As we approach the Abbott Government's second set of Budget Papers due in May 2015 - a timely reminder of how far we are going backwards

Sky News on 3 April 2015 telling Australia what social media commentators have known since December 2013:

In the year ended 30 June 2013 the then Labor Federal Government reported total revenue of $338.7 billion, total expenses of $381.4 billion (est. 25.1% of GDP) and a fiscal balance deficit of $28 billion. Net government debt and net interest payments on that debt stood at stood at 10 and 0.5 per cent of Gross Domestic Product (GDP) respectively.

The Abbott Coalition Government was sworn in on 18 September 2013.

In the month Tony Abbott took hold of the reins of government the Department of Finance listed Australia’s net debt at $174.5 billion and an underlying cash balance (deficit) of $22.9 billion projected to fall to $18 billion by 30 June 2014.

The Abbott Government reported total revenue of $374.6 billion, total expenses of $415.2 billion (est. 26.2% of GDP) and a fiscal balance deficit for the year ended 30 June 2014 of $42.2 billion. At that time net government debt stood at 12.5 per cent of GDP and net interest payments at 0.6 per cent.

In February 2015 and just on halfway through the Abbott Government’s term in office, the Department of Finance listed net debt at $254.9 billion and an underlying cash balance (deficit) of $40.4 billion projected to fall to $40.3 billion by 30 June 2015. At which time net government debt is expected to be 13.9 per cent of GDP and net interest payments at 0.7 per cent of GDP.

So why did budget deficit and public debt increase so dramatically in those first nine months and why is it barely decreasing to date?

Well, there have been signposts along the way and the most obvious place to start is with the borrowing spree that Treasurer Joe Hockey went on almost from Day One of the Abbott Government.

By 4 December 2013 (after less than 3 months in office) Abbott Government borrowings were averaging in excess of $203 million a day. At 30 June 2014 borrowings stood in excess of $351 billion and the 2014-15 budget papers predicted that borrowings will be 23.3% of GDP by 30 June 2015.

Then there was the $8.8 billion grant to the Reserve Bank in October 2013 and the loss of est. $2.9 billion over the 2015-16 and 2016-17 financial years due to the repeal of the Mineral Resources Rent Tax.

Add to this the cost of The War On Terror conducted Abbott-style, which is conservatively estimated to cost $400 million in this year alone for troops deployed in the Syria region, plus the $5.3 million a month cost of an ongoing and inevitably fruitless search for a long gone commercial aircraft.

Throw in the approximately $4.7 million spent on the prime ministerial fleet of bomb-proof cars (which will be stationed around the country for Abbott's convenience) and the est. $250 million reportedly being spent on a new VIP aircraft sometime this year primarily for the prime minister's use .

Factor in the cost of servicing political egos found in the Dept. of Finance lists of parliamentary entitlements paid and the additional expense of VIP flights for political elites.

Add the est. $2.4 billion in tariff revenue foregone due to international trade agreements signed since 2013, along with the est. $86 million spent on two royal commissions into 'pink batts' and trade unions.

Pour in the mix that $400 million plus reportedly spent on hosting the G20 Summit in 2014.

Then toss in a reported $1 billion in public service redundancy payouts expected to flow from the Abbott Government's 'restructuring' of government departments and downsizing of the public service between September 2013 to 2016-17.

Insert the increasing costs of immigration detention and the in excess of $2 billion in contracts awarded in early 2104 for the management of two overseas detention centres. This equates to these contracts costing over $420 million annually. The National Commission of Audit's February-March 2014 report states the projected detention costs for all centres over the forward estimates currently exceeds $10 billion.

Top it all off with the unfair 2014-15 federal budget, which for all the ideologically driven pain it intended to inflict was expected to only save $27 billion over a four-year period and which has now been effectively gutted by the Abbott Government is a desperate grab for some degree of popularity.

Combine all of the above with Prime Minister Abbott's recent conversion to a 'debt is good' philosophy and it is easy to see why government finances are mired in red ink. With the non-Treasury document being circulated by the Treasurer, the March 2015 Intergenerational Report Australia in 2055, predicting net government debt could be as high as 60 per cent of GDP in forty years' time.

Now Tony Abbott has abandoned his 'debt and deficit disaster' rhetoric he has decided that the real budgetary crisis is actually federal government spending. Spending is probably the slowest growing line item in all the aforementioned figures, nevertheless Abbott was quoted in The Australian on 2 April 2015 as stating;even with the changes that we’ve already made, we’re still heading for government spending at around 31 per cent of GDP".

If all this sounds a mite confusing, remember one of the features of budget predictions and economic outlooks produced by the Abbott Government to date is that rarely do all of the documents contain the same basic assumptions or numbers. Since September 2013 creative writing not reliable economic policy appears to be the order of the day.

