Tag Archives: debt and deficit

Clairvoyants Revelling In A Financial Kama Sutra

17 May

Barnaby Joyce writes for the Canberra Times (my emphasis added):

Budget bottom line? Theatricality trumps actuality

The Budget is defining for politicians. They preen and pose and the building fills up with tribal acolytes. But it is after all, theatre. It is not actual it is a budget.

Everyone has an opinion, and you can as well, as it is an amorphous interpretation that you can get as wildly wrong as you like without any ramifications to you personally.

Actuals, as opposed to budgets, they are real. CEOs, accountants, shareholders live and die on actuals. If you “fudge” as an accountant and the partner finds out, you are out. If you cannot get the account to reconcile, say so, stay back and get help, but do not fudge it as it is the cardinal sin of accounting.

Budgets are more wishful thinking, sometimes pure romance. So accountants – dour, colourless characters that we are – get joy out of actuals, but budgets are more the indolent afterthought.

Anyone can play budgets and many positions are possible with clairvoyants revelling in a financial Karma Sutra, but in actuals only one position is right.

Well by the time you read this, which I am writing on Tuesday night, the Budget will basically be an item of ridicule and all will be waiting for the election this time with a fear to match the frustration.

The forward face value of our debt is in excess of $370 billion and that is from a Government Treasury whose claim to fame in the past is that they are consistently and miserably wrong, underestimating the problem, leaving the Treasurer with the time to gloat over an undeliverable promise. The unethical issue of getting the forecast wrong is that the alleviating action is put off and massive debt hurts those who never caused the problem. How on earth do we pay this money back, what is for sale, whose job is safe?

On the big picture, the Baby Bonus is gone and we have no real idea what the National Disability Insurance Scheme is going to cost, nor what Gonski really means in detail as far as cost is concerned.

On things you probably may not hear, big business will be forced to go monthly on PAYG. This will move the cost down to suppliers who will be under the pump to pay sooner. If you want to get someone on a 457 visa, the application charge will now be more than double, at $900. Why? No real reason for this apart from the fact they are running out of money.

There is confusion as to what on earth the message is, saving while spending in unnecessary areas and getting further into debt. What is the big plan that can stand in the here and now without relying on heroic projections? The levy for NDIS is projected near $3 billion for a cost which some have estimated at near $20 billion a year. Our terms of trade will have to be on the optimistic side to say the least as commodity prices are currently weakening.

I have to admit New England got a few promises more than most electorates, making my job harder there, but the question is how does one deliver a promise in either opposition or more pertinently when we have no money. Promises should not be confused with delivery. This is a question that I do not believe sections of the media will delve into with much intent, preferring the colour of the announcement over the complexity of the delivery.

Complexity is hard to distil down to a line but a very good indicator always is the debt. For Canberra, as I have stated so many times, debt is the canary in the coal mine and Canberra should be more observant of this issue than any other city in Australia. Departments know the problems for them are directly correlated to the size of the debt for the incoming government. When the Greens, Labor and independents decided that prudence should be put aside, then with it goes stability and security for the city of Canberra.

The final analogy I would say about this budget is the overwhelming feeling in the building of irrelevance in the Government’s papers and following discussions. It was an anticlimax that happened in the corner without any of the gravitas or attention of previous budgets. Australia does finally get to the TV to switch off the politics; they have done that.

Hear hear!

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“In A Few Years Time We Will Be Like Ireland”

15 May

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“Gillard’s An Imbecile” – Barnaby

7 May

I do love that rare, near-extinct breed … the Straight-Talkin’ politician:

2GB Chris Smith Afternoon Show Transcript
7 May 2013

Topics: Beef industry crisis, Budget deficit.

Chris Smith: Barnaby, good afternoon.

Barnaby Joyce: Good afternoon Chris. How are you today mate?

Chris Smith: I’m very well. I’ve heard from your team to say that you are in Richmond at a beef industry meeting, but this is not the Richmond near Windsor in Sydney right? You’re in the middle of Queensland.

