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A leader should not lie

With everyone still reeling from the budget delivered last May, and distracted by Tony Abbott’s determination to commit political suicide, Joe Hockey’s MYEFO statement delivered in December passed by with little scrutiny.

In light of recent claims being made by the Prime Minister, the Treasurer, and the Finance Minister, and in the interest of bringing some honesty into the discussion, it would be timely to take a closer look.

The document begins with the statement “Despite a deteriorating global economy over 2014, the Australian economy continues to grow solidly.”

This seems completely at odds with the assessment of the Reserve Bank of Australia whose Governor Glenn Stevens, speaking at a House of Representatives Economics Committee in Sydney on Friday, said “clear signs of a near-term strengthening remain unconvincing at this stage. This is a weaker outcome than we had expected six months ago.”

Joe even contradicts it himself when he says “nominal GDP growth in 2014-15 is expected to be weaker than forecast at Budget, at 1½ per cent. This would be the weakest nominal GDP growth in a financial year in over 50 years.”

In December 2013, Joe told us in his first MYEFO that “The latest Private New Capital Expenditure and Expected Expenditure (CAPEX) survey suggests that resources investment will remain at elevated levels in 2013‑14.”

A year later he is still asserting that “The business environment has improved since 2013 and costs for all Australians have been reduced as a result of the abolition of the Carbon Tax and the Minerals Resource Rent Tax. The abolition of these taxes will encourage investment and job creation. “

Whilst Joe hopes that eliminating these sources of revenue will ‘encourage’ good results, the reality is that, in Joe’s own words:

employment growth has not been strong enough to keep up with growth in the labour force. This has led the unemployment rate to rise slightly. Weaker wage and employment growth are expected to lower individuals’ income tax receipts by $2.3 billion in 2014-15 and $8.6 billion over the forward estimates and increase payments for existing government programmes.

Business investment growth in 2013-14 was weaker than expected, amid a fast decline in resources investment. From 2014‑15, resources investment is expected to start sharply detracting from growth. The forecast decline in resources investment is now steeper than it was at the 2013 PEFO, with the sector having become increasingly focused on containing costs.

Joe tells us that “The Government has accelerated environmental assessments and approvals for over 300 major new projects worth over $1 trillion for Australia and these projects are now getting underway” yet investment projections for future years see a drop of approximately 5% each year.

Joe reassures us that “Subdued wage growth and the removal of the carbon tax is helping to contain inflationary pressure, notwithstanding the inflationary effects of the fall in the Australian dollar. Headline and underlying inflation are forecast to be 2½ per cent through the year to both the June quarter of 2015 and the June quarter of 2016.”

In 2012-13, Australia’s first year with a carbon tax ended with underlying inflation of 2.2%.

In August 2013, Treasury released the Pre-Election Economic and Fiscal Outlook (PEFO), which forecast the budget deficit would hit $30 billion in 2013-14 with deficits totalling $54.6 billion over the four-year forward estimates. Four months later, Joe Hockey had added $16.8 billion due to Coalition policy decisions bumping the deficit up to $47 billion in 2013-14 and $123 billion over the forward estimates.

“The deterioration in the underlying cash balance since the 2013 PEFO is $16.8 billion in the 2013‑14 financial year”

The final budget outcome for 2013-14 turned out to be a deficit of $48.5 billion.

Joe repeatedly tells us that “the budget position is fundamentally stronger than it would have been under the unsustainable trajectory of debt and deficits left behind by the former Government.”

Unfortunately for him, due to the Charter of Budget Honesty, he eventually has to state the real figures – since May 2014 there has been a “$43.7 billion deterioration in the budget over the forward estimates. An underlying cash deficit of $40.4 billion is now expected in 2014-15. ”

This compares to PEFO’s forecast of a $24 billion deficit in 2014-15, $34 billion in MYEFO 2013, and $30 billion in the 2014 budget. Since May the budget has suffered a further deterioration of $10.4 billion for the current financial year.

