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Hockey and Cormann Blindsided

In May 2013, Wayne Swan estimated revenues for the 2014-15 financial year of $401 billion; this was two years in advance. In May 2014, Joe Hockey projected revenues of $385 billion for the same period one year in advance.

Just six months later, in December 2014, Hockey downgraded his original estimate to $374 billion. On this revised figure, Wayne Swan’s projection was out by about 7%, while Hockey’s was out by 3%.

While both men were taking advice from the same people within the Treasury department, each had their own input and their own ideological preferences. So whose projection was the more accurate? Taking the time factor and more recent information available to Hockey into account, Wayne Swan was more accurate.

Welcome to the world of revenue estimates. It’s an inexact science full of unknowns and Joe Hockey is now learning that the hard way. While we might be tempted to go soft on him, we all remember his heartless demeanor as shadow treasurer, one that was excessively critical of Wayne Swan as he conveniently ignored the difficulties Swan faced at the time.

Now, it is Hockey’s turn to receive some criticism. Hockey is a man all at sea. He really doesn’t know what to do. His body English gives him away. His Neo-liberal ideology has no answer to address how he should approach this difficult task. He says his budget will act as a shock absorber to protect the Australian economy, but he doesn’t say how. Whoever wrote that line for him, incidentally, should consider a career change.

For Hockey’s benefit and Cormann’s too, there is only one way to protect the Australian economy and that is by deficit spending and lots of it. If either man is going to ‘fix the budget’ they will have to do what Labor did and spend up big. This is both men’s ‘Caesar at the Rubicon’ moment.

swan It’s no good trying to take a swipe at Wayne Swan for his earlier projections. These men should take a good look at their own. All the debt hysteria that Hockey whipped up prior to last year’s election is coming back to bite him. How well we remember the debt truck travelling around the country creating fear and uncertainty in the minds of those who don’t understand how a government funds its spending. Well, now it appears, he doesn’t either.

Back in December 2013, after the release of his first and quite dishonest MYEFO, I wrote an article telling Tony Abbott what he had to look forward to:

“In 2016 he will likely have to account for 6.5-7% unemployment, a lack-lustre private sector, a serious Terms of Trade deficit, a national debt of around $600 billion, no surplus in sight and a less than encouraging world economic outlook. The numbers will bury him. And in addition to all of this, we still don’t know what we don’t know.”

I should have addressed it to Joe Hockey. It wasn’t difficult for me to see what was coming. It should not have been difficult for him.

To produce a healthy budget you must have a fully engaged workforce maximising the production of goods and services. Ideally, this should be achieved by the private sector but when they are sluggish, as they are now, government must take up the slack and inject money into the economy; lots of it, targeted at producing goods that we, and the rest of the world want. It is deficit spending but it is not debt.

Their failure to understand this is Hockey’s and the government’s problem. Because they are hypnotised by neo-liberal economic ideology, they can’t see it. When Hockey says the budget will act as a shock absorber, he doesn’t really know what that means. If he did, he would follow it up by announcing a stimulus package to get the 1.8 million Australians currently unemployed and underemployed back to work. That’s a shock absorber.

Banasse BetaShares chief economist David Bassanese says a perception that Australia’s longer-term budget problems are due to falling commodity prices is misguided. Mr Bassanese said that he estimates half of the $40 billion deficit this year is caused by unemployment being higher than normal – currently at 6.3 per cent, and forecast by this month’s MYEFO to hit 6.5 per cent.

He’s right. The underutilisation of the workforce is the big drag on the economy. Mr Bassanese argues that a gradual fall in unemployment and the revenue boost from income tax bracket creep are the key elements to tackle if the Government is to return to surplus.

The reality though, is that surpluses are not good for the economy anyway. They suck money out of the system, money that could be contributing to growth. Deficit spending injects money into the system, creates employment, creates demand, increases production, increases taxation revenues and growth. It’s not that hard to grasp.

If Joe Hockey and Mathias Cormann can’t see that and continue to cut spending they will only aggravate an economy already on a knife edge.