Barnaby Joyce: This is Richmond in the Gulf. We’re up here because we have a Beef Crisis Meeting. What that means Chris is that last week we had cattle selling for merely $20 a head at Longreach. That’s disastrous. When you think that you’d need 25 head of cattle to pay for the fortnightly groceries. You can’t do that, you’re not going to survive.

What is it caused by? Well, three things. One thing is the drought. There’s not much you can do about that except pray for rain. There are two you can do something about. One is the live cattle trade. When you shut it down; it completely decimated our markets so that people don’t have a market to sell into. Now all those cattle are going south and they’re forcing down the price in other areas.

The Indonesians are happily sitting back saying: “Well you made our life a misery and now we’re making your life a misery”. That’s why we need to be so careful that we never overreact. Sometimes we see these terrible things on television. They’re terrible but we have to fix the problem not stuff the industry.
We have a parliamentary secretary who doesn’t believe in the live cattle trade. This just shows you how incompetent the Labor Government is.

Chris Smith: It’s so out of whack. Maybe it’s because of all those farming-oriented cabinet members Barnaby?

Barnaby Joyce: They just don’t seem to get it. Why isn’t the Trade Minister Mr Emerson, instead of doing his funny little dances and his OP Ed pieces about et al and sundry, why isn’t he, the actual Trade Minister, over there trying to fix up our trade? Why isn’t he over in Indonesia trying to fix it up?

The other thing is the dollar’s high. The dollar, if you actually want to, you can actually affect it. It’s not written on tablets of stone and presented from Mount Sinai. You can influence the price of the dollar down if there is real motivation and desire to do so. One of the reasons they don’t do it is because they want to be economically pure. The way we’re going at the moment we’re going to be pure in debt, economically dead, so let’s make sure we keep our industry going.

Chris Smith: Let’s give people an idea. You’re saying $20 a head, right? Two years ago, one head of cattle sold for $500. That’s how far the industry has plummeted.

Barnaby Joyce: Yes, obviously they didn’t all sell for $20 a head but that was the bottom of sale. It gives you a sense that what happens then, so your listeners would understand, people won’t sell them at the saleyards; they’ll just shoot them in the paddock because the cost of transport is more than what you’re going to get. More to the point, these people are under the pump. The bank manager’s screaming at them, the values of their place is going down. If you think about it in another way, imagine if you got your pay packet and it was only a fifth of the money or an eighth of the money you usually got in it. You’d be a little bit shocked wouldn’t you?

Chris Smith: Now, the deficit, it seems to get worse by the day. We’ve had Penny Wong this morning on the ABC today confirming the blow out will hit $17 billion.

Penny Wong: What I can confirm is that we are facing a very significant revenue shortfall from what was anticipated. Certainly in the current financial year if you look at what was expected at Budget until now, we’re going to be receiving as a government, about $17 billion less and we do anticipate that we will see revenues hit across the Forward Estimates. So, in that context, given the challenges the Budget faces and the nation faces, the Government has to take responsible decisions, so we have indicated today that we won’t be proceeding with the boost, the additional boost to the Family Tax Benefits that was planned for later this year. That’s a regrettable decision, but one that’s responsible in the economic circumstance.

Chris Smith: Okay, so the Family Tax Benefit is out of the picture because there will be no added bonus associated with that. Another broken promise out the window – but they have to do that. While Penny Wong tells it how it is Barnaby, we have the Prime Minister yesterday with school children, she seems to have school children with her almost every week now, she didn’t think the deficit was such a problem.

Julia Gillard: Now, we’ve got to work our way back to a surplus and obviously pay off the debt, but the scale of the debt is around 10 per cent of GDP. What does that mean? It’s the same as someone who earns $100,000 a year, having a mortgage of $10,000. I think most of you would know, you’re probably living in homes mum and dad are buying, that they have mortgages well in excess of $10,000 and they would happily change places with someone whose mortgage was just 10 per cent of their income. That’s not something that you have to worry about.

Chris Smith: So Barnaby, relax, it’s only a $10,000 mortgage.

