The root of the problem

Yesterday, in an address given to the left-wing think tank Per Capita, Prime Minister Julia Gillard revealed the staggering depth of her ignorance in financial matters - and explained why we our nation's finances are in such a mess.

She presented the hypothetical case of John:
For a period in 2003 to 2007 every year his employer gave him a sizeable bonus. He was grateful but in his bones knew it wouldn’t last.

The bonuses did stop and John was told that his income would rise by around five per cent each year over the years to come.

That’s the basis for his financial plans.

Now. If you were John, what would you do in this situation? Most people would say "cut your spending to your new income level". This would be sensible. Instead, Julia Gillard says he should rack up the credit card debt. No really, this isn't a joke, that's what Julia GIllard said he should do:
A rational response would be to make some responsible savings, to engage in some moderate borrowing, to get through to the time of higher income with his family and lifestyle intact and then to use the higher income to pay off the extra borrowing undertaken in the lean years.

That's right. Prime Minister Gillard says that if your pay rises less than you expected it to, you should just keep living off your credit cards.

This is mind-boggling grade-A stupid stuff and demonstrates a complete, total, and utter lack of any sort of fiscal awareness whatsoever.

But it gets even worse than that. Because what Julia Gillard didn't say was that John's already been racking up credit card debt every year for the last 5 years, and it's already at about seventy percent of his yearly income! 

No-one in their right mind would follow Prime Minister Gillard's advice for their household. Yet it is being forced on the entire country.

UPDATE: Paul Murray nails it

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