If they wehockey surplus ren’t so blindsided by the excessively wealthy to whom they owe their election victory, they would see that instead of attacking the less well off, they could have their surplus simply by abolishing tax concessions for superannuation and employer contributions, which would save them $36 billion this financial year and nearly $50 billion by 2017-18.

It is that easy.

And while we’re on the subject, yes, Joe Hockey did set a date for the budget to be back in surplus. Way back on 16th May 2012 he told the National Press Club that the budget would be back in surplus in the first year of an LNP government and each year thereafter.

 

42 comments

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  1. stephentardrew

    John:

    These guys are birds of fellow so its no surprise that they cannot see the wood for the trees. This is what happens when you get a bunch of ethically challenged ideologues who believe their own dystopian narrative while stacking up a mountain of lies that they cannot reverse or deny. Talk about setting a trap for yourself then tightening the jaws. Latest Morgan pole shows a 15 point gap. Labor is killing them or rather they are self-immolating.

    It cannot be emphasized how cruel and uncaring this lot are for their fellow citizens. No more half justifications it is time to call them out for what they are greed infested anti-scientific ideologues who lack a well developed moral compass. The frightening thing is they actually believed they could get away with this draconian approach to government. They were dead in the water before they even started and the scary part is the damage they are doing to this country.

    I was reticent about the grounds for a double dissolution but I really think we need to get some petitions together and push for the opposition parties to block supply. I really think things are that serious especially with what is happening in the US with winding back of Dod/Frank. We only have a small window of opportunity before the next financial crisis and need to be prepared. These idiots will simply give us austerity upon austerity while further bailing out the banks.

    Economist Steve Keen predicted the last GFC and he is adamant we are in for another in the not too distant future. I am not being sensationalist the facts speak for themselves.

    US Ukraine, EU, China are embroiled in a stupid game of dodgem cars while sitting upon a bundle of nukes. Don’t these fool ever learn diplomacy?

    Conservatives are a bunch of fossilized prehistoric ignoramuses bound for extinction nevertheless I think we need to accelerate their demise.

  2. Gregory T

    The look on Hockey’s face, when Cormann spoke over him, was priceless. The fact that Joe needed a chaperone, says it all.

  3. Peter F

    @stephentardrew: Yes, it is time to block supply to these idiots

  4. Pingback: Hockey and Cormann Blindsided | THE VIEW FROM MY GARDEN

  5. stephentardrew

    Graham signed it ages ago.

  6. John Fraser

    <

    The unemployment figure of 6.5% is either a Treasury "projection" or "prediction".

    But it doesn't matter ….. because due to the Abbott gangs policies and ideology it will go beyond that figure.

  7. eli nes

    great work to a rapturous applause from a like-minded minority but would it be better if the people who matter could see such an article or hear the cigar boys stumble over answers?
    Swan has no supporters, gillard is friendless and labor is silent on the economy beyond the GFC.
    Even, last week, when the banks were advised to keep more cash to avoid a crisis. Did anyone hear labor reminding us they guaranteed OUR deposits in the GFC not the banks.
    Did anyone remember hockey being unchallenged by the lemon when he compared us to Ireland who guaranteed the banks (not Irish deposits) and their overseas ‘borrowings’ and the country is still in crisis whilst we avoided recession.

  8. Terry2

    Interestingly, Hockey argues – at a time of collapsing government revenues – that the 1.5% company tax reduction should still go ahead as it will stimulate employment and that will boost government coffers as people get jobs and start paying income tax.

    So, can we expect General Motors, Ford and Toyota to recruit workers and continue making cars here ? I doubt it.

    Can we expect banks and others to abandon their call centres and ‘back office’ arrangements in the Philippines and India ? not likely.

    Will this encourage offshore companies to come to Australia to take advantage of our low tax environment and employ Australians ? also unlikely.

    Is this sound economics ? hardly.

  9. John Fraser

    <

    @eli nes

    Go and have a look at #illwalkwithyou ……. because you are the minority walking alone.