Barnaby Joyce: She’s an imbecile. This is incredible, the debt as we speak right now is $271.1 billion gross. If you don’t believe me, check it out for yourself, AOFM, Australian Office of Financial Management website. On top of that you’re going to have your state debt. Of course if things fall over you’ll be picking up the state debt as well. Between the State and Federal Government debt we would be well in excess of half a trillion dollars. Our GDP of this nation is 1.3 to 1.4 trillion dollars. So if my mathematics are correct, even if you just take the Federal Government debt, it’s getting close to 15 to 20 per cent of our GDP.

Dear reader, this really, REALLY angers me.

The “GDP” fallacy.

GDP is not … NOT … government income!!!!!!!!!!!

The government’s income (ie, from taxing us) for this financial year, was projected in the October MYEFO to be $373 billion.  Finance Minister Penny Wong has now declared that the actual budget outcome will likely be $17 billion less than predicted. So that’s about $356 billion in annual income for the Federal government this year.

The Federal debt is (so far) $271 billion. Meaning that the Federal Government debt-to-income ratio is 76%.

So Ms Gillard … and Barnaby … the correct, honest analogy would be as follows:

“It’s the same as someone who receives $35,600 a year on public welfare, having a personal line-of-credit of $27,100.”

Please, please … get this right!  GDP is not … NOT … government income!!

Chris Smith: She’s fiddling with the numbers mate.

Barnaby Joyce: You see what they do, it’s so annoying, they say, “Oh the net debt, the net debt…” So where are we going to get this magic money Ms Gillard to pay off your gross debt? Where they’re going to get it is the cash reserves in the Future Fund. The Future Fund’s there to pay the public servants’ superannuation because they never put the money aside for. So all you’re doing to taking money from one credit card to pay off the other credit card and both credit cards are overdrawn.

Chris Smith: So there was no real surprise about the Newspoll results today. Labor’s primary vote has fallen to 31. That’s normally shock horror stuff. I just get the feeling that we’ve become desensitised to these numbers now.

Barnaby Joyce: The Australian people have given up on them. The Greens and the independents go with this crowd. They’re also ducking for cover now, pretending they weren’t there. Mr Windsor gave us this government. Mr Oakeshott gave us this government. The reason they’ve done this to our country is because they let them. To this day they are supporting them. They’re all in there together. They all wanted their time in the sun where they ran the show. Well they ran the show and what an absolute and categorical disaster it is, from Richmond in the north where they’re dealing with a cattle industry in crisis to down in the south where we’re running out of money. Left, right and centre and all over the joint, we’ve gone out the back door.

Chris Smith: I want to put this to listeners this afternoon, Julia Gillard also last night spoke about her desire to see more female Prime Ministers and hoped there would be less focus on makeup, hairstyles and choice of fashion. Now as I remember, a lot of the cartoonists and commentators had a great deal of fun with his glasses and his eyebrows. What about Bob Carr’s glasses, etcetera, etcetera? I don’t think that we’ve been overly critical of Julia Gillard’s state of dress or what she wore or how she looked any more than we mentioned the same with other Prime Ministers. It’s just how good you do the job.

Barnaby Joyce: We all get caricatures. They’ve had me tangled up in barbed wire fences and hayseeds hanging out of my mouth. It comes with the territory. If you don’t like the heat get out of the kitchen. They probably will have more female Prime Ministers and I hope they do, but by gosh I hope they’re vastly more competent than the current one we’ve got.

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Barnaby: Learned Oracles Coming To A Belated Epiphany

11 Apr

Senator Joyce writes for the Canberra Times:

A nightmare for us all, as random spirits haunt Labor

When Labor is basically all out of the country, they work a great deal better: they should get away more often from their independent and Green partners.

I must say they are two Australian assets that I would be quite happy to get a price for if anyone in China is interested.

Back home, the white ants continue their merry way through the finances in Treasury, where the debt is now just short of $270 billion gross. No doubt they are now drafting up the next extension on your credit card rather than working out that eventually the structure will collapse if they do not fix their spending problem.

