Tag Archives: budget deficit

Two Charts Prove Labor Was A Lousy Government

10 Sep

Despite enjoying the highest Terms of Trade (ToT) in the nation’s history …

Click to enlarge

Click to enlarge

… the Rudd/Gillard/Swan Labor government still could not balance the budget.

Not once.

Indeed, from 2009-10 onwards, as the ToT quickly rebounded from the 2008-09 GFC “dip” — thank you China — to scale new all-time record highs, the difference between their May Budget estimate, and their Final Budget Outcome, grew steadily worse*:

Click to enlarge

Click to enlarge

Moral of the story?

If you cannot manage a budget, you should never be allowed to manage other people’s money.

* The Final Budget Outcome (FBO) for 2012-13 has not yet been released by Treasury. Presently, the “estimate” is -$19.4 billion. On past form, the FBO is sure to be worse.

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Australia’s Public Debt Now 61% Worse Than Ireland Before It Crashed

7 Aug

There are many who want you to believe that Australia’s public debt level is “low”, and nothing to be concerned about.

The truth is, there are a lot of lies told about our public debt. Usually, they are lies of omission. A deliberate choice to not give you the truth, the whole truth, and nothing but the truth.

Recently the Australian Financial Review published an article that — unlike politicians’ claims — would hold up in court:

You’ve been grossly misled about Australia’s finances – again.

Getting insight into the true state of the government’s finances is as important as understanding your own. The government’s liabilities are ultimately our debts, and will be paid back by taxing our earnings.

Last time I sunk my teeth into these issues I explained how the ostensibly very low “net debt” figures bandied around by many, including the PBO [Parliamentary Budget Office] are a complete fiction: they assume the debts of wholly owned government companies and state governments simply do not exist.

The net debt numbers are also artificially reduced by taking cash from the Future Fund, which was set up to meet unfunded superannuation liabilities, which are not – surprise, surprise – included in the debt estimates.

It’s the same as ignoring money you owe to someone but recognising the cash you have saved to repay them.

Once you add back in state and wholly owned government entity liabilities, Australia’s net debt almost doubles from 10.6 per cent to over 20 per cent of gross domestic product. Since net debt is open to so much fudging, real analysts focus on true debt. Since 2007 federal and state government debt has exploded from $150 billion to $500 billion, with the actual debt-to-GDP ratio approaching… 40 per cent

This is precisely what Barnaby Joyce has been saying, since late 2009.

In recent days here at Barnaby Is Right, we have seen how our Treasury department boffins have completely failed to recognise the true reason for Australia’s structural budget deficit.

It is exactly the same reason that Ireland crashed in 2008.

A banking system — and a government — that had become dependent on profits (and taxes) flowing from “an unsustainable boom in the housing sector”:

ScreenHunter_08-Jul.-23-08.09

So our supposedly “low” and ever-rising public debt level does matter.

Because at 40% of GDP (Federal and state debt combined), our true public debt level is now 61% worse than Ireland before it crashed … and bailed out its banks:

Screen shot 2013-08-05 at 7.37.30 PM

PublicDebt_total

You may notice that the chart for Australia shows an apparent small decline in (Federal) government debt in 2013, to 20.7% of GDP (circled in red).

That is the Federal government’s forecast.

We all know what their forecasts are worth.

See also:

Australia Plans Cyprus-Style Bail-In Of Banks In 2013-14 Budget

Australian Banks “Welcome” Cyprus-Style Bail-In Plan

IMF Tells Australian Lawmakers To “Prevent Premature Disclosure Of Sensitive Information” On Bank Bail-Ins

UPDATE:

Labor spending simplified –

BQ-q4DeCAAALEGc

Politicians To Share Burden Of “Burden Sharing” Budget

2 May

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From The Australian:

A CRACKDOWN on existing disability entitlements and a levy on higher-income earners are being considered as part of the Gillard government’s plans to fund the $15 billion-a-year national disability insurance scheme…

Yesterday Ms Gillard said reasonable options, even those previously rejected, were being considered. She said the concept of “burden sharing” would guide the government’s decisions.

The more who share the work, the lighter the load for all: business, families, institutions,” she said.

Fine.

But rather than starting with a “crackdown” on the usual populist political targets – people on Disability Support pensions, and “higher” income earners – how about we see our erstwhile “leaders” … well, lead … with a personal example.

