Tag Archives: ireland

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”:


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


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


Labor spending simplified –


Treasury Ignores Housing Sector In Structural Budget Comparison With Ireland

6 Aug


The Australian Treasury’s recent update to its working paper Estimating The Structural Budget Balance Of The Australian Government, makes for interesting reading.

Interesting, in that it provides all the reason needed to put a broom through the entire department.

Why so?

Treasury points to an analysis which shows that the IMF has repeatedly over-estimated Ireland’s true structural budget position, and calls it a “cautionary tale” for Australia:

Box 2: Ireland’s structural budget balance

Changing estimates of Ireland’s structural budget balance provide a cautionary tale, highlighting the difficulty of estimating structural budget balances in real time.

Since the onset of the GFC, the IMF’s estimates of Ireland’s pre-crisis structural budget balance have been revised down significantly. While the IMF initially estimated that Ireland had been close to structural budget balance in 2007, its latest (April 2013) estimate now suggests a structural deficit of around 8½ per cent of potential GDP in 2007 (Chart A).

Australian Treasury, "Estimate The Structural Budget Balance", May 2013, page 10

Australian Treasury, “Estimating The Structural Budget Balance Of The Australian Government”, May 2013, page 10

The authors then promptly ignore the striking similarities between Australia’s structural position now, and Ireland’s pre-GFC:

While part of the revision to the IMF’s pre-crisis estimates of the structural budget balance is due to a lower estimate of potential GDP, the main reason for the change is that these estimates failed to capture the dependence of the fiscal position on an unsustainable boom in the housing sector (Kanda 2010). With residential investment and house prices soaring, property-based taxes grew at a pace well above GDP growth. Failure to recognise at the time that the bulk of these revenues were cyclical led to significant tax cuts and expenditure increases, which created a large structural hole in Ireland’s public finances.

Alas, the ivory-towered Treasury wonks fail to see that this is not just Ireland … this is Australia they are talking about.

They are too busy obsessing over the process of estimating the structural budget balance, to notice the stark similarity in what has actually happened out here in the real economy.

Indeed, it is clear from the paragraph preceding all of this, that the only lesson they have learned from the “international experience”, is not to over-rely on “point estimates” in making their calculations:

The key point to draw from the analysis is not the specific year in which the [Australian] budget returns to structural surplus, but the steady improvement over time. Indeed, international experience has illustrated the difficulties in disentangling temporary and permanent economic influences on the budget, which cautions against overreliance on point estimates of the structural budget balance (see Box 2).

Australian Treasury, Estimating The Structural Budget Balance, May 2013, page 9

Australian Treasury, “Estimating The Structural Budget Balance Of The Australian Government”, May 2013, page 9

Australian Treasury, "Estimating The Structural Budget Balance For Australia", May 2013, page 10

Australian Treasury, “Estimating The Structural Budget Balance For Australia”, May 2013, Box 2, page 10

Er … no.

The “international experience” does not caution against “overreliance on point estimates”.

It cautions against allowing “an unsustainable boom in the housing sector … with residential investment and house prices soaring”.

It cautions against government fiscal policy that relies on “property-based taxes” growing “at a pace well above GDP growth”.

It cautions against “failing to recognise at the time that the bulk of these revenues were cyclical”.

It cautions against “significant tax cuts and expenditure increases” creating “a large structural hole in Australia’s public finances”.

It also cautions against something else.

Allowing technical wonks, with no real world business experience, no commonsense, and no wisdom, to be employed in what is arguably the most important department in the Australian Government.

Is it any surprise that Treasury cannot get any of its budget estimates and projections within a bulls roar of reality?

Their over-educated eggheads cannot see the forest for the trees.

Here is another striking similarity with Ireland, that Treasury doubtless has not noticed either.

When you add the public debt of Australia’s state governments to the federal government debt, Australia’s total public debt position is now worse than Ireland pre-GFC:

Screen shot 2013-08-05 at 7.39.04 PM

Screen shot 2013-08-05 at 7.37.30 PM

And with Australia’s banking system being the most exposed to residential mortgages in the world…


… now you know why Moody’s has warned of an Australian banking system collapse:

The continued strong expansion in real estate loans—at least relative to other lending segments—has raised some eyebrows. The Australian banking sector has the highest exposure to residential mortgages in the world… The high degree of exposure to the domestic mortgage market raises many concerns. Recent experience has shown that house prices can fall significantly and trigger serious banking meltdowns. But what are the chances of a similar housing collapse in Australia? Many international analysts think the chances of an antipodean housing bust are quite high—it would take a bold economist who has been in a decade-long coma to declare that an Australian housing correction was impossible. When trends in Australian house prices are compared globally, the signs look worrying. House prices have increased for longer and faster than in many of the markets where prices cratered during the Great Recession.

With even our panglossian Labor government now predicting rising unemployment, does all this sound rather like Ireland to you?

Can you see the forest … or only the trees?

