Mug punters continue to run with the lemmings Never mind the bulls and bears, it's the lemmings that continue to rule the market for many individual Australian investors - the mug punters taking themselves for a ride, buying high, selling low and then blaming "the market" for their mistakes. And congratulations to Wayne, Joe and Tony for helping to talk down perceptions of the Australian economy and its outlook - a contributing factor in the lemmings' rush. The juxtaposition of news articles yesterday told the story: more than half a million people have pulled out of the Australian share market over the past two years, presumably scared off by volatility and the steady diet of scary headlines about both local and global outlooks. Meanwhile, Australian share-funds averaged gains of 24 per cent over the past year. D'oh! And then there's Westpac chief economist Bill Evans, interpreting the dive in the latest Westpac-Melbourne Institute consumer sentiment survey as reflecting a negative reaction to the federal budget. If he's correct in that guess, both sides of politics deserve to take a bow for convincing gullible members of the community there's an inherent crisis in not rushing back to surplus much faster than we usually do, that Australia's low level of net federal government debt is some sort of fundamental problem and that the Australian economy is doomed. As previously explained, the forecast deficits this year and next were the best bits of last week's budget. Australia does have a demographic challenge to deal with - a large one - and we will need genuine tax reform and a more realistic set of expectations than have been encouraged by both sides of politics and the media over the past decade. There is a broad restructuring of the economy underway that will see some people lose jobs, but more new jobs continue to be created than old jobs lost. As usual, there are big headlines when one shop closes, but no one notices when another opens. We face a challenge but certainly not a crisis, with a structural budget deficit that is on the way to being fixed. Too bad that both the Labor and Liberal parties seem to have convinced the population that there is something intrinsically evil about government debt and running a relatively small and reducing deficit. In an attempt to outflank an opposition scare campaign over the deficit, Treasurer Wayne Swan contributed to the sentiment by painting a ridiculously speedy return to surplus as an extremely good thing - and thus left the impression that the economy would be in trouble if the deficit lingered. Hockey and the rest of the coalition front-bench have of course amplified the scare campaign, mindlessly chanting a gross government debt figure that is simply misleading and seeking to create an air of crisis that only they might be able to heroically fix. It's cheap politics, but it has worked. Never mind that the political opportunism and dumbing down of what once might have been economic debate has become a negative economic fundamental in its own right. None of us should have any delusion about which has the highest priority on both sides of politics: the good of the nation or grabbing the keys to the Lodge. In such a climate the lemmings confirmed their role in providing a feed for the rest of the market, making even the over-paid index-hugging funds managers look OK, by running away at exactly the worst time. The ASX figures showed 38 per cent of the population owned shares at the end of 2012, the lowest level since the ASX started keeping records in 2000. It's an observation by a Fidelity International investment director, Tom Stevenson, that we should buy shares as we do fruit and veg - more of what's cheap and less of what's expensive. Instead, the human herd has a tendency to do the opposite - we like buying shares when they're expensive and shy away from the market when it's cheap. That's what the half-million mugs have done. On second thoughts, I might need to retract the lemmings analogy as it's unfair to lemmings - many of us are sillier than that. And never mind that it's a myth that they charge over Norwegian cliffs en masse. Michael Pascoe is a Business Day contributing editor.