Let us begin this concept of “burden sharing” with a May budget that includes a “crackdown” or “levy” on these high income earners –

Prime Minister Julia Gillard – $495,430

Deputy PM Wayne Swan – $390,627

Cabinet Minister – $328,698

Opposition Leader Tony Abbott – $352,517

Speaker – $333,462

Shadow Minister – $238,187

Backbencher – $190,550

Source: The “independent” Remuneration Tribunal.

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Barnaby: “This Is How Stupid They Are”

30 Apr

Dear reader,

Please enjoy a few minutes of politico-economic sanity:

2GB Chris Smith Afternoon Show Transcript
Tuesday 23 April, 2013

Topics: Chris Smith, Senator Barnaby Joyce
Subjects: Budget black hole

Chris Smith: Senator Barnaby Joyce, good to have you on the program.

Barnaby Joyce: My pleasure, how are you?

Chris Smith: I’m well. Where are you today?

Barnaby Joyce: Well I’m actually making my way to Canberra, but I’m stopping off in Tamworth on the way. The bloke I used to stay with, he and his wife, unfortunately he passed away from cancer so I’m going to the service for that. I was going to go to Rockhampton but changed direction.

Chris Smith: So, you’re heading to, hopefully, a new place. Have you done any polling of late to work out how close you’re going to get to Tony Windsor?

Barnaby Joyce: It’s going to be tough. Mr Windsor will desperately say he wasn’t there, he’s not responsible for this government and he didn’t put them there. I will keep on reminding people that he did. The only reason that we’re $270 billion in debt is because he put them there. The only reason that we’re heading towards another $12 billion deficit is because he put them there. The only reason we have a carbon tax is because he put them there. He’ll be saying it wasn’t me, it was somebody else, I was away that day.

Chris Smith: The Prime Minister’s big budget black hole, estimates now putting the budget deficit anywhere between ten and $20 billion which is not a bad effort considering we were told that less than a year ago that we’d have a surplus of $1.3 billion. How is it possible that $21 billion goes missing Barnaby?

Barnaby Joyce: Bad management, simple as that. What happens is, they’re spending 12 bucks and only bringing in 10 and sure enough you start running out of dough. All of your listeners would understand that the deficit is just like the loss of the government for the year. The real problem of course is the debt that sits behind it. The debt is getting bigger and bigger. They had a good week last week, they only borrowed another half a billion dollars last week. The week before they borrowed another two billion. If you put the price of your house out to $300,000 a pop that’s 6,000 houses that they borrowed for the week a fortnight ago. They borrowed for another thousand or so last week.

Chris Smith: They keep talking about their debt to GDP ratio. “It falls in line with the rest of the world”. The rest of the world is a basket case right now, how dare they compare us with the rest of the world right now.

Barnaby Joyce: Yes Chris, that’s like walking around the graveyard saying: “This person’s more dead than that one”. It’s irrelevant. Once you’re out the backdoor, it’s irrelevant. It becomes an argument in sophistry, an argument in rather large numbers you can’t repay. This is a garbage argument: “Oh, we’re not as bad as Greece. We’re not as bad as Portugal”. I hope not. If we keep going the way we’re going, Ms Gillard, Mr Swan, Mr Windsor and Christine Milne if they keep running the show, don’t worry we’ll get there.

Chris Smith: I had to laugh when I was hearing this long speech of 33 minute duration, off and on through my commercial breaks here yesterday. I was hearing this reference to company tax revenue being down and company tax revenue usually gives us, company tax revenue has hit us and company tax… I thought to myself, no wonder company tax revenue is down, because if they open their damn eyes they would have seen companies close left, right and centre.

Barnaby Joyce: People are doing it tough. I was talking to a manufacturer the other day. He travelled 500km to have dinner with us and amongst the things he wanted to show me was his carbon tax bill: $12.1 million for the year. He said: “What that means to me is that I should go to another country. Why do you guys do this? What is wrong with you people? If I moved to America this is my cost. If I move to Asia here’s my cost but I choose to stay here. Guess who gave me these costs – the government!”

Chris Smith: They change the goalposts so often. The other goalposts they’re about to change if you believe some of the scribes today, is this Medicare levy. We’re going to get to the stage where we’re upping the Medicare levy for the National Disability Insurance Scheme. Shouldn’t they be looking at the bank, that is, our bank, the National Bank and say: “Hang on a second we’re in such crisis at the moment, maybe we’ll hold off on that for a while”, like most people do in business, like most people do with their house budgets.

