You may recall the days of late 2009, and early 2010.
Barnaby Joyce had been appointed Opposition Finance spokesman. He was taking flak from all sides over his public warnings regarding Australia’s rapidly rising government debt trajectory. Ever the “little ‘ol country accountant”, Barnaby had quickly calculated the basic numbers:
Let’s talk about the abundance of faith exhibited by Labor when it tells us of the eight consecutive $19bn surpluses that are required to bring the budget back into orbit when the continued stresses on the international economy are clear and evident, especially in Europe.
Within the first two days of launching this blog in February 2010, I stated that “No, We Cannot Pay Our Debt”:
This country has never seen anything like eight consecutive years of $19 Billion surpluses. In fact, the Howard Government achieved it just 3 times… in 12 years… during an unprecedented mining boom.
A day later I posed the question, “Can We Even Pay The Interest?”
Click to enlarge
As you can see, Ken Henry’s projected Interest on debt alone is greater than many of the 12 years of Howard Government surpluses. And they came during an unprecedented mining boom…
Paying back the projected Interest-only will obviously be a big challenge. So try to imagine how we are ever going to pay back the principal too…
It is easy to see why Barnaby is so concerned about our ever-rising debt under Rudd Labor.
Because quite simply, we can not pay it back.
Since the days of February 2010, Barnaby has been demoted, and the trajectory of ALP’s borrow-and-spend-a-thon has streaked ever higher – see the masthead of this site.
Those Interest-on-debt projections have, of course, continued to extend further and further into the future:
Budget 2012-13, MYEFO, Appendix B, Note 10
Yesterday came the news that not only is there not going to be a return to budget surplus this year – quelle surprise! – but that an “expert” think-tank (ie, lobby group for vested interests) is now predicting a further decade of budget deficits:
Structural changes in the economy are likely to leave Governments across Australia facing budget deficits of around 4% of GDP for at least the next decade, according to research released today.
The Grattan Institute paper, Budget Pressures on Australian Governments, suggests it could be a long time before Australian governments post a collective surplus.
Fairfax papers reported (note the $40 billion error in the opening line; contrast the final paragraph):
Australia faces a decade of budget deficits with the annual total set to pass $60 billion in 2023 unless governments take tough action to “share the pain”, an expert panel has warned.
The Grattan Institute’s assessment comes as Treasurer Wayne Swan confirms the budget has taken a $7.5 billion hit since the midyear update in October…
The institute says that while notionally on track to surplus now, the combined state and federal budget deficits should reach 4 per cent of gross domestic product by 2023, which is about $60 billion in today’s dollars and would be about $100 billion in 10 years’ time.
I fear this estimate may well err to the conservative. A $100 billion combined budget deficit in 2023? No problem … Fed Labor achieved $55 billion in 2009-10:
Source: Catallaxy Files
One can only imagine just how big the TOTAL of Australian government debt – and the Interest bill – will be if the Grattan Institute’s prediction for another decade of annual budget deficits is realised.
Meanwhile, over the weekend the Australian Financial Review reported that the Liberal Party has backed away from its own commitments to achieving a budget surplus (h/t MacroBusiness):
Opposition Leader Tony Abbott has declared “all bets are off” on whether the Coalition will deliver a surplus in what could be its first year in office, prompting warnings from a prominent economist that the budget may not be balanced for years…
Asked at a public meeting in Melbourne when the Coalition would deliver its surplus, Mr Abbott said he had previously been confident about the timing based on government figures as they stood just before Christmas. He indicated he had changed position because the government wouldn’t reveal the budget’s true state.
And fair enough too.
Clearly though, none of the “expert” economists, commentators, and certainly none of our politicians – with the exception of Barnaby Joyce – will take any notice of this paragraph in the Grattan Institute’s report (emphasis added):
Balanced budgets over the economic cycle make a big difference. Persistent large government deficits incur interest costs. They lead to large government debt that can limit future borrowings. Some argue that high debt reduces economic growth. On any view, persistent large deficits can unfairly shift costs between generations, and reduce flexibility in a crisis.
As many developed countries have rediscovered in recent years, high government debt coupled with low economic growth creates a terrible economic dilemma. If government increases spending, the debt gets worse, markets charge higher interest rates, and borrowing more becomes impossible. If government tries to reduce its deficit, GDP slows further, and government debt can rise as a proportion of GDP, making the problems worse. Their successors and financial institutions can then find it difficult to borrow at reasonable costs, and economic growth is often slow for a long time.
