Tag Archives: government bonds

Friday On My Mind – Another $700m In Debt

27 Apr

While most everyone else is obsessing about this Friday’s royal wedding, I’m thinking about another kind of “marriage” contract.

Til Debt Do Us Part.

You see, $189.84 Billion in debt is not a big enough ball-and-chain for the Goose.  Come this Friday, he’s signing us up to another $700 Million in the red contract.

Noone with two brain cells to rub together could still believe this government’s line that they will produce a surplus budget for the year (just 1 year, mind) in 2012-13.  Their ongoing dalliance with debt is all the evidence needed.  They are addicts, who will never go a single year without borrowing-and-spending far more than they take from us in taxes.

The simple fact is, we’ll all be paying for Goose’s indiscretions.  For decades to come.  Our creditors must be paid.

So tell us Wayne … who’s buying now?  Who Really Owns 73% Of Our Debt?

Who Owns 73% Of Our Debt?

24 Apr

Back on the 14th of March last year (“Who Owns Our Debt?“), we discovered that noted SMH economic commentator Ross Gittins was wrong. He had claimed –

You thought the pollies had done little else but spar about deficits and debt? Sorry, different debt. They’ve been arguing about the public debt – the amount the federal government owes (mainly to Australians).

At the time, a search through the RBA’s Statistics tables (“E3.xls”, Commonwealth Government Securities Classified By Holder) proved Gittins wrong.  We found that at September 2009, $65.972bn in Commonwealth debt was estimated to be held by non-residents. From a total of $104.228bn.  In percentage terms, an estimated 63.3% of public debt was actually held by non-residents of Australia.

Naturally we posed the question – Who exactly, are these ‘non-residents’ who hold 63.3% (or more?) of our public debt?

A little over a year later, we’ve had another look at those numbers (click to enlarge) –

Magenta - Total Public Debt. | Blue - Non-resident holders.

According to the updated RBA spreadsheet (“E3.xls”), at December 2010, $127.027bn in Commonwealth debt was estimated to be held by non-residents.  From a total of $174.794bn.

In other words, at December last year we owed $174.794bn.  And of that, $127bn – that is, 72.6% – was estimated to be owed to non-residents of Australia.

We ask again – Who exactly are the ‘non-residents’ who now own 72.6% (or more?) of our public debt?

This Little Goose Went To Market

21 Apr

This Little Goose Went To Market

With the Budget coming up, let’s take a look at how well the government has been managing our >$189 billion gross national debt “investment” portfolio.

The Australian Office of Financial Management’s (AOFM) official Overview of the Portfolio document makes for interesting reading (click images to enlarge) –

AOFM Portfolio Overview - Face Value

AOFM Portfolio Overview - Market Value

Note the difference at 31 March 2011 between the Face Value, and the Market Value, of the “Physical debt” and the “Physical assets“, respectively.

The Market Value of the debt in “our” national portfolio is now greater than the Face Value, to the tune of $7.9 billion.  And the Market Value of the assets in our portfolio is now $3 billion less than the Face Value.

Notice also the standout feature – that our portfolio is being taken ever deeper into the red.  To the tune of $15 billion (15,000,000,000) every 3 months, through end September last year.  And by a further $23 billion (23,000,000,000), in just the last 6 months.

Seems someone forgot to tell Wayne Swan that the GFC peaked 31 months ago, in September 2008.  And, that there is an ongoing and worsening European debt crisis, the US has been placed on negative credit outlook for the first time in history, and the World Bank President has warned the global economy is “one shock away from a full-blown crisis”.

Wayne must be oblivious to all this.  Because this month he authorised the AOFM to “invest” up to $4 billion more in Residential Mortgage Backed Securities (RMBS) – yes, those things that blew up America’s financial system.  Read the detail at the AOFM website, and you’ll see our Swanny is even happy to “invest” more borrowed billions in RMBS’ that hold Low Doc loans exceeding 10% of the initial principal value of the security pool.  Seems he’s never heard of “sub-prime”.

Oh yes, and to pay for these – and the ongoing mega-billion NBN disaster – he’s all set to borrow even more hundreds of millions at the end of next week.

Would you want this Goose managing your investment portfolio?

Bring on an election!

Roast Goose

Same Old Labor Govt – Same Old Debt

9 Oct

Media Release – Senator Barnaby Joyce, 4th October 2010:

Senator Barnaby Joyce says that the Labor government seems to be getting back to normal. “Our gross debt went up by $3 billion last week, the week before it went up by $4 billion. The gross Federal debt is now $163.152 billion.

This is the issue that should be front and centre of Labor Government’s attention, beyond private members bills for euthanasia, same sex marriage and a bid to cool the planet with a new carbon tax.

The reality is there in the numbers. The debt is racing ahead; it is not under control, it is not going to stop.