Australian Treasurer Joe Hockey needs to come up with a better argument concerning the federal Goods and Services Tax

David Pope in the Canberra Times, 30 March 2015

Brisbane Times 30 March 2015:

Treasurer Joe Hockey says Australian consumers have changed their behaviour so much in recent years, through online shopping and choosing more GST-exempt goods, that they are putting pressure on the GST as a revenue-raiser.

Apparently Joe Hockey is upset that this consumption tax raised $47.4 billion in 2012-13, $50.7 billion in 2013-14 and, is expected to raise $53.7 billion this financial year, $57 billion in 2015-16, $60.4 billion in 2016-17 and another $63.8 in $2017-18.

That’s not good enough for our millionaire Liberal treasurer.

It appears he is rather perturbed that people are still buying GST-exempt basic fresh food, simple dairy products and unprocessed cooking ingredients in their local shops or purchasing online second-hand, handmade or other goods worth less than $1,000.

This is the rather weak excuse he is offering for encouraging the states to believe there should be more in the federal Goods & Services Tax kitty.

The GST is a regressive tax when applied to low income households and no amount of vague talk in the mainstream media about possible ‘compensation’ for pensioners will change that.

TRUST: no respite for Australian Prime Minister Tony Abbott

Peter Martin, Economics Editor at The Age, blogging it like it is on 10 February 2015:

As Abbott brought forward the timing of the leadership vote on Sunday his supporter and finance minister Mathias Cormann told the ABC the economy was "heading in the right direction".

He wanted "to build on the achievements we made in 2014".

Take a moment to consider the achievements and the direction in which things are heading.

That year began with a quarterly rate of economic growth of 1 per cent. After the budget it slid to 0.5 per cent, and then to 0.3 per cent. It's falling, rather than rising.
The direction is down….

The Reserve Bank made its view about economic growth clear on Tuesday. Here's what it said when it cut rates an hour or two before its governor briefed Cormann and others in cabinet:

"In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak."

It's weak and it's bleak. It isn't heading "in the right direction".

Looking ahead the Reserve Bank expects growth to remain "a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected."

Unemployment has climbed from a quarterly rate of 5.3 per cent at the end of 2012 to 5.8 per cent at the end of 2013 to 6.2 per cent at the end of 2014. We get the first figures for 2015 on Thursday.

The direction is undeniably clear, but it's not the right one. Unemployment is worse than it was at the peak of the global financial crisis. The Reserve Bank expects it to get worse still...

Hockey and Cormann will tell you that while unemployment is growing, employment is too. But it's not, really. The number of hours worked per month grew barely at all throughout 2014. More people may have been employed at the end of the year than the start but on average they've been working less, some shifting to part-time work and others to fewer hours of full-time work. Disturbingly, the Reserve Bank says the number of hours worked per month has scarcely changed since December 2011 despite three years of population growth.

None of these facts would surprise anyone in business or anyone looking for a job. What would surprise them would be to hear from the team at the top that things are "heading in the right direction". It would make them think they were being lied to….

Joe Hockey's first budget was far worse than it seemed on the night in part because he didn't tell us the truth about it on the night. The usual calculations showing the households that won or lost were missing.  The treasury had prepared them as usual, the treasurer withheld them.

And he made up stuff. He said treasury had told him that fuel excise was "a progressive tax". It hadn't. He said the poorest Australians "either don't have cars or actually don't drive very far in many cases," something many of them know to be untrue. Petrol takes up a much bigger share of a low-income budgets than high-income budgets.  

He said his own wealthy electorate of North Sydney had "one of the highest bulk-billing rates in Australia". It had one of the very lowest in all of Sydney. He said "higher income households pay half their income in tax". They pay nothing like half. Even those on $200,000 pay just 36 per cent. Back from his holidays this January he revived the claim and went further saying typical Australians pay nearly half their income in tax.

"When Australians spend the first six months of the year working for the government with tax rates nearly 50 cents in the dollar it is a disincentive. You're working July, August, September, October, November, December just for the government and then you start working for yourself and your own household income after that for another six months, he said.

But Australia's tax-to-GDP ratio is around 30 per cent, including account all taxes, state and federal. It simply can't be the case that typical Australians pay nearly half their income in tax. They don't.

And exaggerated claims have eaten away at trust. Hockey said Australia was on track to run out of money to pay for its health, welfare and education systems. The figures put forward by his then health minister suggested otherwise. In ten years the cost of Medicare had climbed 124 per cent, the cost of the Pharmaceutical Benefits Scheme 90 per cent and the cost of public hospitals 83 per cent. But Australia's gross domestic product - the money we would use to pay for these things - climbed 94 per cent.

The government tells us it's concerned about future generations, but won't release the treasury's intergenerational report. It tells us it wants a discussion about tax, but won't release the tax discussion paper finalised late last year.