I now see the learned oracles that pilloried my warnings about the debt trajectory years ago coming to a rather belated epiphany.

Labor has desperately been looking around trying to work out what silverware can be whisked out of the house to meet the payments at the hock shop.

What they have come across is your savings in superannuation. They say it is only for the “fabulously rich”, but if that “rich” does not collect enough money then they will just get the Macquarie Dictionary to change the definition of “rich” to something more appropriate for Treasury’s dire requirements.

The mining tax collected $126 million in its first six months and none of the major miners expect to pay much in the near future. That one was a complete fizzer.

The problem is you cannot tax business into prosperity; they actually have to get the overheads down and the product moving if we are going to level this debt trajectory out. You also cannot get business moving if you sell off too much of the capital base. This is not necessarily the case at present, but saying that any deal from any entity is a good deal is slightly naive, to say the least, when it comes to foreign ownership in Australia.

The independents, and now quite a few of Labor’s own members, are trying the great political illusionist trick of: “It was not me, I was not there. I did not really agree, please still vote for me.”

On the Northern Rivers the Labor members for Page and Richmond are fighting against coal seam gas. This is a neat trick since it was under the governance of the Australian Labor Party, at a state level, that most of the exploration licences were sold.

Tony Windsor, the independent member for New England, did one better, selling his whole property, at a very good price indeed, to a coal mining company before becoming a champion for the farmers down the road in their struggle with coal mining.

The Greens did the famous “marriage is over” news conference, but the relationship seems to be going along strong without any discernible change in allegiance in any crucial vote. It is the new art form in the politics of the sham divorce.

If Janelle Saffin, Member for Page and Justine Elliot, Member for Richmond, really oppose coal seam gas then they should resign from the Labor Party, or at least have the gumption to cross the floor. None of these participants ever do, so every day of government, and every action of the government, is one they supported, or at the very least refused to stop.

The Next Budget Nightmare, NBN, has now become the Ninety Billion Nightmare with this debacle set to cost the Australian taxpayer $94 billion, $45 billion over budget and four years over schedule. This is telling of this government’s incompetence and flippant disregard for managing the government’s coffers.

This train wreck is not a Labor government; it would be wrong to suggest that a Labor government would be this bad. This train wreck is a Green-Labor-independent alliance and they are all jointly liable for every fiasco that stands in proxy for responsible government.

The wiser heads, and they do exist, in the Labor Party will be making sure that after this comes to an end, and it will, that they never ever get themselves into this position again.

A position where they are held to ransom by random spirits who had neither the ethos nor the capacity to govern but instead foisted their peculiar desires into what should have been responsible, nation-based, strategic plans.

 

See also Only NOW Experts Agree: Barnaby Is Right On Debt

 

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David Murray Shows The Greens And MSM Are Clueless. Again.

18 Apr

Former chairman of the Future Fund, David Murray, ruffled lots of establishment feathers during his tenure, particularly for his scathing criticism of the Warmageddonist movement.

Now, he has shown up the Greens – and, the entire lamestream economics and political media contingent – with his astute comments about the real reason why the government must balance the nation’s books.

From the Australian (emphasis added):

FORMER Future Fund chairman David Murray has accused the Greens of making “ill-advised” demands on the federal budget, declaring the priority should be to protect the government’s credit rating as the global financial system remains under strain…

Mr Murray, former chairman of the nation’s $73 billion sovereign wealth fund and a former Commonwealth Bank chief executive, said he was concerned about the Greens’ suggestions that curbing government spending was not important, given the woes in the global economy and the size of the blow-out in the budget at the peak of the global financial crisis.

“What’s at risk here is that with very significant offshore borrowings and a shaky world for raising capital, if the commonwealth in particular can’t hold its ratings, that will affect the ratings of the banks, that will affect the cost of debt, and it also means that the commonwealth is not there in the same measure as a backstop if things go wrong again and the banking system can’t fund itself offshore,” Mr Murray told The Australian.