    Uh oh ! ….. I forgot you are helping carry Hockeys stinking carcass of a Budget that he threw at the Australian public 218 days ago.

  10. Jexpat

    They could also reign in or eliminate negative gearing, which would serve to put a damper on the housing bubble AND bring in tons of revenue.

  11. revolutionarycitizen

    Anyone who still thinks government spending is good for growth and employment should go and have a look at the European Union…

    What is wrong with our economy and the budget is the underlying economic thinking of those that write it, Hockey and Swan don’t write the budget in absolute terms, they supply the feed in policy directives and then Treasury does the mathematics and applies the economic thinking to it.

    Debt does not breed wealth when it is accumulated at governmental level, if wealth was created by Government Bonds the EU and the US of A would have GDP growth rates in double digits. Fact is, they’re broke, not just one of them, all of them, broke, some economies in the EU are now beyond fixing, and it is only the good will of the European people themselves that is holding that whole failed experiment together, only because they know and fear the consequence of dissolving the union.

    Australia does have a debt crisis, more-so at the household and business level than at the governmental one, but focusing on the governmental one first. The government can not keep borrowing money or legislate spending programs that would require borrowings without having some idea of how it would repay the debt. People are maddest at Swan not for the enormous spending binge, but because he and his masters never had any intention of stopping the binge or repaying the debt accrued. The very fact that whilst they had already increased the governmental debt burden by 400% and then agreed to initiate the largest single spending program in a generation (NDIS) without having the money to pay for it shows the level of reckless disregard for the nation’s finances.

    Is Joe Hockey guilty of increasing the deficit? Sure is, he actually had to fund everything Swan had legislated and left to the forward estimates to pay for, things like the NDIS and Gonski, where the real funding amounts for these programs won’t peak for some time to come. This government is going to have to find the AU$30,000,000,000 to finish the NBN because Swan and his masters had only agreed to and legislated a funding cap of AU$30,000,000,000 and we now know the NBN is going to cost at the very least twice that. (Without every returning anywhere near that amount of money to government coffers)

    For whatever reason Hockey and Abbott have decided to actually increase government spending, that’s right, government spending has increased, not only because of the legislated spending requirements of the previous government on things like NBN. NDIS and Gonski, but because this government has decided not to do what is required, actually reconfigure the entirety of the budget, department by department, program by program. Even the 175 governmental entities they abolished only saves AU$125,000,000 a year or there about, and considering that will be quickly eaten up be the expected AU$25-28,000,000,000 pa NDIS budget in years to come, one has to ask, what was the point?

    The very fact that the majority of the budget is still going on social welfare programs without any real measurable reductions on poverty, homelessness and so on is a clear indication that not only are these programs not working, but a clear signal that many of these programs should be wound-up or reconfigured, hopefully saving all of us some money in the process.

    Nothing of any substance initiated by the previous government has been challenged by this one, the minimum increase in health and education is 6%, after three years at 9% growth, meaning at best growth in health and education spending will remain at double CPI, and well above the rate of revenue growth, making it absolutely unsustainable.

    There-in lay the problem, the government, this one included simply can not get spending under control. Swan grew revenues at twice the rate of GDP growth and still couldn’t do it, leaving Smokin’ Joe with not a hope of ever doing it.

  12. John Fraser

    <

    @rc

    Your fundamentals are in line with the murderer Monis.

    Your an idiot times 30,000,000,000,000.

  13. revolutionarycitizen

    John, everything I stated is factually accurate, maybe you should try a little economics 101… before you beclown yourself further…

  14. Kaye Lee

    You have no idea about investing for future return do you rc. And that is the problem with the economically illiterate who think the nation runs on a credit card.

