Tag Archives: Grattan Institute

Australian Government Will Never Get Out Of Debt

23 Apr

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”:

Surplus-Deficit

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?”

Interest_Surplus_Comparison

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:

Screen shot 2013-04-22 at 6.35.12 PM

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

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

Gillard “Mad Dog’s Breakfast” Devours Australia For Benefit Of Foreign Interests

16 Jun

Have you stopped to think carefully … and deeply … about why a (supposedly) democratic and (supposedly) poll-driven government persists with pushing through big “tax” policies, when polls consistently prove that the majority of citizens oppose them?

Is it really a matter of high-minded “belief” and “principle”?

Or, is it really about something far more low-brow and prosaic – selling out Australia for the benefit of big foreign interests.

One only need pause to scratch below the surface of the political rhetoric, and reflect carefully on the evidence, for the answer to become crystal clear.

From The Australian, June 15, 2011 (emphasis added):

Mr Forrest [head of local Aussie miner Fortescue Metals] slammed the draft laws for the mineral resources rent tax, released on Friday, as a “mad dog’s breakfast” that would benefit Rio Tinto, BHP Billiton and Xstrata at the expense of the smaller, local miners – and that could trigger legal action if it went unchanged.

“I think there are many companies, a government or two, and ourselves, who will mount a High Court challenge,” Mr Forrest said.

“It is not my preference. My preference is to speak to the Treasurer, explain to him that the reason why the multinationals agreed to this tax in just three days from (Julia) Gillard being appointed (Prime Minister) was because they were protected from it and everyone else had to pay.”

The Gillard government’s carbon dioxide “tax” scheme is designed with exactly the same malevolent, Australia-loathing intent as the mining tax.

Global mining giant BHP Billiton’s South African CEO, Marius Kloppers, has been directly and intimately involved in the by-invitation-only, closed-doors negotiation over the design of both of our Green-Labor government’s great big new “tax” schemes.

Consider very carefully what Kloppers has angled for, in his sweetheart deal with Gillard on the carbon dioxide “tax”.

From The Australian, September 16, 2010:

A(nother) key consideration would be to give industries exposed to the tax a rebate, Mr Kloppers said, because without a global price, these companies would become uncompetitive and might consider shifting polluting assets to countries without a carbon tax.

Sounds reasonable, right?

Wrong.

It’s a sneaky, deceitful, anti-competitive, market-monopolising ploy. One that would completely absolve BHP of any costs at all under the “carbon tax”, while penalising all of their smaller competitors – our local, up-and-coming Aussie miners.

Which is why our much-maligned local Aussie businessman (and indigenous philanthropist of the first order), Andrew “Twiggy” Forrest, was on to this scam like a flash.

From the Herald Sun, Sept 22, 2010 (emphasis added):

Mr Forrest said that Mr Kloppers’ carbon tax plan was designed to help BHP.

“He says you get a complete rebate if you are an exporter. BHP is a total exporter so he is embedding a tax that will be paid for by everyone else, a la the minerals resource rent tax.”

Consider too, the recent Open Letter by “13 leading economists” in favour of a carbon dioxide “pricing mechanism”.

10 / 13 of whom are directly connected to the banking industry.

An Open Letter whose leading light, former ANZ bank economist Saul Eslake, is now employed by the Grattan Institute.  An “independent public policy think-tank”.  One that was set up and funded by the Australian Government… and BHP Billiton.  An “independent” institute featuring none other than … you guessed it … BHP Billiton’s Marius Kloppers on its Board of directors.

“Independent” my @$$!

Let there be no misunderstanding.

Everything that this government does, is done with the deliberate intention of weakening our country – destroying our local industries, impoverishing households, and weakening our government financial position.

Why?  Because our every act of wilful economic self-harm, has benefits for non-local (ie, foreign) interests.

The evidence is unmistakable.

They really are, quite literally, selling us out.

Once upon a time, what they are doing was called “treason”.

And punished accordingly.

The MRRT and the proposed “carbon pricing mechanism” have both been deliberately designed – and secretly negotiated – to place an unfair burden only on local Aussie companies.  To the benefit of the monster multinationals such as BHP Billiton and RIO.

The carbon dioxide “tax” / trading scheme is deliberately designed to destroy our nation’s natural low-cost energy advantage (coal-fired power).  To the benefit of the international bankstering cartels such as Goldman Sachs and friends.

Consider also, this very interesting fact.

Our Green-Labor government does not even know – officially – who owns more than 60% of the $200 billion public debt they have racked up.

Now, the “independent” (there’s that word again) Reserve Bank of Australia “estimates” that 73% of our debt is owed to (unidentified) “non-residents” of Australia. But our government’s own department, the one that actually sells our debt, officially doesn’t have a clue.

The writing is on the wall, dear reader.

Because both of the two big economic “reforms” that are about to be legislated by our Green-Labor government – led by life-long “creeping communist” Julia Gillard – are designed to devour Australia.

For the benefit of foreign interests.

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