Without trust we lack confidence. We are neither spending nor investing what we should. Business and consumer confidence has been sliding since September….

The government itself has become an impediment to economic growth…..

Abbott Government releases its 2014 Energy Green Paper - prepare to be underwhelmed

The Abbott Government released its Energy Green Paper on 23 September 2014.

The document sketchily mentions renewable energy or forms of renewable energy a total of 134 times within its 92 pages, while mentioning conventional gas/unconventional gas a total of 434 times, coal 100 times and exports 131 times.

Readers who care about Australia's sustainable energy future move onto the body this paper at their own risk.......

Australian Government Energy Green Paper September 2014

Abbott Government Mid-Year Economic & Fiscal Outlook 2013-14: no responsibility taken, excuses scattered like confetti, strong hints that it's the poor who will be paying the government bill

Joe Hockey spinning on live television at the National Press Club on 17 December 2013

Australian Treasurer Joe Hockey needs to grow a spine, find a political and social conscience and begin acting like an adult before he loses the nation's excellent credit rating, drives away investment, destroys industry and causes a recession with his juvenile point-scoring and loose talk.

Taking responsibility for his first 90 days in office (not the fictional 100 days) would be a good start.

On 3 September 2013 Australian Treasurer Joe Hockey stated that the Federal Labor Government was borrowing an average $83 million per day.

By 17 December 2013 the Federal Liberal-Nationals Coalition Government was borrowing on average an est. $216 million plus per day.

In the MID-YEAR ECONOMIC AND FISCAL OUTLOOK 2013-14 (MYEFO) released on 17 December 2013 Hockey admits that an increase in Abbott Government borrowings has increased Australia’s national debt:

* The increase in the expected level of net debt since the 2013 PEFO primarily reflects a higher issuance of CGS owing to an increase in the financing requirement, which is partly negated by higher yields (interest rates) than were assumed at the 2013 PEFO.

* The main factor contributing to the increase in net debt is the higher expected issuance of CGS relative to the 2013 PEFO of around $60 billion in face value terms as a result of the increased financing requirement. This is partially offset by revaluation of the projected CGS on issue of around $9 billion owing to an increase in expected yields and hence a decrease in the market value of CGS.

According to Hockey net government debt now stands at $191.5 billion in 2013-14.

Gross debt is of course higher and currently is in excess of $304.5 billion – with $216 billion of this amount being added to the total by the present Abbott Government between 18 September and 17 December 2013.

Impacting MYEFO is the inescapable fact that the Abbott Government has increased federal government spending over that outlined in its pre-election Fiscal Budget Impact of Federal Coalition Policies document, which in its turn also indicated levels of revenue which the Coalition was willing to forgo to meet its ideological requirements.

Some of the more significant components of the revenue write down apparent in MYEFO are ideologically rather than fiscally based.

The biggest one-off spending item in 2013-14 was the unplanned $8.8 billion it gifted to the Reserve Bank, a sum which coincidentally comprises over half of the budget deficit blow-out Hockey is complaining about.

Again according to Hockey, since the Economic Statement released in August 2013 the budget deficit has blown out from the predicted $30.1 billion 2013-14 deficit under Labor to a  $47 billion deficit this year under the Abbott Government.  That's a $16.9 billion difference in the bottom line primarily flowing on from Coalition policy and/or economic decisions.

However, the average voter wouldn't know it from Hockey's blaming Labor rhetoric.

BACKGROUND

The Pre-Election Economic Fiscal Outlook (PEFO) produced in August by The Treasury, for the information of all political parties and candidates prior to the 7 September 2013 election day.

MEDIA REACTION

The Sydney Morning Herald 17 December 2013:

How on Earth did we convince ourselves this bunch would be miles better at fixing the budget than the last lot?

Joe Hockey claims his midyear budget update is an honest assessment of the state of fiscal affairs he inherited from Labor. It isn't.

Rather, it is an attempt to lower expectations about the speed and ease with which the Coalition will be able to get the budget back on track.

He won't be able to achieve it for many years - he's not saying when - and not without significant and painful, but as yet unidentified, cuts in government spending. In short, he is unlikely to be able to do it much faster than Labor would have. What's likely to differ is who will bear most pain.

Labor would have erred in the direction of higher taxes, particularly on the better-off. Hockey has ruled out higher taxes and is hinting at cuts in government spending on ''welfare, education and health''.

Contrast this grim slog with all the Coalition said in opposition about the deficit being purely the result of Labor mismanagement.

This time last year Tony Abbott and Hockey were promising to deliver a budget surplus in each year of their first term. By the election campaign the return to surplus had been delayed until the first year after the next election.
Now even that is in doubt....

The Australian 18 December 2013:

JOE Hockey now has to stand up.

After gaslighting the Australian public for weeks about Labor's mess, the Treasurer has produced a horror outlook for the economy complete with the potential for a decade of deficits and a Devil's debt number of $666 billion.