    Unemployment is going to send many more people into poverty which will cost the government more in welfare and family payments and decrease their revenue from income tax. The quickest way to boost the economy would be to increase Newstart by $50 a week. Every cent would be recycled back into the economy increasing the return from GST. People who have enough to eat, who have an address, who can afford an interview outfit and the fares to get there, are much more likely to be able to get a job. As they spent the money, demand would increase, requiring greater supply, creating jobs and leading to an increase in tax revenue. Putting money into education, health, research, the NBN – all these are productivity enhancers. What is the point in cutting company tax while slashing the disposable income of most of the population? What is the point in giving subsidies to mining companies that are making billons in profit to send overseas? Mining has never been a big employer an they have no hesitation in sacking people when there is a downturn. Thta’s why they want 457 visa workers which will just add to our unemployment. Every business person knows you have to invest money to make money and the government has the ability to make these long term investments that will bring far greater returns. Hockeynomics will send us into a downward spiral. Private debt will skyrocket as it did under Howard. Private companies can go broke – our government never can.

  15. patriciawa

    Hear, hear! John!

    Here, here, Kaye!

    Why aren’t you two running the country?

  16. John Fraser

    <

    Anyone seen "rc" around lately ?

    He appears to have disappeared up his own fundamental.

    And that's "factually accurate".

    Looks like we will all have to rely on Hockeynomics to dig Australia's Budget hole deeper.

  17. stephentardrew

    RC:

    You regurgitate failed unadulterated right-wing bullshit. Good lord man this mob of fools are a wrecking ball while you are off living in la , la, land. There are real people out there suffering; there are youth losing their futures while you wax on with completely discredited waffle. Austerity is for economic morons. You do happen to know that the Chicago school is throughly discredited as many economist move on to develop modern theories that are more amenable to empirical facts don’t you? Economics 101 is insulting mendacious egocentric bullshit. You think we are uneducated and born yesterday. I would hold up my academic, business management credentials knowledge in proposition logic, science and physics up against your drivel any day and win. You insulting prat just piss off.

    Haven’t you noticed Kaye eats you alive you despicable offensive toll.

  18. Möbius Ecko

    What an economic ignoramus revolutionarycitizen is, and he tells those here to look up economics 101.

    He even repeats the lie that Hockey’s MYEFO was paying Swan’s forward estimates, which was counted in PEFO and known. Hockey more than doubled the debt off his own back in forgoing revenue by getting rid of taxes, promising tax cuts and his government’s spending promises that were not Labor policies. His increased debt forecast is also all owned by him as he told Swan that there were no excuses, so there are none for Hockey either.

    After telling us to look up economics 101 he says look at Europe. My if you want to see economic ignorance on display, that one statement displays it.

    How about the UK for comparison as it’s not part of the EU, so is closer to our situation? How’s austerity working there, a similar austerity that Abbott wants to undertake here? The social destruction Cameron has wrought is mind boggling.

  19. Venetta Lee

    I refuse to believe these men have blindly stumbled into this budget mess, they have stomped into our economy kicking and slashing at it with the intent to cause chaos. If I, as a layman with the most rudimentary understanding of economics, can see their actions are likely to force Australia into recession I can only believe they are doing this deliberately.

  20. stephentardrew

    The Cartman twins strike again. There running the South Park economy.

  21. stephentardrew

    Spelling boo, boo They are.

  22. revolutionarycitizen

    Steph, every economist worth their salt has looked at the spending projections between Swan’s last budget and Hockey’s, they’re almost identical, in-fact they’re so close one could accuse Hockey of plagiarism.

    Mobius, The UK does not represent the closest analogous economy, not even close. How can we be in austerity as you claim when our government is actually increasing its spending? Do you know what austerity means or are you just parroting leftist propaganda? As for Austerity, what part of Greece and the UK actually running out of money don’t you understand? Greece not only ran out of money it in effect defaulted on its debts and required Germany give it hundreds of billions of dollars in order to prevent Greece from coming the next Zimbabwe. Europe’s economy is in the toilet, and no amount of government spending over the past couple of decades has prevented it. So why would you expect government spending to work here seeing as it has never worked anywhere, ever?

