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Joe Hockey: An Unhappy Dilemma

Has anyone noticed a change in Joe Hockey’s approach to the economy? It seems we are not in a budget emergency after all. It seems the latest national accounts figures suggest things are on the improve.

The latest national accounts figures show a growing economy; 0.8% for the December quarter. That’s a much better result than the September quarter’s 0.6%. Treasurer Joe Hockey says it is still below trend of 3-3.25% per annum but he was being cautious. Considering all the doom and gloom he was predicting prior to the election one would expect him to be guarded in what he said but, given this unexpected upturn, he must find the latest figures something of a dilemma. He should be over the moon but he knows he can’t take any credit for them because he hasn’t done anything yet. They belong to Labor. And, if you multiply December’s 0.8% by 4 you get 3.2% per annum which if it continues at that rate, is bang on trend. And none of it will have anything to do with Joe Hockey. It will all belong to Labor.

This does not mean, however, that a surplus budget is just around the corner. Far from it. Targeted spending by the previous government produced deficit budgets to keep the economy moving. Labor’s four year projections to 2017 will require more money than revenues are projected to raise. That means the shortfall has to be borrowed and Hockey will have to keep borrowing unless he cracks the jackpot at some fantasy casino. Hockey’s dilemma is that he promised to stop the spending. If he doesn’t, the forward projections, if left as they are, will likely produce a national debt of more than $600 billion by 2017.

When you consider that the national debt as at September 2013 when the Coalition came to power was just $284 billion, you can see the problem. Joe Hockey doesn’t want to see that figure climb up to $600+ billion on his watch. What a dilemma; how to keep the economy growing and not continue to borrow; how to make those horrible debt projections go away. It would be easy to blame Labor all the way through to 2017. If you hear anyone on the government side say Labor left them with a $600 billion debt, this is how they arrived at that figure. They are talking about the projected debt for 2017, but I doubt blaming Labor will wash with the electorate.

There are three things that Joe Hockey can do about this. One is to slash social spending (health, education, welfare, services), but even if he did, that won’t come close to the result he needs. The second is by raising taxes which he won’t do. He wants to lower them. The third is to place his trust in the private sector and convince them to get off their bums and invest in the future. This is what he means when he talks about the need for growth. Growth will increase revenues and improve the budget bottom line. Otherwise, when we come to the next election and Labor exposes the state of the economy as being exactly where they had projected and forecast it to be back in 2013, Joe could be seen as having done nothing to rein in debt and deficit. There is a fourth option open to him and that is to sell off everything they can get their hands on. The bad news is, that won’t help much either. It will help with some infrastructure projects, but it won’t rein in debt.

When the national accounts figures were released last week and they showed surprisingly good results for the December quarter, you would have thought Joe would be thrilled. But he wasn’t. One possible reason is that it forces him to accept that Wayne Swan and Labor were on the right track and that the need for continued borrowings was perfectly reasonable under the circumstances; in fact, it is even more so now, given the parlous state of Australian manufacturing and rising unemployment.

Can you imagine the spin doctoring we will be fed in 2016 when Abbott and Hockey have to explain why debt and deficit are no better than they were in 2013? I just hope Labor are on their game when that happens. In the meantime there is another big problem that is quietly brewing away within the Coalition ranks. It’s the same problem Labor suffered to its great shame. It is the foul winds of disunity, infighting, undermining and front and backbench alignments. The vultures are stirring in Coalition-land, if not yet circling. There are deep internal divisions within the government outlined quite succinctly by Laura Tingle in the Australian Financial Review last week. Joe’s relationship with Tony Abbott is slowly going the way of…you know…and pretty soon I suspect it will be out there for all to see.

But that’s another story.

 

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15 comments

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  1. John Kelly

    Reblogged this on THE VIEW FROM MY GARDEN and commented:

    When the national accounts figures were released last week and they showed surprisingly good results for the December quarter, you would have thought Joe would be thrilled. But he wasn’t.

  2. mars08

    Can you imagine the spin doctoring we will be fed in 2016 when Abbott and Hockey have to explain why debt and deficit are no better than they were in 2013?

    All I’ve heard from Shorten this week is that he would not support any move to change the Australian flag… and that he thinks the minerals resource rent tax has damaged Labor’s relationship with the resources sector. Such a leader, he is.

  3. DanDark

    Yes its all unravelling for the 2 amigos
    If you base your argument,
    and propaganda on lies,
    like these 2 baffoons did
    Well of course the walls
    will come crashing down,
    and quickly

    March in March this weekend
    Will sort the wheat out from the chaff
    Abbott is doomed,

    Rabbott holds the record
    for being the most disliked PM
    in this country,
    something for him to be proud of LOL

    His use by date is up
    Time to throw the lot out
    They are ‘wrecking the joint”…….

