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Welcome to the Government Non-government Sector Game.

Tonight, my guest is Louisa, who's representing the non-government sector and as usual, I'm the government.

Thank you. So, I've got a problem because I've just received a message from the government telling me that I need to pay $100 in taxes every month and the problem for me is that I don't have any dollar bills.

Well, I've got plenty of work to be done in the public sector and there are plenty of unemployed workers wanting to work.

What sort of work would the public sector do?

There's your pay for the month - $100. Thanks very much for doing all that productive work in the public sector.

Well, I can now pay you $100 in tax, I guess.

Thank you.There's the accounting for the tax receipts. So do you want more work? There's plenty of extra work that can be done in the public sector and plenty of workers who want it.

For sure.

Here's $120 so we can expand employment and expand public services.

And so if you're paying me $120 and I only have to pay $100 in taxes, then my bank balance increases by $20. So, I'm feeling pretty rich.

It's a win-win and we're at full employment now. So the economy is now at full employment and I want to maintain that position, so I'm going to keep spending $120 this month. There's your income.

Thank you. So, I saved $20 last month. You've spent $120 into the economy and I only have to spend $100 dollars in tax. So now my bank balance is $40 and things are looking up.

Well, to reward the savers who have saved $40, the government is now going to issue some bonds which will provide an interest-earning opportunity to replace the cash that's sitting there earning nothing.

OK, so I'll take my $40 in savings and I'll purchase $40 worth of bonds and I'll have an income-earning asset because it will be accruing interest.

How good is that?

What's the problem?

The IMF has just sent me a message telling me that government debt and deficit are excessive and I know I'm going to have to run a surplus by cutting back spending in public sector employment. And I have to reduce the national debt. So this month, I'm only going to spend $80 and cut employment.

So that means, I've only got $80 of income and there's more of us unemployed. And I still want $100 in taxes. Well, how's that going to work?

Well, I'll buy back some of your bonds. I'll buy back $20 worth of your bonds, and then you'll be able to pay the taxes and I'll reduce national debt that way - win-win! IMF is going to be very happy with the progress.

But my savings are going down and there's more of us unemployed.

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