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Abbott and Hockey Running Scared

A week or so out from Joe Hockey’s second attempt at bringing down a national budget, what are we hearing? Not much. It will be dull and routine, boring, the job of fiscal repair is half done and so on. What rubbish. Behind all the upfront rhetoric we are hearing, the calming assurances and so on, both the PM and the Treasurer are running scared.

The overwhelming rejection of the 2014 budget, one that was so poorly crafted, has left our fearful duo so concerned they are keeping their twin mouths shut for fear this next one is sunk before its maiden voyage.

Unlike last year when they mistakenly thought anything they brought down on budget night would be acceptable given all the scare mongering they engaged in during the election campaign, this time the pressure is on them to show some actual skill.

A bad review this time will be disastrous for them both. In reality, however, they are both on a hiding to nothing. They cannot avoid a deficit, they cannot afford the slightest suggestion of unfairness. They won’t be able to effect any significant savings which only leaves them with some form of revenue raising, either through increased taxes or removal of tax expenditures.

In short, they’re stuffed either which way. With the 2014/15 budget outcome likely to peak at a $50 billion deficit (it was originally going to be $18 billion) and the national debt at $359 billion, an embarrassing $75 billion more than when they took office in September 2013, their economic credibility has been well and truly shattered.

promiseThey will, of course, continue to blame Labor for not passing their dumb ideas and their blatant but miscalculated targeting of the poor for that blowout. But the man in the street has already seen through all that. What the man and woman in the street see is sheer incompetence.

That is what has our dynamic duo so concerned. They are afraid this year’s budget will solidify a perception of dumb and dumber repeating their first performance. Even the business community has gained that perception and awaits with some trepidation at what might hit them between the eyeballs this time.

During the course of 2014/15 there have been numerous suggestions put forward by non-economists, but clearly people better equipped than either Abbott or Hockey, to help them see the error of their ways. Those suggestions given freely, which highlight the extraordinary waste in tax concessions granted to the wealthy, have been heard, but we are yet to see if the advice has been taken.

It remains to be seen whether dumb and dumber have seen the light. I suspect they will make an attempt to rein in some concessions but not too much for fear of alienating themselves from their cigar smoking mates in their Ivory towers.

Deloitte Access Economics are suggesting a $45.9 billion deficit this year and a $14 billion blowout on next year’s estmates. For 2015/16, I expect a self-defeating deficit pitched around $20 billion but, like this year, finish up around $50 billion. Self defeating because it will not be a deficit that produces anything that adds value to our GDP.

We would be better served if they budgeted for a deficit around $100 billion if that included some infrastructure projects that relieved our unacceptable levels of unemployment and contributed to our national wealth.

trickleBut these amateurs won’t be doing that. Their neo-liberal ideology doesn’t allow for that. Their household budgeting mentality doesn’t understand how different their position is from our households. Their opposite numbers in the UK don’t understand that either and are about to feel the pain because of it.

So, when the budget is presented to parliament next week, listen to the rhetoric, the spin and the doublespeak, but don’t be fooled by the numbers. By this time next year they still won’t add up to an improvement in GDP or employment.

37 comments

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  1. stuff me

    1 & 1 are 2… oh, I forgot, LNP can’t count…

  2. diannaart

    Hockey, Abbott, et al – not in their nature to see any fault within themselves.

  3. eli nes

    the Australian steamship, ASS budget could founder on the climate change ice like the 27 kilometre Antarctic iceberg that fell into the sea the other day or the no science please we are christian, lab ice that seems everywhere?

  4. Jexpat

    Considerable expereince with right wing ideologues leads me to expect the worse, dressed up pretty for the less than numerate journos, with the devil in the details.

  5. Terry2

    Expect some highly creative accounting in the budget papers which will require some very close scrutiny :

    This leaked overnight to the Daily Telegraph :

    “The Daily Telegraph understands that total savings since the Abbott government embarked on its controversial border protection policy in 2013 will be booked at $3 billion.”

  6. Lyle Upson.

    for the entire time i have been laughing at the Abbott, i have been thinking about two matters … fix the corporate taxes and expand the economy … both beyond the intellectual capacity of the Abbott … so the laughing will continue

    nice to see the Abbott is now locked into no other option that a path that is beyond his intellectual capacity … the freak never saw that coming, i think, because of being too busy being an adult in charge instead of being a leader

    i sure hope there will be a bunch of captain calls in this coming failed budget

  7. Loz

    Thanks for this article John. Abbott and Hockey and the front bench define themselves by their lies and deceit. I for one will not be falling for their spin.

  8. Robin Hood

    Expect an early election before all their cuts hit from last the last budget hits in July.