“That’s the higher risk that has to be managed at the moment. We don’t control what happens in the rest of the world. You need the commonwealth rating as a backstop because of what’s going on elsewhere in the world. You can’t put that at risk. To do that you have to achieve a budget that is cash-neutral at least, so that the debt stabilises and within that cash neutral position you can pay interest.”

Exactly right.

As we have seen here at barnabyisright.com for many months now, the government (and the economy) are now trapped by the errors and abject stupidity of the past.

The credit ratings agencies have put our government on notice that the credit rating of the government – and more importantly, of the banking system – is contingent on the government showing a credible path back to balanced budgets. Why? Because in the GFC, the government explicitly and implicitly guaranteed our hugely overleveraged, foreign-debt dependent, housing market exposed banking system, using the sovereign balance sheet.  If the government can not promptly curb its ever-rising debt and deficits, then the government guarantee propping up the banks will lose credibility.

On the other hand, if the government does attempt to achieve an actual surplus in 2012-13, and not just a forecast for one on May 8th, that spells disaster for the economy too.

How so?

See for yourself – Labor’s Inbred, Debt-Fed Chickens Coming Home To Roost.

We are Ireland Mk 2.

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“One Day You’ll All Wake Up And Realise ‘Hey, He Was Right After All’”

17 Apr

From Catallaxy Files:

Click to enlarge

Indeed.

Especially when it comes to debt and deficits ….

Barnaby is right.

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Barnaby Media Statement On Baby Bonus

15 Apr

Media Release – Senator Barnaby Joyce, 15 April 2012:

Baby Bonus

I have never contacted Tony Abbott to push for a doubling of the Baby Bonus.

With a strong on the ground experience of the problems that large lump sum social security payments can create, I don’t think I ever will support a policy that would exacerbate these issues.

Before the last election gross debt was to peak at $220 billion but it is now forecast to peak in excess of $270 billion so unfortunately, like the nation, our aspirations are affected by Labor’s debt.

The Nationals believe that the Baby Bonus should be made in interval payments over a longer term to avoid the social problems of lump sum payments being made that, in some instances, do not go toward the baby but go to alcohol or other items that are actually at odds to the welfare of the child.

More information: Matthew Canavan 0458 709 433

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Barnaby: Government Ignores Debt At Its Peril

12 Apr

True to his word, Senator Joyce has not relented in drawing attention to the dangers of ever-rising debt.

From the Canberra Times (my emphasis added):

A couple of years ago I was apparently a financial hayseed from the wild west of Queensland when I mentioned the debt.

Canberra is the canary in the coal mine for debt and the canary hasn’t been chirping lately. Mr Wayne Maxwell Swan has lost control and the cuts to spending and jobs are imminent.

I was startled at the trajectory of the debt when it was at $100 billion, and to be honest most ignored me. It wasn’t the size but the speed of the increase that worried me. Our gross debt is now $238 billion.

Last year Thomas Sargent won the Nobel prize for economics partly because of his work on government debt.

He noted that if you choose not to debase your currency, which can be the precursor to social collapse, government debt must be repaid through running budget surpluses at some point in the future equivalent to the size of our debt.

Debasing your currency is what the USA, UK, and EU are all doing, by “printing” money. In our Orwellian world of doublespeak, that is now euphemistically called “Quantitative Easing”. Their currency debasement is the key reason why (a) Switzerland’s central bank pegged their currency to the “QE’d” Euro, to protect their economy, (b) Norway’s central bank acted to weaken the Kroner, after all the “hot money” that was going to Switzerland went looking for a new “home” threatening to damage their economy, and (c) why the Aussie Dollar is way overvalued, wiping out whole industry sectors here, with only Bob Katter (and now, Paul Howes) arguing that something should be done.

Mr Swan believes, and this is just not going to happen, that we will have a surplus of $1.5 billion next year. Well, by then our gross debt will be about $270 billion and the custom of late means that it will be vastly more than that.

When Labor came to office, you owed $56 billion, so to get the debt back down to this level, Mr Swan will have to run budget surpluses of $1.5 billion for 142 years.

That’s the important point. A surplus does not mean that the debt is repaid, it just means you have a little bit of money to start paying off the debt.