Barnaby Joyce: The first thing they should be getting, as a little old bush accountant, they should be getting their day to day finances under control. Then other good things that you want to happen like the National Disability Insurance Scheme can be paid for. This idea that: “Oh we don’t know where the money is going to come from so what we’re going to do is borrow more money and if we can’t borrow it, we’re just going to tax you”. That’s just a sign that they’re financially out of control. The people with disability are a soft spot for me and I do want to do something to help them. My gosh you get frustrated when you find the money that has been put up against the wall and all these nutty ideas and when a good idea comes up they have no money for it. We’re beyond not having any money for it. We’re getting to the point where we can’t borrow. We won’t be able to extend our credit limit and we won’t be able to borrow more money.

Chris Smith: You said as soon as they get money they spent more, remember they didn’t get a zap from the mining tax and they spent that on handouts remember before they even got anything.

Barnaby Joyce: This is how stupid they are. They basically said” “We’ve got this ticket in the lottery and now we’re going to buy the house and oh gosh, the lottery didn’t come in. That’s a bad plan, that’s bad luck. Let’s put out a media release blaming somebody about that”.

Chris Smith: Yesterday was a shocker and as I said at the beginning of the program, someone who stands there for as long as the Prime Minister did to come up with a series of excuses as to why everything is stuffed, is a person who is more culpable every minute she speaks.

Barnaby Joyce: I don’t think anyone is listening. I had to deal with the same thing in this area, I had Mr Windsor say that he wanted to bring about a referendum on gay marriage, however he wasn’t going to bring it up with the Prime Minister and if it did come up he wasn’t going to vote for it. I was trying to translate that for people and it’s called confusion – mass confusion.

Chris Smith: The race to become Prime Minister doesn’t just involve Julia Gillard and Tony Abbott, Clive Palmer’s thrown his hat in the ring. Is the Coalition under threat of having their votes diluted because of Palmer?

Barnaby Joyce: Clive’s a mate but a lot of things he’s doing of late things are getting out there. Clive’s a good bloke. I don’t know why we’ve got this distraction here. It doesn’t quite work like that. As you know to set up a political party you’ve got to have members, branches, policies, people willing to give up their jobs and go campaigning for you. It costs a lot of money and I know he has a lot of money but it takes a lot of money to run a campaign.

Chris Smith: I’ve got to tell you that Clive Palmer may be one of your mates but he doesn’t count Tony Abbot as one of his mates. This is what he told me yesterday when he was in the studio.

Chris Smith: Tony Abbott has never been Prime Minister.

Clive Palmer: Thank God for that.

Chris Smith: His party has never been in the position of running the country, is there a sense of vengeance?

Clive Palmer: Not really. My number one criticism is that all sides of politics wherever they’re from, have lobbyists who are not elected, who advise them. If you go to Parliament House, there’s a box in Parliament House, on the floor of Parliament where the advisers sit. Tony Abbott goes over and gets advice from his advisor and someone else gets advice from theirs. Those advisers have direct links, were or are or will become in the future, employed by lobbyist companies. If you go to those companies, it doesn’t matter if it’s a Liberal or a Labor Government who you want to influence policy, they’ll assist you for a fee. I think that’s subrogating the Australian rights.

Chris Smith: Thank God Tony Abbott has never become Prime Minister he said.

Barnaby Joyce: That’s not helpful. The thing is, if Clive’s got a problem with advisers and lobbyists, that’s great, let’s deal with that problem. What are we going to do? Leave the Labor Party there and the Greens and the independents to run the show for another three years? What do you think is going to be left of this country if they stay there for another three years? You won’t have to worry about me campaigning there for another three years because honestly I would be lying to you if I said I’d know how to fix it.

Chris Smith: This is all about vengeance isn’t it?

Barnaby Joyce: Vengeance is a bad thing. Vengeance eats you up and gets you nowhere. You have to learn to park grief and move on. If you start carrying around a bucketful of bile no one cares about it, it just eats you up.

Chris Smith: What’s your message to Clive?

Barnaby Joyce: Clive help us get the country back on the rails. We don’t need any more instability. I’ve got to give up my job, an easy-paying job to have a crack at a seat where the bloke has 71 per cent of the two-party preferred vote. Why? Because our nation has got to get back on the rails. We all have to put our shoulder in to get the show back on the rails, not try and sink the boat. If we sink the boat we all go down with it.

