Tag Archives: chris bowen

Is Bowen’s Budget Update Predicting A Mass Extinction?

4 Aug


Here is a classic example of why this government’s constantly revised economic predictions are not worth the paper they are printed on.

And why — as quoth MacroBusiness reader “Mav” — we could replace the Treasury department with a monkey and a dartboard, and get the same standard of accuracy with economic forecasts.

According to Bowen / Treasury in their “$33 billion black hole” Economic Statement released on Friday, this year the headline unemployment rate will rise to 6.25%. With an annual growth rate in employment of 1%. It will remain at 6.25% in 2014-15, with employment growth of 1.5%.

In 2015-16, however, something magical is predicted to happen.

Despite employment growth remaining steady at 1.5%, the unemployment rate will, somehow, plummet to 5%:

August Economic Statement, Overview, page 1

August Economic Statement, Overview, page 1

Er … say what now?

I am not the only one questioning this “major economic parameter”, on which all the budget predictions are based — including tax revenues, the public debt level, interest expenses, and an alleged return of that mythical creature in the ALP museum, a surplus in 2016-17.

National Australia Bank were quickly out with an economic statement of their own on Friday, where they too remarked on this amazing budget prediction:

The estimates beyond 2014/15 appear unrealistic, with employment growth too weak to reduce the unemployment rate to 5%. While 1½% employment growth in 2014/15 is expected to maintain the unemployment rate at 6¼%, the same employment growth in 2015/16 reduces the unemployment rate to 5%.”

The only way that is possible, is if they are expecting an awful lot of people to leave the work force, and yet, not be counted as “unemployed”.

A mass extinction event?

Or a mass retirement of baby boomers, perhaps.

If so, then all those folks looking forward to retiring in 2015-16 will be very pleased to know that, under the government’s Crisis Management strategy, APRA is being given “robust” new statutory powers — “direction powers”, they say — which enable the government to order your super fund where and how it should “direct” your super.

For your benefit, of course (see Crisis Management: APRA To Be Given Power To “Direct” Your Super).

Somehow though, I don’t think a mass retirement of baby boomers is a plausible, or sufficient explanation for that amazing budget update prediction.

A more plausible explanation is one that I came across recently … alas, I cannot recall where.

And that explanation was, that in the years beyond the “Estimates” period — those years labelled “Projections” in government budget figures — the Treasury modellers simply assume a “return to trend” for major economic variables.

How does that return to “trend” happen?

Who knows.

It is an assumption.

Just like so much of the pseudo-science we call “economics”.

Oh yes, by the way.

In 2015-16, when unemployment will magically plummet from 6.25% to 5%, the government is predicting a deficit of $4.7 billion. And then, a surplus of $4 billion the following year:

August Economic Statement, Overview, page 1

August Economic Statement, Overview, page 1

It’s magic Johnny … magic!

5 Years After The GFC, ALP Admits Economy Has Not “Recovered”, And 3 More Won’t Help

3 Aug


The Global Financial Crisis peaked in 2008-09.

Since then, the ALP has relentlessly talked up the “strength” of our economy — by comparing to basket-case northern hemisphere countries — and by extension, the brilliance of their economic management.

Many hundreds of times, they promised a “return to surplus”. And fair enough too.

After all, our economy was — so they said — the “strongest advanced economy” in the world.

We had a “huge pipeline of investment”.

“Low unemployment”.

“Low inflation”.

“Low interest rates”.

And record-high Terms of Trade (ToT), from a Chinese stimulus-fuelled mining boom.

A mining boom that — so they said — would give us a period of “unprecedented prosperity”, “stretching to 2050”.

They should know.

After all, their leader is fluent in Mandarin.

And yet, despite all this … no surplus.

Only more, and deeper deficits.

Yesterday, they admitted that their latest budget — released less than 3 months ago — has already developed a $33 billion black hole.

Word is, they are now going to call an election, for September 7.

So we should, perhaps, pause for a moment to reconsider the strength of our supposedly “strong economy”, according to the ALP’s own words, and their own yardstick.

In the August Economic Statement released yesterday, in one little paragraph, the ALP has conceded that 5 years after the GFC, the economy has not “recovered”:

August Economic Statement, page 29 (click to enlarge)

August Economic Statement, page 29 (click to enlarge)

And their newest revised forecasts, showing deficits to 2016/17, tells us that 3 more years of their brilliant economic management won’t help.

The simple truth is this.

By their own measure — a budget surplus — the economy has not “recovered”.

And with their revised “forecasts” now predicting rising unemployment, and no surplus till 2016/17, there is no hope in sight for an economic recovery.

Under their management, at least.

Another $4.9 Billion In Usury Expenses, $300 Billion Debt Ceiling Hit This Year

2 Aug


You can read all about the $33 billion budget black hole elsewhere.

Here, we are interested in the interest bill.

In less than 3 months since the May budget, the “Total Interest Expense” bill has blown out by another $4.9 billion “over the forward estimates”.

Compare, if you please.

May Budget:

Budget 2013-14, Budget Paper No. 1, Statement No. 9, Note 10 (click to enlarge)

Budget 2013-14, Budget Paper No. 1, Statement No. 9, Note 10 (click to enlarge)

August Economic Statement:

August Economic Statement, Table A1, page 48 (click to enlarge)

August Economic Statement, Table A1, page 48 (click to enlarge)

Yes, we are now talking about $15 – $16 billion every year, in Interest expenses.

That’s before any of the debt principal starts getting repaid.

Our present $300 billion debt ceiling?