Slowing growth, rising unemployment, a further decline in tax revenue and a sharper drop in mining investment are all wider economic challenges facing an Abbott government wedged between curtailing government spending and maintaining consumer and business confidence in the face of growing uncertainty. Without drastic action, the Treasurer has warned of ongoing budget deficits, rising debt and no chance of an income tax cut for 10 years....

But, having laid the blame himself with Labor, even allowing for the Coalition's own responsibility for part of the post-election deficit blowout, Hockey has to accept that he has indeed "drawn a line in the sand".

He must start providing solutions, no matter how tough....

Abbott Government debt

On 4 December 2013 Australian Treasurer Joe Hockey announced that; The Government has today agreed to the Australian Greens’ proposal to repeal the statutory debt limit and enhance transparency around government debt reporting. 

On 4 December Abbott Government borrowings were averaging in excess of $203 million a day.

Now the fiscal brakes have been removed from Hockey's little red treasury wagon, I wonder how much further into debt he will drive the Commonwealth.

Federal Treasurer Joe Hockey in danger of becoming a walking talking sovereign risk

The current national government debt ceiling is $300 billion and, on 13 November 2013 the House of Representatives passed the Commonwealth Inscribed Stock Amendment Bill 2013 increasing the Treasurer’s standing borrowing authority in the Commonwealth Inscribed Stock Act from $300 billion to $500 billion. Subsequently the Senate sent the bill back down with the amount amended to $400 billion.

It doesn’t take a genius to realize that Australia’s national debt is not going to grow beyond $400 billion before mid-2016, if the Abbott Government is as good a financial manager as it promised it would be.

At present government borrowings stand at an estimated $292 billion, with $22 billion of that being borrowed by the Abbott Government since 18 September 2013.

Since the Senate acted, Treasurer Joe Hockey has been publicly threatening a Tea Party-style hissy fit which would allow government services to stop and to bring about “massive cuts” if Labor does not support the Coalition's bill to raise the debt ceiling.

Mr. Hockey apparently finds nothing amiss in making threats which have the potential to damage Australia’s reputation.

If he keeps on in this manner foreign/domestic investors, business and consumers may react negatively.

If this happens Mr. Hockey will have become a walking sovereign risk and cost the economy many billions of dollars.

As the Business Spectator opined on 15 November:

The national interest, however, would be better served by Hockey getting out of campaign mode and into governing mode. Asking for more debt next year would be a minor political embarrassment (and let’s not forget that it most likely won’t be needed), but in the meantime we would look less that the scared kid of Asia hiding under the stairs. 

That Mr. Hockey’s ego-driven threats are hypocritical and a political ploy can be clearly seen when one looks back to May 2012, when the former Labor Government announced its intention to raise the debt ceiling from $250 billion to $300 billion the Coalition was not happy and attempted to block this increase:

If you do raise the debt ceiling, you have a rather large train rolling off the edge of a rather large cliff. [(Leader of the Nationals in the Senate and Member of the Opposition’s Shadow Ministry Barnaby Joyce, Financial Review, 14 May 2012]

Now they are saying they are living within their means but are also saying, 'Just in case, please give us an increase in the credit card limit to $300 billion.' It does not sound like a lot if you say it quickly but it is a hell of a lot of money that Australians have to repay. Enough is enough....

The government must appropriately reflect the significance of increasing the limit on the face value of stock and securities that can be on issue under the Treasurer's standard borrowing authority. The Treasurer must then make the case to the Australian people that Labor deserves the right to increase the credit card limit. The Treasurer must explain why he cannot use the Loan (Temporary Revenue Deficits) Act 1953. I asked him a question in this place. He could not answer it. So, to that effect, and I move the following second reading amendment:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House requests the Government to vary the resolution in relation to the Appropriation bills agreed by the House on 8 May 2012 to permit amendments to be moved and debated to Appropriation Bill (No. 2) 2012-13.”

This is the very least that the public deserves......

We will quiz the AOFM and the Department of the Treasury at estimates. We want to get to the bottom of exactly why this sneaky government is trying to avoid proper scrutiny on the debt limit. [Liberal MP and Shadow Treasurer Joe Hockey, Hansard, 21 May 2012]

Acting Prime Minister, does  the government view the increase in the nation's credit card limit from $250 billion to $300 billion as a very serious issue or no big

deal?...

This is a budget with the debt issue, this increase in debt from $250 billion to $300 billion debt ceiling.... [Liberal MP and Shadow Minister for Finance, Deregulation and Debt Reduction Andrew Robb, Hansard, 21 May 2013] 

Joe Hockey's current belligerence is also a far cry from his attitude just five days after the federal election when he told voters: You can go forward and spend your hearts out because we're going to have a good Christmas

* Photograph found at Google Images