– ENDS –

Only NOW Experts Agree: Barnaby Is Right On Debt

28 Mar

It only took 3.5 years.

Public vilification.

And humiliation.

And demotion, losing his Shadow Finance Minister portfolio.

But in the end, the truth will out.

The worm has begun to turn.

And some economic “experts” are beginning to agree.

Barnaby is right, on his most fundamental and politically courageous warning – the steeply rising “trajectory” (trend) of Australian government debt:

CGS_endFeb

From the Herald Sun (my bold emphasis added):

GILLARD Government debt levels are forecast to blow out by 80 per cent to $165 billion in this term alone – equal to more than $14,000 for every working Australian.

Analysis of Budget documents reveals that between the 2010 election and Federal Treasury’s update in October last year, the 2012-13 net debt estimate rose $54 billion to $144 billion.

With Wayne Swan having junked the Government’s commitment to a surplus this financial year, Bank of America Merrill Lynch now forecasts Treasury will raise the estimate by a further $21 billion in the May budget.

“The government is starting to develop some form when it comes to over-estimating the improvement in its budget balance,” Bank of America Merrill Lynch chief economist Saul Eslake said yesterday…

Mr Swan’s spokesman said the Government had no plans to raise the gross debt limit. Mr Eslake said the increase that had already occurred was “troubling”.

If the trends that look increasingly obvious aren’t addressed at some point we might cross that threshold from safe territory to dangerous territory very, very quickly,” he said.

Monash University Professor of Business and Economics Jakob Madsen said the gross debt rise was “disturbing”.

It’s a dangerous trend and it’s at the wrong time.

Business Council of Australia CEO Jennifer Westacott said spending had grown “out of step” with revenue.

“If that doesn’t change we are going to have serious public debt problem,” Ms Westacott said.

Mr Eslake, Professor Madsen and Ms Westacott all said Australia did not currently have a debt crisis.

But, Ms Westacott said, “we do have a budget management crisis”.

Really?

Shame these “experts” did not notice this problem and speak up earlier. Have we not had to endure 5 years of constantly being told that the ALP government have given us “sound economic management”?

Do not be misled by all those who (still) downplay the importance of Australia’s government debt position.

Do not be misled by all those who prefer to pull the wool over your eyes, by talking about government debt using only the “net” figure rather than the gross, because the “net” figure is lower and does not sound so bad – conveniently ignoring the highly important fact that the $13 – $14 billion per year in interest expenses due are payable on the much larger gross figure:

Budget 2012-13 - Budget Paper No.1, Statement 9, Note 10

Budget 2012-13 – Budget Paper No.1, Statement 9, Note 10

Do not be misled either, by those who – intentionally, or accidentally – distract from and dismiss the importance of ever-rising government debt, when they (quite correctly) point out that an even bigger problem is our world-leading private debt.

As your humble blogger reaffirmed less than a week ago:

“This is the #1 reason why, even though it is true that private debt is much worse than public debt, I believe that Barnaby Is Right in constantly expressing concern over the rapidly rising trajectory of public debt in Australia. Because, regardless of whether or not you agree that our public debt is “low compared to other OECD countries,” the undeniable fact remains that our rapidly rising government debt does represent a weakening of the government’s balance sheet… even before any banking crisis arrives! Foreseeing that our banking system was, just like the rest of the West, our key vulnerability, and that weakening the government balance sheet unnecessarily would only make our future problems far more calamitous, was one of the main reasons why I launched this blog in early 2010. When you hear some distinguished-looking, eminent economic “expert” – or politician – reassuring us that Australia’s public debt is “low”, just keep one word at the front of your mind. Ireland. And remember what happens to the public debt level, when a government with previously “low” public debt suddenly finds itself borrowing to the stratosphere – often from the IMF – in trying to bail out an over-leveraged banking system.”

Australia’s total government debt – using the popular “as a percentage of GDP” measure (which I loathe) – is now worse than where Ireland’s was before their private debt bubble burst. And ours hasn’t. Yet. Note well: the following charts are only current through 2011; our Green-Labor government has piled on an awful lot of additional debt since then –

Screen shot 2013-03-27 at 10.35.05 PM

IRELAND – click to enlarge

AUSTRALIA - click to enlarge

AUSTRALIA – click to enlarge

Australians should never forget that, prior to their real estate (private debt) bubbles bursting, Ireland and Spain were considered the “outstanding” economies of the EU.