  9. David

    Will these Wizards of Economic illiteracy try for this scenario? Forget about the measures stuck in the Senate, wipe the slate, come up with much less pain to pensioners, unemployed, disabled, reinstall some of the measures thrown out last time relating to climate and science etc. Fiddle numbers, enthusiastically smile and proclaim things are not as bad now thanks to their superb handling. All is well in the land of Oz just believe them, hope for a big bump in the polls, call a double dissolution, numbers more favorable in the Senate. LNP returned and reinstate all that was lost to them previously.
    i wonder if that is how the toxic physco Abbott is thinking.
    Incidentally is his better half and minder Ms Credlin, still captaining his ship? Been very quiet lately.

  10. Kyran

    As long as dumb and dumber keep running – towards the coast. Hopefully, the brakes they have placed on the economy won’t apply to their demise. Your reference to the ‘second attempt’ at a budget, as opposed to a second budget, is a tad telling. There have been a few articles on the ‘income’ deficit, thought this one might be interesting.
    http://www.abc.net.au/news/2015-05-04/corporate-tax-avoidance-ato-data-gives-senate-ammunition/6442298
    Dynamic duo? My, aren’t we in a mess. Thank you Mr Kelly. Take care

  11. Ross

    The LNP and UK Tories are in lock step, same types of policies, same mentality.
    Come Saturday you can expect to see a UK labour minority government with SNP support.
    If we go to early election this year with Abbott as PM, Labor will be back on the government benches with a healthy majority, probably within two years of losing office.
    You would have to say the LNP and UK Tories have right royally screwed it up.
    One good thing, the poisonous Murdoch influence on elections is over at last.
    After budget night expect to see a bounce in government support from Merdepoll, no one else.
    When the public stop listening a government is gone for all money and the public stopped listening to this government months ago.

  12. David

    Ross wonder if there will be newspoll tonight banking on Abbott getting a boost from his ANZAC publicity

  13. Ross

    David,

    Any unrealistic Merdepoll bounce will be grasped by Abbott and the MSM, the real polls will not move.

    ANZAC day was not and has never been a vehicle for any lying, low life, grubby, publicity seeking politician.

  14. Kaye Lee

    John,

    I think you’ll find Deloittes are actually predicting a deficit of $45.9 billion this year and a $14.1 billion blowout in predictions for next year from MYEFO a few months ago.

  15. miriamenglish

    Abbott and Hockey could start by not paying out money to the biggest polluters
    ● Glencore Xstrata $109 million
    ● BHP Billiton $93 million
    ● Peabody $58 million
    ● Rio Tinto $57 million
    ● Anglo American $49 million

    If he cut out subsidies to all the rest of the big polluters, and eliminated the tax giveaways to the wealthiest members of our society then they might actually be able to get their precious deficit down. But of course, in their neo-con incompetence they won’t. The ordinary people, the ones who actually keep the country afloat, will be targeted for cuts again, for “austerity”. Ideologues don’t learn — it’s never their beliefs that are wrong; something must be wrong with reality. That’s why they fired the scientists. Blasted reality!

  16. John Kelly

    Yes Kaye, thanks. The ABC story was confusing. I have corrected it. Bill Mitchell had a bit to say about that story too. “The ABC news report (May 4, 2015) – Budget figures likened to Stephen King novel as Deloitte predicts $14.1 billion blowout for 2015-2016 – is one of the worst pieces of journalism you will ever read. There is no critical scrutiny in this report at all. It clearly just takes the press release from the private consulting firm and summarises it for public consumption. That is not balanced reporting or good journalism. The ABC is our national broadcaster, funded from the public purse and reaches all the population. It is also a free resource so there are no barriers to entry to consumption. It therefore has a responsibility to provide balanced reporting and should never become partisan. The problem is that on economics matters it has become a neo-liberal mouthpiece and continually gives headline space to mainstream economics organisations who make money from selling spurious advice about the economy. The only reasonable thing that this ABC Report is that the headline likens the fiscal analysis of Deloitte Access Economics, a Canberra-based economic consultancy firm, to fictional prose, which I think is an accurate assessment.”

  17. Annie B

    Good article again, John K. … Well done .. and much food for thought. … the poitical demise of old ‘dumb and dumber’ cannot come quickly enough.

    ……..

    @ eli nes

    Your comment : ? ” the Australian steamship, ASS budget could founder on the climate change ice like the 27 kilometre Antarctic iceberg that fell into the sea the other day”

    I take your point, but if you are referring to climate change in some way as well, ( which I agree is ongoing and a threat to us all ) …. with reference to the 27 kilometre Antarctic iceberg – that detached itself and is now ‘floating’ willy-nilly down there …

    That kind of fracturing from glaciers, has been happening for decades / centuries. It is part of an ongoing process, however, the more frequently it happens the more fresh water is introduced to the salt water, which may upset the balance of marine logic and biology. That iceberg ripper came off the Getz glacier … the Mertz Glacier is probably something to be more concerned about. ….