    “NOT IN MY NAME MISTER RABBOTT”

  4. Terry2

    After months of secrecy and spin, how refreshing to hear Ken Henry opening up a frank and open dialogue on the economy.

    Unfortunately the narrow ideology of the Abbott government does not allow for discourse and scrutiny.

  5. Carolyn Janson

    Well, I am thrilled – mildly. It’s always good to see facts which tend to destabilise and bring down this government. Keep up the head-scratching, Joe! Just a pity the chief delinquent didn’t take the Treasury portfolio. And here’s hoping Labor can take full advantage of this state of affairs.

  6. RichardU

    Has the penny dropped yet that the award of World’s Best Treasurer to Peter Costello was somewhat premature? The Howard Costello regime has more to account for than helping to destroy Iraq.

  7. Bill Kelly

    To the ones who voted so happily for Abbott at the Federal election I say , ” when your job is on the line remember you are the ones who stabbed Australia in the back.”

  8. Bacchus

    Peter Costello was only “World’s Best Treasurer” in his own (and weak-minded coalition supporters’) mind.

    Paul Keating (1984) and Wayne Swan (2011) however, were both named “Finance Minister of the Year” by Euromoney. 😉

  9. Anomander

    With this feckless lot of curmudgeons in charge our finances are effectively up the creek.

    There is no way their ideological position will ever permit them to increase taxes, with the exception of course of taxing the poor, which seems to be a palatable proposition for them.

    Declining revenues caused by closures in industries like manufacturing and sacking of thousands of public sector workers, will definitely lead to a dramatic increase in unemployed workers placing even greater demand on welfare.

    Axing of the money-making Carbon price and Mining Tax will only worsen the situation, as will the extravagant explosion of expenditure on off-shore processing, all driven by the misguided adherence to their 3-word slogans.

    Let’s also not mention the recent announcement to spend some $14 billion on military aircraft and their alleged intent to deliver major infrastructure projects.

    The only course of action their feeble minds can foresee is to slash support for core functions like health, welfare and education risks creating a destructive feedback loop and plunging us deeper and deeper into debt.

    Surely, there must be some constitutional trigger we, the public, can invoke to get rid of this destructive mob of cretins before they cripple our nation for decades to come?

  10. mars08

    Ah… hey… hey… hey… Just hold on a minute, folks!!!! You are such an ungrateful bunch!!! Surely you DO realise that this government stopped the boats. Think about that before you whinge!!!!

  11. Terry2

    mars08

    How do you know that , there’s meant to be an information blackout ?

  12. mars08

    A magic LNP pixie told me. He was quite upset at all you nasty socialists. i think his name was Christopher. Pixies don’t lie, do they?

  13. sam

    Hockey is a moron.

    He’s trying to follow neo-liberal ideology to run the economy. Never mind that output gap ‘sweaty joe’. 😉

    And making a right fool of himself. THE MOST wasteful government in recent history if this article holds true as Australians arent getting much ‘help’ from his budget blow out to 600 billion.

    *hey but we will go for some good f35 jet fighters that should employ those holden/toyota/qantas workers (sarcasm).

    Which says to me liberals don’t know much about running government. (just the usual, run it down and sell off to mates).

    Australia has its own sovereign currency. It should run sustained deficits because it doesn’t ‘borrow’ money like a household/business it creates currency and bonds AND can do so with is own terms and conditions. The consequences for trying to run surplus in a a downturn period for the economy is obvious. Budget = income (tax + other revenue) – outgoing (welfare + other spending). Yes that’s right Joe will see falling revenue and increased unemployment. This has been well understood.

    Nothing solves this problem more efficiently than targeted government spending to CREATE JOBS. Enough berating the most vulnerable people in society for being ‘dole bludgers’ how about the government fulfill its obligations to create the conditions for employment.

    Would be nice to see a proper aged care sector, renewable energy sector. Solve youth unemployment etc. Sorry Libs don’t believe in that. Their ideology is ‘race to the bottom’ with cheap jobs and extremely precarious long term job prospects as the boom-bust events are magnified by this sort of disfunctional ideology.

    Structural deficits – the great con job!

    Australian labour force data – monthly blip or turning point?

  14. Dissenter.

    I am certain they had our raised tax free threshold on the line. It still may be BUT IT IS GOING TO BE HARDER to sell.!!!

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