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

“In A Few Years Time We Will Be Like Ireland”

15 May

Another Government Raid On Citizens’ Super

5 Dec

Yet another government has joined the ever-growing list of those stealing their citizens’ super to plug holes in their budgets:

Portugal has raided €5.6bn (£4.8bn) of pension fund assets in a controversial scramble to meet its deficit targets.

The cabinet agreed to transfer the assets from four of Portugal’s biggest banks to the state balance sheet.

The assets will be used to bridge a gap needed to meet the fiscal deficit target of 5.9pc of GDP set by the terms of the country’s €78bn bail-out from around 10pc in 2010.

“This measure is more than sufficient to meet the budget deficit goal in 2011,” said Helder Rosalino, secretary of state for central administration, on Friday.

Portugal said it had informed the EU and IMF and assured them it would be a “one-off”. However the 2010 budget was met by shifting three pension plans from Portugal Telecom on to the public social security system. The liabilities don’t count, yet.

What is particularly noteworthy, is that this blatant theft of Portuguese citizens’ superannuation is being done in order to meet an IMF-imposed deficit reduction target.

Just like Ireland earlier this year, when it too was ‘forced’ to raid its citizens’ super.

Your humble blogger has been documenting the wave of largely unreported super thefts that has been rolling around the world since the GFC began in 2007-08.

And warning that Australia’s politicians are already firmly on track to do the same here as well.

Indeed, the Green-Labor government has already quietly introduced a new policy directing your employer to send your future super payments to the ATO.

A sneaky policy neatly stolen from the Liberal Party.

No need to wonder why both “sides” of Australian politics want to increase the super rate from 9% to 12%.

To glimpse the truth – that government theft-by-stealth of your super is inevitable here too – all you need do is look at our ever-rising debt trajectory …

Commonwealth Government Securities On Issue | Source: Australian Office of Financial Management (AOFM)

… note that Wayne’s latest budget update predicts a 57% blowout in net debt this year alone, observe the ‘slow-motion train wreck’ occurring in the global economy as a consequence of massive over-indebtedness in the USA, UK, Europe, and China, and above all, remember that our government is on the hook to bail out our Too Big To Fail ponzi banks.

Just like everyone else.

The list of countries that have already stolen citizens’ super to finance government spending, includes some that won’t surprise you (Argentina, Bolivia, Hungary, Ireland, and more), and others that might shock you (USA, UK, France).

If you have not familiarised yourself with the ever-growing global trend of government theft of citizens’ super, and especially the evidence that the first steps have already begun here too, then I urge you to read some of my many previous articles on this topic:

It Has Begun – Labor Steals Liberal’s Idea To Steal Your Super

Labor Begins To Steal Your Super

Stealing Our Super – I DARE You To Ignore This Now

Now The UK Government Is Stealing Super Too

RBA Says Our Banks Are Stuffed … In Other Words

Our Banks Racing Towards A “Bigger Armageddon”

Why They Are Planning To Steal Our Super, Explained In 4 Simple Charts

Fresh Evidence Our Banks In “Race To The Bottom” Means You Can Kiss Your Super Goodbye

No Super For You!!

“Grand Theft Pēnsiō – Europe’s ‘Economic Superstar’ Steals 5% Of Private Super Funds”

A very wise man said long ago, that “the borrower is the servant to the lender”.

Thanks to our foolish willingness to accept the Big Lie that debt is a “necessary evil” (it’s not), not just citizens, but entire nations, are now rendered servants to obey.

Slaves to bankers.

War On Obesity: “Have We Now Smited The Fat People? Oh No, We Lost!”

26 Sep

Senator Joyce’s brilliant speech on the economy and the national debt.

Whatever you do, don’t miss Barnaby’s hilarious genius towards the end:

All these endless “wars on …” remind your humble blogger of his little inspiration on that May day when they told us that they’d topped Osama Bin Laden. Without deigning to give us a smidgen of proof (again), of course:

The War On Error

Osama is dead.
There’s been enough said.
Now the war on terror needs a new figurehead.
I declare War on Pollies who can’t lie straight in bed.

What Happens When Greece Defaults?

24 May

Andrew Lilico, an economist with Europe Economics and a member of the Shadow Monetary Policy Committee in the UK, outlines the coming domino effect.

From The Telegraph UK ‘Finance’:

It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.

What happens when Greece defaults. Here are a few things:

– Every bank in Greece will instantly go insolvent.

– The Greek government will nationalise every bank in Greece.

– The Greek government will forbid withdrawals from Greek banks.

– To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.

– Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)

– The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.

– The Irish will, within a few days, walk away from the debts of its banking system.

– The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.

– A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.

– The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.

– The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter.  On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening, so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)

– They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.

– There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.

– This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalising a number of banks via debt-equity swaps.

– Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won’t be heard for years. By the time they are finally heard, no-one will care.

– Attention will turn to the British banks. Then we shall see…

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