    BUT it is the underlying melting of glaciers there, that is more of a worry ( from what I have learned ). And I have made a study of it for months, as my son was in the Antarctic for 12 months to end November 2014, and is looking forward to resuming his duties there, either this year or next. … Whatever, he hopes to return for 2 or 3 more deployments to the great southern continent. …. He has seen first hand, the icebergs ( large and small ) and the effect they can have. … I can say no more than that.

    If you are interested – this link might explain more : http://theconversation.com/when-an-antarctic-iceberg-the-size-of-a-country-breaks-away-what-happens-next-39257 … written by an expert in polar oceanography.

    There are other sites that explain the latest of ‘break-aways’ that have occurred. …. One utterly massive iceberg broke from the eastern area of Antarctica some years back, and has drifted slowly toward Perth, however it has almost lived out its life now. They do die a natural kind of death. The Eastern area of Antarctica is the 1/3rd area of Antarctica that Australia is responsible for – ( but does not own ) … under the Antarctic treaty.

    Interesting stuff.

  18. Pingback: Abbott and Hockey Running Scared – Written by JOHN KELLY | winstonclose

  19. kerri

    Dumb and Dumber (I really like that moniker John Kelly) have been so sucked in to their Mark Textor spin story that they actually believe that that is what politics is all about! Their own spin doctors have done such a “job” on them that D&D actually believe that the public will swallow vacuous, glossy brochures and three words slogans. I mean after all the rubbishing Abbott gets about 3 word slogans you would think by now he would have stopped using them but no. Monkeys in the Zoo learn faster than these buffoons.
    I sometimes wonder how many times Margie finds Tones in the pantry clutching an Anzac biscuit with his hand stuck inside the jar? Probably chanting “must have biscuit” or “all Labors fault”
    “Measured, responsible and fair” meaningless!! Just phrases cooked up by bulltish artists to keep them on the Government payroll as “advisors”!
    Reminds me of Field of Dreams?
    “If you build it they will come”
    “If you say it they will SWALLOW THE CRAP HOOK LINE AND SINKER,!!!
    My only hope is that the media will continuously play clips of D&D’s “I didn’t say that. We didn’t promise that” interspersed with clips of them that they want us to forget them saying and promising.

  20. miriamenglish

    There’s a really interesting and very long article The case for cuts was a lie. Why does Britain still believe it?
    The austerity delusion
    by Paul Krugman in the business pages of The Guardian (http://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion) in which he wrote:

    “Since the global turn to austerity in 2010, every country that introduced significant austerity has seen its economy suffer, with the depth of the suffering closely related to the harshness of the austerity. In late 2012, the IMF’s chief economist, Olivier Blanchard, went so far as to issue what amounted to a mea culpa: although his organisation never bought into the notion that austerity would actually boost economic growth, the IMF now believes that it massively understated the damage that spending cuts inflict on a weak economy.

    Meanwhile, all of the economic research that allegedly supported the austerity push has been discredited. Widely touted statistical results were, it turned out, based on highly dubious assumptions and procedures – plus a few outright mistakes – and evaporated under closer scrutiny.

    He goes on to ask why, even though austerity as an economic strategy has been so lavishly disproved, do UK politicians still keep trying to push it. (I’d ask the same of Australian politicians too. I get the image of a fool who has hitched their wagon to a dead horse and is convinced that 2 dead horses might work better.)

    He discusses economic stimulus and why deficits can actually help an economy. That we should opt for austerity during booms, and use government stimulus during busts is actually standard economics that has been understood for more than half a century, not some revolutionary new approach. The clueless economists who shout for austerity during an economic crisis are actually the renegades spouting unsubstantiated hypotheses.

    Next he asks why this turnaround in belief, and shows the series of almost unbelievably stupid steps that led to it.

    He examines how a few people used bad statistics to attempt to associate spending cuts with economic expansions and to point to Greece as the looming danger for everyone. Why they were wrong is laid out. In particular he shows an interesting chart that displays rate of economic growth against austerity, and clearly shows austerity inhibits growth, which is the opposite of what the neoconservatives believe in their delusional desire for cuts.

    The belief in austerity as a strategy collapsed everywhere except Britain (and Australia). Why. He explains what happened in UK and why they continue to push for austerity — at least for austerity for the poor, while beefing up the purses of the wealthy. Much of the blame can be pointed at a wickedly complicit mainstream media and a hopelessly limp reaction by Labour. (I think the same is true here, with the difference that unlike Labour in UK, Labor in Australia actually managed to protect us from the worst of the recession.) But the deluded politicians continue to point to the deficit as a dreaded evil and preaching a new round of cutbacks, despite the clear evidence austerity will only damage the economy still further. We have the same stupid delusion here.

