the Australian Government can’t run out of them. What’s more, the Australian Government does not need to collect taxes before it can spend money. In fact, when taxpayers pay tax, they are sending money back to the Government. The Government needs to have already spent the money – otherwise there would be no dollars with which to pay tax in the first place.
Tax is still very important. But it does not pay for Commonwealth spending.
More information
If you would like to take a really deep dive into how the economy works, click on the link below to visit an external website lays it all out for you. Be prepared to let go of much of what you have been told about money. And take comfort in the fact that economics is actually a lot simpler than you have been led to believe!
The articles are written from a US perspective. But that’s fine because in all relevant ways we have the same monetary system here.
