Pop. That is the sound of the pin of reality piercing the inflated balloon of Australian economic wishful thinking.

Fresh this afternoon:

Victoria and NSW have lost their prized AAA credit ratings, with ratings agency S&P Global downgrading both states on Monday in moves that put a cloud over the federal government’s own AAA rating.

So much for all the spin that Australia’s government debt is less than that of other nations. So much for destroying the private sector to protect the public sector. So much for increasing debt today to reduce debt tomorrow. So much for it being a great time to borrow because interest rates were low.

Presumably, Australia’s relations with China were also a factor given because of the hits come and coming to not just commodity but also tourism and education exports.

But guess what? Everything else equal, interest rates on Australian government bonds have just increased and RBA printing more money ain’t gonna fix that. You can flush those modern monetary theory textbooks down the toilet with the rest of the Keynesian intellectual crap pulsing through the Australian public finance ecosystem.

Corona has given licence for governments to spend on their favourite ridiculous boondoggles. No doubt there is a case for providing income support to those badly impacted by coronavirus. But it was not a licence to build overpriced world-class public toilets in tiny regional towns with fibre to the cistern internet connectivity. It was not a licence to increase the number and pay of public servants. It was not a licence to build unnecessary, overpriced and useless infrastructure.

We will all pay and pay dearly for this economic ludditetry. Correction. Our children and grandchildren will pay dearly for this.

Keep your eyes on the news. Perhaps the credit rating of Queensland government debt will also soon fall to junk level, equivalent to the quality of its government.

Australians soon won’t be able to rejoice because we are young and free — because we drunk in debt.

Give it time. There is now a bias for mortgage and other interest rates to increase. But watch the government blame the banks and not their pathetic incompetence.

Zimbabwe down under.