    Wonderfully informative article.

  21. Rod

    There are well established macroeconomic mathematics

    GDP = C + I + G + (X – M)
    (GDP) is the sum of total final consumption spending (C), total private investment (I), total government spending (G)and net exports (X – M)

    And
    GDP = C + S + T
    GDP (income) ultimately comes back to households who consume (C), save (S) or pay taxes (T) with it once all the distributions are made.

    Equating these two perspectives we get:

    C + S + T = GDP = C + I + G + (X – M)

    Simplify the equation you get

    (I – S) + (G – T) + (X – M) = 0

    Which says that if we exclude imports/exports

    (I – S) = (G- T)

    Any savings in the private sector is matched exactly $ for $ by the government deficit or if the Gov runs a surplus then the private sector savings are reduced or go into deficit.

    Since we import more than we export and Abbott wants to reduce Gov spending and eventually run a surplus then that means he is coming after your savings.
    You can see that happening now, low interest rates because the economy is slowing (reduced Gov spending) is eating into your savings.
    ie is your capital growing or maintaining in relation to inflation.

  22. Matters Not

    Yes it is a wonderful informative article. A ‘must read’.

  23. Sir ScotchMistery

    For goodness sake John K, what planet are you on to be discussing jobs?

    The only jobs that count are the ones of those sitting in Canberra as our rulers. The jobs of the man on the street aren’t worth a pinch of pelican poop, and it’s high time we accepted that we are being screwed six ways south of Sundays.

    Also, on top of the jobs, are the parliamentary super funds and they screw us for the term of these moron’s natural lives.

    Bastards.

  24. Pingback: Abbott and Hockey Running Scared | THE VIEW FROM MY GARDEN

  25. John Armour

    “Wonderfully informative article”.

    Up to a point Miriam and Matters Not. He also wrote this:

    “It’s true that you can’t run big budget deficits for ever (although you can do it for a long time), because at some point interest payments start to swallow too large a share of the budget. But it’s foolish and destructive to worry about deficits when borrowing is very cheap and the funds you borrow would otherwise go to waste.”

    The reality is that a government that is sovereign in it’s own currency can run deficits until hell freezes, provided the spending doesn’t strain the productive capacity of the economy and cause inflation.

  26. Trevr

    Well, well, well. Three holes in the ground. Between the Abbott rabble masquerading as an Australian Govt, the media masquerading as a news and information dissemination business, and the confused and apathetic Australian electorate masquerading as politically informed, there seems little doubt that the Lying Nasty Pricks on the Treasury benches will hurriedly rewrite the play book of electoral success according to Abbott, so that their bells and whistles Budget #2 will innoculate the supporters of Abbott Rabble fantasy land to continue to believe the spin. For the rest, gird the loins for a rerun of the exhaustion accompanying the frenetic outpouring of Lies, more lies and then lies on yet more lies that are the political policy making processes of this deplorable Abbott. Whether he pulls the pin on the grenade of double dissolution or not, what is unmistakeable is the incompetence that is at the heart of the duplicity which has caused the LNP to be viewed as a tragi-comedy by the Australian electorate.

  27. David

    @devnull…why?

  28. dev_null

    @David
    Its summed up here.

    http://bilbo.economicoutlook.net/blog/?p=30819

    The ABC is reporting a bunch of innumerate fiscal myths, hyping it up with a plethora of fanciful expressions and backing up the claims with an ‘expert’ which has forecast the last 4 budgets with wildly inaccurate outcomes.

    Even the ‘most’ correct statement here doesn’t really add up:
    “Things like iron ore prices are lower than they used to be, the budget boom is turning into a budget bust.”

    http://www.tradingeconomics.com/australia/balance-of-trade
    So by aggregate accounting statement even when the ‘balance of trade’ was sufficient to deliver an external sector overall surplus it was only for brief periods of time and can hardly be the cause of a ‘budget bust’ which implies that the currency issuer is going to run out of money or wont be able to fund its spending. (Which even the RBA is categorically saying is untrue).

    http://www.theage.com.au/comment/low-10year-bond-rates-are-the-deal-of-the-century-but-abbotts-not-at-the-table-20150120-12tq4j.html

    ABC has been relying on just one opinion/one expert and not giving balanced opinion. Hence why its sad.

  29. David

    Perhaps the author was attempting satire?

  30. stephentardrew

    Thanks again John.

    Miriam, Matters Not and John Armor in total agreement.

  31. stephentardrew

    It’s beginning.

  32. David

    If this is what ongoing nightmares are…this Govt has the country in one

  33. Carrie Brown

    Bring Kevin Rudd back 🙂

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