From the New York Times, June 2011 (my bold added):

Where Private Borrowing Led To Public Debt

FIVE years ago, a survey of the euro zone would have shown two star countries. They were growing rapidly and running government budget surpluses. Their national debts were low. Other countries sought to emulate their success.

The outstanding countries were Spain and Ireland.

At the time the two economies appeared to be impressive, there was one indication that could have provided a warning. Each country’s private sector was borrowing heavily overseas. Those loans were fueling rapid economic growth that, in turn, produced rising tax collections, allowing national governments to run budget surpluses.

Which is almost exactly the same situation Australia is in.

Minus the government surpluses.

For many years our massive banking sector – now bigger by market cap than all of Europe’s combined – has borrowed heavily overseas to finance our world-leading overpriced housing bubble.

It does not take an “expert” economist to see what the future holds for us.

Just “a little ol’ country accountant”, with the courage to speak up and call it as he sees it.

Barnaby Joyce.

UPDATE: And yet another expert comes out. To say the same thing Barnaby has been warning of, for the last 3.5 years –

The ticking budget debt bomb

ONE of the nation’s top financiers yesterday joined the debate on the country’s rising debt level – describing it as dangerously high.

AMP chief economist Shane Oliver also urged the government to stop using economic comparisons to countries in Europe and the US to justify a predicted 80 per cent blowout to $165 billion this term.

“It just shouldn’t be this high,” said Mr Oliver, who said the government hadn’t taken advantage of the decade-long resources boom.

“If you take Ireland for example, it has had a similar level of public debt to Australia in 2007 and only six years later, debt is over 100 per cent of GDP.”

Swan Siphons RBA In Failed Attempt To Reach Surplus

23 Feb

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And here you were believing our politicians and media parrots, when they say that the Reserve Bank of Australia is “independent”.

From The Age (via MacroBusiness):

TREASURER Wayne Swan defied objections from the Reserve Bank governor and siphoned half the central bank’s profits into the Budget bottom line to fulfil his political commitment to achieve a surplus.

The Reserve Bank governor, Glenn Stevens, told a parliamentary inquiry that he wrote to Mr Swan, asking him to direct all of the bank’s $1 billion 2011-12 profit to its critically short reserve fund, needed to absorb changes in the value of the bank’s foreign currency holdings. Normally worth around $6 billion, the fund had dwindled to $2 billion.

”It’s a key part of our capital. It has been depleted considerably by the effects of the rising exchange rate,” Mr Stevens told the inquiry. ”I believe the prudent course is to rebuild it as quickly as we can but I am not subject to the other pressures that the government is.”

Mr Swan denied the request, and insisted on taking half the profit as a dividend to help achieve his promise of a budget surplus this financial year.

That promise has since been dumped, leading to the opposition mounting a sustained attack on the government’s fiscal credibility.

”In the end it was his prerogative,” Mr Stevens said. ”He made a judgment, and I had to accept that judgment.”

Another day, another epic fail by our World’s Greatest Treasurer.

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Are Gillard Govt Insiders Really Saying This?

16 Feb

Via Catallaxy Files reader and commenter “Mk50 of Brisbane”.

On the budget:

Just got a friend on the line from Finance. The whispers there are for a deficit of $30-35 Billion this FY if the lunatics continue running the asylum.

I DO stress these are just rumours.

On the government:

From an email just received from a contact in PM&C:

“… In all my years I have never seen anything like this. … The Gillard government are filthy, vicious, dirty, disease-ridden, perverted, corrupt, ghastly, disgusting, mendacious, revolting, retarded, thuggish, loathesome, atrocious, abhorrent, awful, beastly, contemptible, accursed, deviant, repulsive, despicable, foul, grimy, hateful, inferior, cretinous, hellish, horrible, appalling. lousy, thieving, nauseating, obnoxious, odious, sleazy, offensive, micromanaging, repellent, reprehensible, arrogant, repugnant, kleptocratic, rotten, stinking, terrible, vile, wretched, incompetent, sociopathic, schizophrenic, worthless, pretentious, wretched, arrogantly cretinous unhinged societal parasites of the foullest kind. Now, let me elaborate each point with multiple examples…”

It’s not a short email.

Top rant.

Humbling stuff.

And difficult to dispute.

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