Forecast to be hit in December this year … and blowing through $350 billion in April 2015, then $370 billion in April 2016:

August Economic Statement, Table 11, page 46 (click to enlarge)

August Economic Statement, Table 11, page 46 (click to enlarge)

And we know how reliable Treasury “forecasts” and “projections” are.

Don’t blame the government.

They’re victims, just like the rest of us.

Self-serving, conniving, complicit victims, yes.

But victims, nonetheless.

Our economic problems are not the politicians’ fault.

They’re OUR fault.

Because we all continue to go along with a fundamentally corrupt, parasitic “money” system.


$15 billion a year in interest costs, is $1,285.53 per employed person (ABS: 6202.0 – Labour Force, June 2013).

Just so you know how much extra tax you will be paying, because our politicians are too under-the-thumb of the international bankster class to reclaim our national sovereignty, and simply order Treasury to “print” the money we need, interest-free.

Labor’s Economic Plan: Copy Cyprus And Iceland

19 Jul


Your humble blogger was interested to watch new treasurer Chris Bowen’s speech at the National Press Club yesterday.

Readers may have noticed that resuscitated PM Rudd has immediately distanced his own economic narrative from that of former PM Gillard, and her imbecilic deputy PM and “World’s Greatest Treasurer” Swan. Rather than their mantra-like “Strongest advanced economy / mining boom forever / everything is fine / stop being so negative” tripe, Kevin Rudd has instead begun to offer the teensiest bit of honesty about the problems the economy faces, both now, and in the weeks and months ahead.

So in that vein, I wondered whether our new treasurer might just put a little bit more meat on the bone of Rudd’s rhetoric, by outlining (or even hinting at) just what this “new Labor” under Rudd might have in mind in terms of economic policies. One could be forgiven for expecting so, considering that the title of Bowen’s speech was Labor: Managing The Economic Transition.

Now I grant you, unlike any appearance of Wayne Swan on TV, I was able to quite easily watch all of Bowen’s speech without feeling an immediate boiling of the blood and red mist descending. So that’s something to be said for our erstwhile new treasurer.

Shame then, that nothing good can be said for the content of his speech.

Indeed, it would appear Labor’s grand economic plan is to copy Cyprus and Iceland, by turning Australia into a “financial services centre” (my bold added):

The estimated net contribution of the resource sector to real GDP growth is expected to fall – from contributing to roughly half of Australia’s economic growth over the past two years to around a third by the end of the forecast horizon.

The production phase of the resource boom will also be significantly less labour-intensive than the investment phase.

This brings me to the second transition we face.

That transition is to growth being driven by the non‑resource sectors.

It’s not surprising to see Treasury forecasting that the non-mining economy will make a larger contribution to Australia’s economic growth.

These transitions will occur inevitably.

The question is: will they be smooth or bumpy? Will the Australian economy benefit from them or suffer?

Our challenge is in improving our productivity and competitiveness to assist in this transition.

This is the key economic challenge for the next three years – and lies at the core of Labor’s positive plan to promote competitiveness to spur jobs and investment.

This will mean working with the manufacturing and services sectors to promote investment.

I’m not talking about picking winners or subsidies – I’m talking about breaking down barriers to competitiveness.

What we’re doing in financial services is a good example of what can be done.

Financial services

The financial services sector has seen incredible growth in the last 20 years and it is this growth that we need to harness.

Despite the strength of the local industry, our exports and imports of financial services are low by international standards.

There is a great opportunity for the financial services industry to become more outwardly focused.

Encouraging competition and efficiency would improve the range and choice of financial products available to consumers and promote increased exports of financial services.

Improved economies of scale would reduce the costs of financial products for Australian consumers and businesses.

As our track record shows, only Labor is interested in taking advantage of these opportunities.

In 2009 and 2010, it was pretty unfashionable for Governments around the world to announce that they wanted to promote financial services.

But in January 2010, as Minister for Financial Services and Superannuation, I released the Australian Financial Centre Forum’s report on Australia as a Financial Centre – the Johnson Report as it became known – and four months later, the Government started implementing the key reforms.

Stages 1 and 2 of the signature reform – the Investment Manager Regime – have passed the Parliament.

We have taken steps to create a deep and liquid corporate bond market in Australia. Legislation to simplify corporate bonds issuance has passed the House of Representatives.

The Government has passed legislation to enable the retail trading of Australian Government Bonds.

And the Government recently announced that Australia will be the third major currency in the world to be able to trade directly against with the Chinese Renminbi, after the US dollar and the Japanese Yen, in China’s foreign exchange market.

Why have we done this?

Because Labor knows that increased trade in financial services will increase Australia’s growth prospects and standard of living.

We know positioning Australia as a financial services centre in the region means that we would be able to offer increased job opportunities for a range of skilled workers in the financial sector.

And there is potential to do so much more.

Yes, I can just see all those tradies coming back from the mining construction boom, shedding their Consciences, donning white collared shirts, and learning how to become peddlers of usury products.

Aspiring to be a “financial services centre” is nothing more, and nothing less, than aspiring to copy the economic model of Iceland and Cyprus, both of whom enjoyed an initial “boom” from doing this.

Followed by another one.

If this is what Labor have to offer in terms of “managing the economic transition”, then we really are in deep, deep doo doo.

A final comment.

It is interesting to this blogger to note the complete absence of criticism of Bowen’s speech in the mainstream press, either yesterday or today.

Bowen’s speech contained no indication of Labor having any other new economic policy initiatives. None whatsoever.

A “financial services centre for the region”. That is the great Labor plan, or so it would seem.

After what we have seen happen to other small nations that embarked on this same path, what we should have seen is the media tearing strips off Labor.

Instead, if anything, what we have seen is muted applause.

Methinks the economic commentariat’s left-leaning slip is showing under their skirts.

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