So what are our other options?

Before our debt gets to $270 billion it has to pass through our current debt limit of $250 billion.

What would happen to Canberra if the limit on the nation’s credit card was not extended? A rather large train runs into a rather large boulder in a few months’ time.

If you choose not to do that you have to instead extend your overdraft again to your fourth debt limit in four years. Now we have an incredibly fast train going off the edge of a very large cliff in a year or so. So which one do you want?

Or do you just close your eyes and say a quick prayer to the Lord that it will all go away? Dear Jesus please pay our credit card off.

My humble suggestion is that you do everything possible for the cogs of the economy to turn in the most efficient way to make us as much money as possible.

This should start by getting rid of the carbon tax.

In my portfolio of water, I would recollect that between 2000 BC and 4000 BC the great civilisations of the world managed to create an economy from the development of irrigated agriculture. The Tigris and Euphrates, the Indus Valley in what is now Pakistan and the Yellow and Yangtze in China.

If you do not have the capacity to create excess commodities, you do not have a surplus-generating economy. Yes it must be environmentally sustainable but it must exist.

This week I have been travelling around the Northern Territory looking at options for expanded agriculture. The people up here were hit hard last year when Four Corners ran the country for a month and exports of live cattle to Indonesia were banned. They are still recovering.

I have just been to a meeting where it has become apparent that when the government doesn’t know the answer they just invoke the word ”environment” and then they are miraculously endowed with omnipotent qualities that preclude your right to question them.

There is one other way we can pay back the debt. We can just tax people to within an inch of their life and vainly hope that they are motivated to remain in the legal economy.

On a scale of one year, you only started working for yourself in the last week. From January 1 to April 3 you have been working for the government.

How much longer do you want to work to pay for the NBN? How much longer do we all have to wait before common sense takes over in a big white big building on a hill in Canberra?

More wisdom and commonsense in his little finger, than in the rest of Parliament House combined.

Barnaby is right.

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Labor Threatens Super Funds To Prop Up The Banks

5 Apr

Illustration by Zeg | Click to enlarge

I accept that some readers may not see the red flag that I see waving all over the following story.

So be it.

In my view, what we have here is a clear preliminary step down the path to government “intervention”, to “save your super” from the risks of the “volatile” sharemarkets.

First by “encouraging”, later forcing, your super fund to invest where the government dictates is a “safe” place for your retirement savings.

That could be the “safety” of government bonds.

Or perhaps, as strongly hinted at by this story, it could be the “safety” of bonds issued by our banking system … who just happen to be “overleveraged” according to the ratings agencies, and recently pitched threatened the government to help them with additional sources of funding in order to “save the mining boom”.

The ‘softening up’ process, the art of steadily planting seeds in the public mind and preparing them for a future event, is called “perception management”.

Here is Business Spectator’s Stephen Bartholomuesz making the argument for the government … prompted by a speech from the former Finance Minister Lindsay Tanner, in which he clearly threatened “government intervention” to force super funds to invest where the government wants them to (more on Tanner’s threat below):

Former federal finance minister Lindsay Tanner may have been overstating the risk of government intervention to correct a perceived bias towards equities within superannuation fund portfolios yesterday but the issue he was highlighting is worthy of further discussion because it contributes to the debate about the need for a developed corporate bond market in Australia.

In a speech to the Ownership Matters conference in Melbourne yesterday Tanner actually approached the issue of the overexposure of super funds to equities from that starting point – the absence of a developed domestic corporate bond market.

The disproportionately high levels of exposure to equities in most balanced fund portfolios is only one strand of the explanation for the absence of a functioning domestic bond market, albeit a material one.

During the great decades-long bull market in equities leading up to the global financial crisis, the bias towards equities in most super funds generated returns that, from a long-run perspective, were aberrational. The GFC reminded investors, and super fund members, that while equities might deliver higher returns relative to most other asset classes over the long term they do so because they carry greater latent risk.