There is no argument for this profligate waste of money. How much money do we want to owe people overseas?

This money does not include the states’ debt which is on its miserable way to $240 billion, as noted in front page articles of recent weeks.

We also have to note now that local governments too are expected to borrow money.

If we do not get on top of the debt, these debts will get on top of us.

More Information – Jenny Swan 0746 251500

Australian CDS Spreads Worsen

11 May

Amid all the anxiety over debt-laden European countries and their banks, few seem to have noticed ominous signs for Australia.  Late last week, as fears really began to rise about the Eurozone, spreads on credit default swaps (CDS) for Australia’s sovereign debt widened the most of all countries in the world except New Zealand.

What does that mean?  Simply, as fears rose about European countries defaulting on their debts, the cost of taking out “insurance” against Australia defaulting on its sovereign debt increased by more than almost every other country.

From CMA Market Data‘s “Sovereign Risk Monitor”:

Friday, 7 May 2010 — 23:30

Sovereign Wideners
Entity Name 5 Yr Mid Change (%) Change (bps) CPD (%)
New Zealand 68.27 +13.91 +8.34 5.80
Australia 54.14 +12.35 +5.95 4.64
Chile 98.64 +11.01 +9.78 6.74
Korea, Republic of 129.84 +10.59 +12.43 10.86
Japan 89.39 +10.32 +8.37 7.73
United Kingdom of Great Britain & Northern Ireland 99.50 +9.26 +8.44 8.44
Qatar 103.29 +8.14 +7.78 7.02
South Africa 190.42 +6.88 +12.26 12.59

Could this reflect the markets losing confidence in Rudd Labor’s ability to manage the economy?  After all, this dramatic deterioration in the markets’ perception of our ability to repay our Rudd-spent sovereign debts also coincides with the government’s announcement of their new Resources Super-Profits Tax –  a tax on our only remaining productive sector (apart from agriculture).

It also comes just days before the next Budget… one which few could seriously believe will genuinely rein in Rudd Labor’s massively wasteful spending and set a determined course for a return to budget surplus.

When it comes to Rudd Labor’s economic (mis)management, it seems the markets are speaking loud and clear.

Is anyone listening?

Eurozone Faces Bankruptcy, Disintegration

10 May

Could the Eurozone go bankrupt? One of Germany’s leading newspapers believes so.

From an excellent major article in Der Spiegel:

Huge National Debts Could Push Eurozone Into Bankruptcy

Greece is only the beginning. The world’s leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it.

The euro zone is pinning its hopes on (IMF negotiator) Thomsen and his team. His goal is to achieve what Europe’s politicians are not confident they can do on their own, namely to bring discipline to a country that, through manipulation and financial inefficiency, has plunged the European single currency into its worst-ever crisis.

If the emergency surgery isn’t successful, there will be much more at stake than the fate of the euro. Indeed, Europe could begin to erode politically as a result. The historic project of a united continent, promoted by an entire generation of politicians, could suffer irreparable damage, and European integration would suffer a serious setback — perhaps even permanently.

And the global financial world would be faced with a new Lehman Brothers, the American investment bank that collapsed in September 2008, taking the global economy to the brink of the abyss. It was only through massive government bailout packages that a collapse of the entire financial system was averted at the time.

A similar scenario could unfold once again, except that this time it would be happening at a higher level, on the meta-level of exorbitant government debt. This fear has had Europe’s politicians worried for weeks, but their crisis management efforts have failed. For months, they have been unable to contain the Greek crisis.

There are, in fact, striking similarities to the Lehman bankruptcy. This isn’t exactly surprising. The financial crisis isn’t over by a long shot, but has only entered a new phase. Today, the world is no longer threatened by the debts of banks but by the debts of governments, including debts which were run up rescuing banks just a year ago.

The banking crisis has turned into a crisis of entire nations, and the subprime mortgage bubble into a government debt bubble. This is why precisely the same questions are being asked today, now that entire countries are at risk of collapse, as were being asked in the fall of 2008 when the banks were on the brink: How can the calamity be prevented without laying the ground for an even bigger disaster? Can a crisis based on debt be solved with even more debt? And who will actually rescue the rescuers in the end, the ones who overreached?

So, the GFC is ‘over’, is it Ken?

Another Week, Another $1.8Bn In Debt

3 May

The Rudd borrowed-money spendathon continues.

Already $138.5bn in the hole, this week alone the Australian Office of Financial Management (AOFM) reports that another $1.8bn in Commonwealth securities and Treasury notes will be auctioned off, to raise money for yet more wasteful spending.

Meanwhile, the interest rates that the government must offer to pay to attract buyers for our sovereign bonds continues to steadily rise.

From The Australian:

The government is facing a battle to keep costs under its self-imposed 2 per cent growth cap, with blowouts in some programs and higher interest payments adding to the deficit.

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