    Kaye, I do actually agree that an increase in Newstart is needed, though I doubt very much that it would provide any meaningful boost to the nation’s GDP figures, in-fact the economy is growing in real terms now faster than it did during the six years of stimulus spending under the previous government. Simply pumping money into a broken economic model is never going to solve the problem. The EU and the US of A pumped money at tremendous rates into their broken economic models and it didn’t help, even after trillions of Euros spent the EU is heading into another deeper recession. Mining was never going to save us in the long term, and no one has ever said it would, we need true economic reform, and simply saying remove the DFR is just lazy and as many pointed out, quite pointless, as the cost to business can be easily shifted within current tax rules, doing away with the DFR may actually cost the government more money than it does now.

    As for more money equates to better outcomes, nonsense, real education spending went up over the past decade, real outcomes declined, so did our PISA ranking. You can spend all the money in the world teaching a garbage curriculum, in the end you’ll still have garbage outcomes.

    Whatever productivity saving the NBN may produce sometime in the distant future whenever it is completed should not have been at the expense of the taxpayer, if there was a real business case for it in that regard, it could and would be built with private money. All we will get in reality is faster movies for $60,000,000,000 plus interest and charges.

    Want to fix the budget and the economy, keep lefties the hell away from it, quite simple.

  23. Möbius Ecko

    My oh my you do so convolute revolutionarycitizen, are you really that economically ignorant or just playing at it to troll?

    And you still don’t understand the difference between the EU, us, UK and why the PIGs cannot be compared to us or the UK.

    Want to screw the economy far into the future allow the right to be in charge of it, very simple really.

  24. Roswell

    RC, with your last sentence you confirmed that you are unable to offer a balanced view. You waved your right-wing flag. Until then I actually thought you might have been providing an objective opinion.

  25. stephentardrew

    RC:

    “Every economist” does you in from the star. How do you get to the general without going through the specific. First sentence fail. No more to read.

  26. stephentardrew

    RC:

    Buy the way the qualifier “worth their salt” is just meaningless noise.

  27. Gregory T

    My my, no matter how hard RC tries, it still comes out Libspeak 101.

  28. John Kelly

    Revolutionary Citizen, your name belies your ideology. Dealing with your posts chronologically:

    Post 1.

    The European Union countries that have adopted the Euro (which does not include the UK), are like the states of Australia. They cannot print money the way our Federal government can. Therefore if they continue to spend like drunken sailors as France, Greece, Italy, Spain and others have, the European Central Bank will have to rein them in, just like our Reserve Bank would have to control spending by Victoria, NSW etc., if it got out of hand.

    Yes, the forward estimates reflect Swan’s forward estimates because they have been legislated. If the LNP want to, they can dump the NDIS, the NBN, and Gonski, by legislating and the forward estimates will look better.

    Debt DOES create wealth. The Reserve Bank spends money into existence and the commercial banks lend it out. The EU, UK and USA have been engaging in Quantitative Easing which is proving NOT to be the panacea for all evil it was expected to be. This is partly because the money being released is not being used correctly. Buying back government securities from banks does not guarantee that money will go where it was intended. The only way that can happen is if the money goes directly into private bank accounts as Kevin Rudd did with his two stimulus packages. Having said that, QE has brought some improvements, but overall it has not been a success.

    Yes, household debt is a problem, but that has been exacerbated by government austerity, i.e. cutbacks that cause individuals to cover on their credit cards.

    As others have mentioned, Sovereign governments can NEVER run out of money and NEVER have to repay debt. It is an oxymoron. They are the very source of their own funds.

    Government spending increases each year because the revenue base increases. But that is not what we are talking about. We are discussing what the government is NOT spending; services it is NOT delivering, while it continues to pay subsidies to miners and give tax breaks to superannuation contributions.

    Education, health and the provision of government services are what governments should be doing. There should be no apology for that. However, when the private sector is given preferential treatment over the provision of health and education services, that is reprehensible and cannot be left unchallenged.

    Wayne Swan and Labor have always put people first and the private sector second. That is how it should be.That by its very nature will require deficit spending. There is nothing economically unsound about that.

    Post 2.

    To place the UK and Greece in the same sentence is absurd. One has its own currency, the other doesn’t. Yes, the European economy is in the toilet because some of the Euro states spend like drunken sailors. Why do you think the Germans are so pissed off?