As the population ages, the tolerance for risk will decline. Indeed, with the GFC as a wake-up call, it has already declined. Hence the deluge of funds that has poured into term deposits and other fixed interest securities as investors and super funds have been introduced, painfullly, to the concept of risk-adjusted returns.

Translation: For decades, everyone’s super went into the sharemarket; thanks to the GFC everyone has lost a fortune; now, everyone is more risk averse, and so their money is going into lower risk investments like term deposits.

For the foreseeable future the environment for equity markets is likely to be quite different to that which prevailed before the GFC.

That would suggest that, particularly for the demographic bulge moving towards retirement, the appetite for equities will diminish and therefore the proportion of equities within fund portfolios will trend and remain lower than it was pre-GFC.

As I was saying.

And now – for those with eyes to see – the red “danger!” flag appears (emphasis added):

We’ve already seen a flurry of listed corporate bond issues earlier this year as companies have capitalised on the risk aversion and desire for yield of investors, particularly the rapidly-growing self-managed fund sector.

If the major banks were to issue listed bonds, and the federal government ever delivers on its promise to facilitate the listing of Commonwealth government securities – which would provide a pricing benchmark for all other issues – a properly functioning, liquid corporate bond market that can be accessed by retail investors and SMSFs could be developed, one which might also encourage the large super funds to become bigger players.

As regular readers know, this clearly hints at exactly what I have long argued is the inevitable fate of Aussies’ super.  Our all-knowing, all-caring Big Brother government – whether Labor or Liberal matters not – will decide to “help” you, by creating mechanisms to redirect some (and eventually, all) of your super into “investments” that the government deems to be “safer” than the share market, and/or “investments” that are “in the national interest”.

They already tried last year, by “encouraging” super funds to invest in their “nation building” infrastructure programs like the NBN. Fortunately, the super funds were smart enough to resist.

But when push comes to shove, you can be sure that the government will move on from “encouraging”, to enforcing.

For your own good, of course.

Back to Batholomuesz:

Given the post-GFC environment for the major banks – they are holding a lot more capital, more and more expensive liquidity, experiencing higher funding costs and face the imposition of a simple leverage ceiling within an economy where households and businesses are deleveraging and demand for credit is therefore very weak by historical standards – it is unlikely that they will return to intermediating mid-teens credit growth any time soon.

Indeed, having had a nasty experience during the GFC, when their own overexposure to wholesale funding markets highlighted their own vulnerabilities, it is likely that the banks will manage their balance sheets far more conservatively in future than they have in the past, with an acute focus on the stability of their funding.

One of the reasons the major banks built up their reliance on offshore wholesale funding was the increasing diversion of Australian savings from bank accounts to super – and a majority of it into equities – as the super system grew over the past quarter of a century.

Bartholomuesz clearly argues that the banks are overreliant on offshore funding because you and I preferred to have our super in the stock market. The thinly-veiled implication is that the banks’ current problems are really our fault, you see. And the unstated implication being, that it makes sense for our super to fix that problem now, by redirecting it into bonds issued by those “safe as houses” banks.

More of those funds within the super system will, if fund members and their trustees shift to a more balanced and defensive posture and (thanks to the GFC) have a better understanding of risk-adjusted returns, become available to both the banks and corporate borrowers.

And there you have it.

We all just need to “have a better understanding of risk-adjusted returns”, and everything will be rosy … we will want to have our super invested in bonds issued by the big banks.

Even if it is just a “relatively modest” amount of our super:

Given the size and growth rate of the super system, relatively modest re-weightings of fund portfolios away from equities to fixed interest securities could have very significant impacts and could – indeed, should – occur without any need for government intervention.

That red flag is waving a little more strongly now.

And if we still don’t want to have our super propping up the banks?

Bartholomuesz’ final sentence rings out like the death knell I believe this article signals:

There probably aren’t too many super fund members who’d be enthusiastic about the prospect of Wayne Swan dictating how their savings were deployed.

Indeed.

Won’t stop him though.

Take the carbon tax CO2 derivatives scam as a case in point.

