Senator Joyce writes for the Australian.
Listen up this time!! -
The joy of vindication on the prospect of a US government default is bittersweet; I was right, Wayne was wrong. To those sucked in by the Treasurer, placing wishful romantic theory above clinical reality, then saying “you wouldn’t cut it with the Bloomsbury group if you talk like that at our soiree”, I suggest this, get real.
Do not confuse tackling a problem with delaying when it comes to debt. If while out on the tiles on a Friday night you discover a septic gash on your leg, and in response down another five jagermeisters, pain gone, problem gone, keep dancing, that is delay. Going to hospital to avoid amputation is dealing with the problem.
Tim Flannery said that the impact of climate change policies won’t be felt for at least a thousand years. The impact of a catastrophic default this time was avoided by a mere 10 hours. When prioritising threats I know which one I would be concentrating on.
Swan has given 25 speeches this year and mentioned climate change 24 times. Debt has only been mentioned 16 times, and eight of these in one speech made last month. A year and a half ago I implored the government to prepare contingency plans for the threat of a US default stating the prospect was “distant but real” but if it eventuated the fallout would be a financial Armageddon making the GFC look like a mere preamble. US President Barack Obama also used the term Armageddon in the past month, so if I’m mad, so is he.
When asked on ABC radio whether the government had prepared for a potential US default, our Treasurer could point to no specific actions taken. But we do have parts of Treasury modelling climate change. The Treasurer believes I have been captured by “Tea Partiers”. Disagree with him on climate change you’re a denier, disagree with him on economics you’re a Tea Partier.
Ken Rogoff, obviously another of Swan’s Tea Partiers, but also moonlighting as a professor of economics at Harvard University, has been warning about these problems since we were first introduced to the term sub-prime. The Global Financial Crisis involved ordinary people and silly governments taking on too much debt. There was nothing unique about it, the same process has been repeated over and over again with tulips, railroad stocks, Florida real estate, dot-com investments and our modern example, collateralised debt obligations.
A couple of years ago Rogoff wrote a book titled This Time Is Different, showing actually it’s almost always the same. Public debt crises are more common than economists tend to acknowledge and financial crises in particular place extreme stress on government finances.
Rogoff wrote a paper a couple of months ago titled A Decade of Debt in which he measured the increase in public debt in different countries since 2007, when we voted in these current economic luminaries. No surprises, Iceland and Ireland, are one and two but Swan got the bronze, Australia is third, with a 150 per cent increase in our public debt since 2007. As I previously said we can’t keep going on like this, but we are. We have just extended our debt ceiling to $250 billion.
In 2008, before the GFC’s nadir, Ireland’s net public debt was 12.5 per cent of GDP according to the OECD. The Treasurer boasts that our net public debt is low compared with others. The parliamentary library estimated last year our net public debt will be 12.3 per cent of GDP in 2012-13, the same year Swan predicts surplus.
In the political sphere the person who drives via the rear vision mirror, with a wonderful recitation about everywhere you have been and why, but not a clue where you are going, is dangerous. When, with a coterie of bureaucrats, they cannot keep the car on the black stuff but seem to be targeting the trees, you are in for the economic ride of your life.
Things changed for Ireland after it guaranteed the debt of its banks during the GFC. We have done that, too. Three years ago the Treasurer introduced the financial claims scheme which guarantees $730 billion in deposits. It’s up for review in October but there is barely a discussion about how we might mitigate the risks of such taxpayer exposure. We are too busy trying to cool the planet from a room in Canberra.
Barnaby is right.
Take very careful note of that last paragraph.
Moody’s ratings agency has already warned our government – when it downgraded the credit rating of all our banks in May – that the government’s guarantee was worth two ratings notches.
In other words, without the government guarantee – the our-future-earnings guarantee – our banks’ credit rating would be slashed even further.
Meaning higher interest rates for you.
The long overdue collapse of our housing bubble.
The collapse of our banks.
The bailout of our banks.
And Australia looking exactly like the rest of the Western world.
Oh yes …
And your super stolen by our government – both “sides” – to bail out the banks, and/or finance the floundering government.
Don’t believe me?
Piss off then.
Read. And learn.
Start here -