How to respond to the trap of low growth and high government debt remains contentious. Far better to avoid the trap in the first place – which means running balanced budgets over the economic cycle.
Although the true state of the budget may be unclear, as the months and years pass by, there is one thing that becomes ever more clear.
Everyone should have heeded the warnings of our “little ol’ bush accountant”, the sacked Opposition Finance spokesman.
Barnaby was right:
“If you do not manage debt, debt manages you.”
– February 2010
Barnaby Is Right 
Qld – the LNP has a problem – Socialism has blighted its economy.
Dr Mark McGovern
Candidates need to put state first
09 March 2012
Queensland owes more money than New South Wales and Victoria combined, with less than a third of the income stream, a Queensland University of Technology (QUT) economist says.
Dr Mark McGovern, from the QUT Business School, said the political parties vying for the top job in Queensland were yet to offer viable solutions for the state’s economy.
“Queensland debt currently sits above $85 billion, dwarfing that of any other state,” Dr McGovern said.
“Rises in debt present major challenges to the incoming government, whatever its composition.
“Supposed returns of $15 billion from extensive, unpopular asset sales have evaporated. They have made no appreciable difference to the relentless rise of debt.”
Dr McGovern said the debt reported by the Queensland Treasury Corporation (QTC) to fund state and local government activity had risen by $11.7 billion, or 16 per cent, to $84.7 billion in the six months leading up to December, 2011.
“Since 2004 such debt has quadrupled from $21 to $85 billion,” he said.
“Queensland Governments between 1992 and 2004 were generally effective in stabilising debt as it fluctuated between $17 billion and $22 billion. Those since 2004 have not been, and no gains from $15 billion in recent asset sales are apparent.
Candidates need to put state first”
Dr McGovern said he was yet to see policy proposals from any political parties outlining a new way forward for the State in the lead up to the election.
He said four elements – adequate disclosure, suitable expert involvement, better government business practices and sustainable financial arrangements – needed to be addressed in a new agenda.
“One step is to adopt clear and continuous disclosure to citizens of how we are going financially,” he said.
“This mirrors in government what corporations are required to do to inform the various business stakeholders.
“We also need to focus on core state business and not try to meet challenges that are properly those of the Commonwealth, and vice versa.”
He said it was also important to announce only costed initiatives while using active, ongoing evaluation of projects and programs while also tightening budgetary controls and adopting more open and responsible procedures.
“The average Queenslander had a debt exposure through its government of $5560 in 2004,” he said.
“Today, despite eight years of a growing population, the average exposure is passing $20,000.”
http://www.qut.edu.au/about/news/news?news-id=40695
Hi BI
I dont know if you are aware of Reggie Middleton?
IMO he is very well informed on Bank over capitalisation.
http://www.boombustblog.com/blog/item/9067-as-forewarned-the-irish-savers-have-been-cyprusd-and-theres-much-more-cyprusing-to-come
He called very early the risk of irish banks which are now being Cyprused.
I think he might be good to keep an eye on for the next Cyprusing.
Cheers Phil
Will do Phil, thanks for the tip. I wonder if he is aware of the info in my post re “G20 Governments ALL Agreed To Cyprus-Style Theft Of Bank Deposits … In 2010”?
I know I am.
Cant wait for your eagle eye to pick out the section of Swanny’s budget that confirms a bail-in package for Australian Banks.
It’s the #1 thing I’m looking for, whether in the budget itself, or in separate legislation sneaked through under cover of the usual budget noise in the media.
The system is wired for the destruction of the many for the benefit of an elite few. And especially at times when the system is economically and socially challenged, as it is again at this very time of history.
http://www.presstv.ir/detail/2013/04/22/299675/us-steps-up-regime-change-bid-on-iran/
Javed Hashmi
Apr 23, 2013 2:30 AM
Finian is as usual very insightful, objective and to the point. This agenda of regime change and war against Islamic Republic is not new. We are hearing these threats from US and its rogue entity in the ME for last 12 to 15 years. The more they threaten, the more Islamic Republic strengthens for a befitting response to these cowardly evil threats. In my opinion, neither US nor the rogue Zionists are in any position to wage a war against noble Iranian people and government. Islamic government of Iran has all its bases well covered and stands ready for any aggression to teach a good lesson to the aggressor.