“Total taxation receipts have been revised down by $6.2 billion in 2014-15 and $31.6 billion over the forward estimates. This brings the total writedown in tax receipts since the Government was elected to over $70 billion.”

How can this be? Surely eight months into office Joe had access to the ‘real’ figures? How can he have got his estimates so wrong?

Pages are devoted to this. The short version is

“Declines in commodity prices have resulted in lower forecast company tax receipts, while weaker wage growth is leading to softer income tax receipts. These developments have been primarily responsible for the $31.6 billion write down in tax receipts since Budget.

These commodity price falls have led to a substantial downward revision to the terms of trade which is now expected to fall by 13½ per cent in 2014-15 and 3¾ per cent in 2015-16. The forecast decline in the terms of trade would be the largest fall in the terms of trade in a financial year since the Australian Bureau of Statistic’s Annual National Accounts started in 1959-60.

We contributed to our own demise by flooding the market with iron ore when demand was low. This drove down the price by 30%, the strategy being to eliminate some of our competitors. It didn’t work.

“While some unprofitable supply did exit the market, the response has been surprisingly limited to date, with much of China’s high-cost production (which accounts for roughly 15 per cent of global production) remaining in the market.

Whilst low cost mines in Australia and Brazil are expected to continue to expand global supply, on the demand side, China’s growth outlook for 2015 has been downgraded from Budget. The associated weakness in the property sector and the ongoing transition from resource-intensive growth is expected to constrain Chinese steel demand.”

Spending has also increased significantly since the Budget.

“The spending decisions that have been taken since the Budget primarily respond to changes in the international security environment, or reflect the commitment to drive growth and support a strong economy.

The Government has responded to a rapidly changing security environment, investing around $1.3 billion to keep Australians safe and secure. To counter the threat of home-grown terrorism, security and law enforcement agencies have been given $631.4 million in extra resources to track, disrupt and prosecute Australians involved in violent extremism, both at home and overseas. Operations in Iraq are addressing the enduring threat of terrorism at a cost of $306.4 million.

The Government has also taken further steps to build a stronger, more prosperous economy. This includes the finalisation of the Japan-Australia Economic Partnership Agreement.” Paradoxically, “This measure is estimated to reduce revenue from tariffs by $1,590.0 million over the forward estimates period.”

Joe then goes on to tell us how we are paying for his decisions:

“the budget costs associated with the Minerals Resource Rent Tax repeal package were fully offset by the end of 2023 by the decision to delay the increase in the superannuation guarantee rate until 1 July 2021.”

To increase the profits of foreign mining companies we are going to decrease the retirement savings of every Australian worker.

“… some of the Government’s largest decisions to repair the budget include the reduction in Official Development Assistance ($7.9 billion over five years) and changes to welfare and social services totalling $2.7 billion.”

We slash money from the poorest people in the world to try and achieve a surplus.

“Building on measures in the 2014-15 Budget, the Government has also agreed to a third tranche of Smaller Government reforms with a further reduction of 175 bodies. This supplements firm action to restrain the size of government by achieving necessary wage restraint and reducing the size of the public service.”

So we address the problem of unemployment and falling income tax receipts by sacking people and paying lower wages?

Despite all the contradictions in this document, where the figures bear no resemblance to the words, Joe valiantly presses on to tell us how much things have improved:

“Compared with the projection of $667 billion in debt inherited just over a year ago, the 2014-15 Mid-Year Economic and Fiscal Outlook (MYEFO) shows the Government on track to reduce this by nearly $170 billion. In addition, budget deficits are still forecast to reduce steadily over the forward estimates and beyond.”

Aside from that debt projection of $667 billion coming from using Coalition policies and decisions, with what accuracy can Mr Hockey claim to guess the debt in ten years’ time when 7 months has changed predictions by over $40 billion? To make up a number and then say you have made it less is just silly.

And whilst the deficits are predicted to decrease each year, they are far higher than those predicted in PEFO, with no sight of the promised surplus (some would say thankfully).