And if we consider closely what Lindsay Tanner wrote in the Australian Financial Review yesterday, then I think it is crystal clear what the government has in mind:

As the vast sums involved here are compulsorily directed to a particular form of saving which enjoys preferential tax treatment, those managing the funds can hardly go on about the sanctity of the free market. As concerns about corporate funding rise, and worries about risk in our super system mount, the only guaranteed way to avoid government intervention is for the major players to deal with the issues themselves.

For those with eyes to see and ears to hear, that is a clear threat to super fund managers.

Redirect Aussies’ super into propping up the banks.

Or the government will make you.

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Our Media In $140 Billion Lie For Wayne

4 Apr

What hope is there, dear reader?

If it is not Wayne Swan himself telling lie after lie about the economy, and the government’s financial record, then it is the mainstream media telling lies for him.

Here’s a classic example:

Last Thursday Wayne Swan said tax revenue had fallen $140 billion since the GFC, $90 billion of which has been due to lower company tax.

That was Alan Kohler in Business Spectator. Who we already picked up for inaccurate parroting of Wayne’s lies yesterday.

Here’s Sky News whistling the same false tune:

… having come through such tremendous global turbulence, one of the after-effects has been the revenue impact, with some $140 billion lost over five years.

Thanks to news wire service AAP, this lie was repeated across the mainstream media over recent days.

And the truth?

The truth is that Wayne did not actually say this in his speech last Thursday. What he did say, was that there was a write-down of $140 billion in revenue:

The bulk of the tax receipts write-down post GFC can be explained by write-downs in company tax. Out of a total write-down of $140 billion, company taxes contributed around $90 billion over the five years to 2012-13.

And what that really means, in simple truth, is that the Treasury “experts” over-estimated likely revenues by $140 billion in their original budget estimates. And then, they later had to “write-down” the amount they did not actually get. Which the media then lazily reported in the form of a tacit excuse for this government’s massive budget deficits. As though money you only hoped to get, and then didn’t, is somehow a “loss”.

But can we really blame the media entirely?

After all, here’s Wayne today – after the media had been dutifully reporting the $140 billion writedown as a “loss” for days now – himself repeating their $140 billion lie in a formal statement:

…the global financial crisis and the revenue challenges it brought to state and federal budgets meant it was unrealistic for any treasurer to pretend a drop in revenue was unique to their state.

‘Nor is it realistic to suggest state revenue losses are anywhere near the $140 billion the federal government has lost due to the global crisis,’ Mr Swan told AAP in a statement.

As we saw yesterday (“Wayne’s ‘Per Cent Of GDP’ Lies Debunked”),  the real truth, hidden behind a smokescreen of half-truths, cleverly worded misleading and deceptive statements, accounting tricks, and outright lies, is that the government is not making a “loss” on tax revenues at all. Indeed, they are pulling in tens of billions more Total Revenue now, than they were in the 2007-08 year, pre-GFC.

The real reason why the budget is in such a parlous state, and why our sovereign AAA rating is now in jeopardy, is because the ALP’s rarely-mentioned spending is still totally out-of-control. As I reported yesterday:

According to Wayne’s Treasury’s most recent published figures, in 2011-12 this government will rake in $37.41 billion more revenue than in 2007-08, pre-GFC.

But they will spend $91.64 billion more than in 2007-08, pre-GFC.

I have not seen a single journalist or economic commentator in the land actually report the simple, plain truth about this government’s actual budget position.

Instead, they lazily report repeat the Government’s lies. Or, lazily report lies all by themselves.

It is inexcusable.

It does not matter what the government says, in speeches or press releases. Indeed, this government is so adept at twisting words, glossing over facts, and using misleading and deceptive statements, the smartest thing to do is to assume that everything they say is a half-truth, misdirection, or blatant lie, and go check the data for yourself.

Every time.

Anyone can go to the government’s Budget website, look up the Past Budgets information, compare the basic Revenue and Expenditure figures, and see the simple truth. In mere minutes.

The low calibre of our supposed “experts” and intellectual “betters”, whether they be in politics, or the commentariat, truly causes me to despair for our country.

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