Finian Cunninghamin reply to Javed Hashmi
4/23/2013 3:47:48 AM
Dear Javed, I do hope you are right in your assessment that the US and its client Zionist terrorist entity are in no position to wage war against the noble people of Iran. Nevertheless, the truly dangerous thing about the imperialist capitalist system, as history has shown us with the First and Second World Wars, and many other horrors, is that this system is programmed to commit war even when that defies all logic, sanity and legality. The system is wired for the destruction of the many for the benefit of an elite few. And especially at times when the system is economically and socially challenged, as it is again at this very time of history. International awareness and solidarity are more important than ever to face down these warmongers and ultimately their destructive economic system – once and for all.
We no longer have any Govt banks who can create from nothing at least some of the money to equal growth or inflation.
In the West the more growth we have,the more debt we incur.Imagine a bucket of water in which private banks pour new water (liquidity) in at the top,while taking many times more out the bottom in the form of interest + capital on both in flationary water (money) and water (money) to equal growth from the bottom. It is impossible for the bucket of liquidity to remain full, let alone maintain equilibrium.
Barnaby is right,the debt under this system can never be repaid.
Can someone please educate me as to why this money has been borrowed from a private banking entity , as apposed to just printing it or Government initiating it. I cannot see how there would be any difference as the banks just create it from thin air anyway. If need be charge interest to combat inflation but at least the interest could have been revenue . The system is insane , the world has sold it’s soul on the dotted line to con men and Government just plays along ?
The Story of The Commonwealth Bank
http://www.alor.org/Library/Commonwealthbank.htm#1a
Thanks for that . I’m speechless . We need to get out of it somehow , it’s ridiculous
Jack Lang was right
If Clive Palmer was sincere he would not name his party the United Australia Party.
http://home.alphalink.com.au/~eureka/lang.htm
The Lang plan
In 1930 Jack Lang was returned overwhelmingly as premier of New South Wales. His first government (1925-1927) had introduced comprehensive systems of widow’s pensions, child endowment, and worker’s compensation; his second government pledged itself to maintain these hard-won games and steer the state out of the Depression.
Immediately, Lang rejected the Niemeyer plan.
At a stormy mass-meeting in the Sydney suburb of Paddington he declared:
“… The same people who conscripted our sons and laid them in Flanders’ fields… Now demand more blood, the interest on their lives…”
The meeting ended in a mass clamour for the principle of Australian Nationalism – Australia First!
Lang proclaimed his plan to fight the Depression:
reduction of interest on all government debts to Australians
suspension of all loan payments to all overseas creditors
the expansion of public works programmes
bank funding of government works through controlled credit expansion.
The “Conservatives” immediately equated the Lang plan with communism, condemned his nationalism as “anti-British” and mobilised against him.
The New Guard
According to Colonel Eric Campbell, founder of the New Guard, his movement was “a defensive organisation pledged to uphold law and order constitutionally and to support the police to that end”. By the close of 1931 the New Guard had received 87,000 applications for membership in New South Wales and had built strong links with similar groups in other states. Its strongest support lay with ex-soldiers and ex-officers. His main aim was to crush “communism”. The New Guard flourished in an age noted for its confusing attitudes as far as “patriotism” was concerned, when Australia feared that “protection” by our “Mother Country” was preferable to any statement or expression of political Australianism. Lang’s nationalism was anathema to the officer and commercial classes; the ordinary ex-soldier became the bully-boy of those whose class snobbery was as much directed towards the poor veteran as the city working class.
The New Guard sprang from a shadowy “Old Guard” which drew its funds directly from large banks, insurance companies, and other firms (see Keith Amos: The New Guard Movement 1931-1935). Any talk of “debt repudiation” raised not the image of Australian self-determination but Bolshevism-Communism. The upper-crust cynically manipulated the New Guard to its end of smashing the Lang government by any means necessary – by direct threats of force and through press hysteria. The New Guard brought New South Wales to the brink of civil war.
Lang continues his struggle
In May 1932 Sir Philip Game, Governor of New South Wales, sacked the Lang government and ordered new elections. The New Guard automatically offered support to the “United Australia Party” (predecessor of today’s Liberal Party). The press painted Lang as a wild man manipulated by the Communist Party, and his government was defeated at the polls.
With the “Communist danger” removed the New Guard rapidly declined and disappeared completely by 1935. It had done its job.
This site may be of interest.
http://www.tomatobubble.com/fh3.html
“History is indeed little more than the register of the crimes, follies and misfortunes of mankind.”
Edward Gibbon, English historian (1737-1794), From: “The Decline and Fall of the Roman Empire”
http://weareawakeblog.com/tag/denison-miller/