    Kaye is right about a Newstart increase. It will give a big lift to small retail businesses. But the economy is NOT growing faster than it was 12 months ago. That is just not true. We are currently in an income recession. People have less money to spend today than they did 12 months ago.

    I’ve already explained why Europe, UK and USA are still in the toilet.

    There are many major projects that will take more time to produce a return than the private sector is willing to wait. That is why governments have to build them.

    Hope this helps.

  29. Eelboy

    As a small business person, I would like revolutionarycitizen to give an opinion on Hockey’s/Corman’s decision to remove the immediate $6,500 tax write-down for small business introduced by Wayne Swan. Do you think this is because, as this article argues, that they are totally beholden to the big end of town and no-one else?

  30. Florence nee Fedup

    Back in 2012, Swan used identical words as Hockey after commodity prices took a dive. Yes, that the budget would act as a shock absorber. Swan has extra problem. that has moderated under Hockey. Yes, the high dollar persisted ,much longer than expected, throwing all predictions’ out.

    We now have a dollar in low 80’s not above 105 cents

    Labor was wrong to swallow the myth that surpluses are good and needed. Saying that, they did pull back latter half 2013 when warning was given, the economy could not endure further consolidation at that, and I would say anytime since

    This mob ignored all that. I am not sure they would be unhappy to see high unemployment and highly unionised industry to go to the wall.. Fits in with their ideology of minute public services and low taxes. This could be a way of destroying unions forever.

    Ideology in their case comes before the economy and a civil, fair society.

    Cormann must be demanded to explain a comment he is making almost daily. That the budget will be a small as possible, and as large as needs be.

    John I believe you and most others see the economy and budget serve the people and nation. They only see the economy as serving business.

    I think this might explain why Abbott and Co cannot understand why people believe he has lied and not delivering. He is delivering his own governments platform and beliefs in full.

    They are so blinkered and focus on their obsessions, they fail to see the disaster they are creating.

  31. Florence nee Fedup

    I think it is still true, if unemployment reaches a certain level, it feeds on itself. Takes on a life of it’s own, nearly impossible to reverse. A more recent development, is the fact, that after every depression/recession, the last thing to improve is employment. Unemployment taking longer to

    It takes must more money each time. A sensible answer seems to be, do not let unemployment rise. Inflation does not appear to be as important as when I was young, Have no idea why, unless it has something to do with Keating’s reforms.

  32. Margaret McMillan

    It might not have helped rc John, but your explanations and Kaye’s make absolute sense to me, an economic illiterate.
    I read an interesting article recently talking about ‘middle out’ rather ‘trickle down’ which I think might be related to what you are talking about. We all know about the dismal failure of the trickle down theory. I like to think of that one as the rich simply pissing on the rest of us. But if you increase the money available to those of us lower on the food chain, then every bit of that gets spent, stimulates the economy and improves government’s bottom line.
    The other bonus of such a policy is that those who now increasingly spend their time worrying about how they are going to pay their bills and feed and educate their families would have some of that pressure removed. Good for the battlers to have more money, good for the economy.
    If anyone happens to know who the person is who wrote the article about ‘middle out’ I’d love to re-read it. He was a billionaire from the States I believe. He pointed out that with all his wealth, he couldn’t possibly find enough things to spend his money on, and therefore simply re-invested it, depriving the economy of potential spending.

  33. John Fraser

    <

    Anyone who takes "rc" with more than a grain of salt is wasting salt.

  34. cuppa

    It was all meant to be so easy.

    Chant some three-word slogans. Tell lies about their opponents. Kick the shit out of the leaners. Cruise on PR from the Mudrok press and Their ABC.

    But then reality hit and the dolts are staggering about like town drunks.

    You gotta laugh.

  35. Robyn

    Thanks for this, but did you mean to say “his body English”? Surely it’s ‘language’, but maybe I’ve missed a bit of satire or something.

  36. John Kelly

    Works both ways, Robyn and both are cryptic.

  37. Pingback: It’s up to the Parliament to stop the madness of the Abbott Junta | Southerly Currents

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