As reported in the Saturday Paper:

“While leaked government speakers’ notes advise Labor should be blamed for the worst budget mess in history, the facts are very different. He has been hit by massive revenue write-downs he himself did not forecast in his budget or midyear review. A total of $56 billion failed to materialise in the 10 months since the budget. This is the same horrible reality he refused to acknowledge contributed to his predecessor’s problems. But Hockey himself has been the architect of much of the fiscal fix he’s in. Unasked, he handed over to the Reserve Bank $9 billion. Then he’s handed back $12 billion in tax revenue to wealthy retirees and big mining and power companies. He’s now promising to give companies running small businesses a tax cut. He is refusing to dip into the $27 billion available by being less generous with superannuation tax concessions.”

I will leave the final word to Liberal MP Teresa Gambaro:

“Real communication is not a three-word slogan, and talking points from political staffers should never be substituted for proper policy development. Equally, policy “initiatives” devised as a spiteful retribution for stakeholders having an opposing view resulting from a government’s own failed policy process is deplorable.

Any politician wanting a real conversation with the Australian people should remember that no-one likes to be talked at. People would rather be spoken with – knowing how to listen properly and being respectful of the “punters” views are key components of any such conversation. Any political figure or party putting political interests ahead of the wishes of the “punters” will quite rightly be shown the door.

Is it too much to ask for a premier or a prime minister to engage in a regular conversation with the people? No, it is not. So why doesn’t it happen?

Voter allegiance should be earned and based on informed dialogue, not by “sloganitis”.

As a federal parliamentarian of the Liberal Party, I despair that the Liberal Party of today is not the Liberal Party I joined 20 years ago and is not the Liberal Party I had the honour of serving in the Howard government.

Open debate is the lifeblood of every democracy, but political collaboration from opposing parties should not be an anathema. These are the conversations we need to have, but instead debate is reduced to a robotic regurgitation of stale talking points that resonate with the public like an overdose of Mogadon.

It is not enough for leaders to listen: they must also hear. A leader must create a team and champion the good performances of team members, not be fearful of them. And finally, a leader should not lie – to their colleagues or the Australian people.”

 

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28 comments

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  1. amca01

    I have no understanding of economics, nor of finance, but I would happily trust the Governor of the Reserve Bank over Joe Hockey. It’s become clearer over the past 18 months or so that this man should not be trusted with running a lemonade stall at a school fete, let alone a first world economy. It seems that Joe has all the slogans and all the words – he seems well able to talk the talk – but like all other current members of the LNP has no idea what the words mean.

  2. townsvilleblog

    more importantly a leader should always tell the truth, I understand that the truth can be twisted however if a leader does not tell the truth then the leader or in this case leaders should be sacked by the people.

  3. Terry2

    I was just reading about the cost to the economy of the superannuation tax concessions mainly going to the big end of town through the low 15% tax rate applied to these super contributions.

    In 2014 these tax concessions cost the budget $35 billion and are projected to rise to $50.7 billion in 2016-17.

    To put this in perspective, the age pension currently costs around $39 billion.

    By scrapping these concessions the average worker would still be putting their compulsory 9% into super and would still be free to top that up but without a massive tax concession to do so.

    The refusal by the Abbott government to come clean and be fair is undermining their credibility and their ability to sell a coherent economic message to the electorate.

  4. Kaye Lee

    “Confidential documents obtained from the Tax Office under the Freedom of Information Act show Australia’s corporate tax base is in crisis because of the explosion in tax haven dealings by multinational companies.

    One of the most telling FOI findings is a comparison between real trade and international related party dealings. In 2012, Australia’s largest trading partner, China, accounted for 20 per cent of total trade but just a fraction of related party trade, whereas Singapore and Switzerland accounted for 40 per cent of related party trade.

    In layman’s terms, the purpose of these related party deals is often to siphon profit out of Australia to avoid paying tax on it. Because Australia has a 30 per cent corporate tax rate, the aim of the game is to declare as little profit in this country as possible, and instead to somehow transfer the profit to a low tax regime such as Singapore, which touts rates as low as 5 per cent for big deals.

    As the parliamentary inquiry into corporate tax avoidance looms, lobbying by vested interests has been furious, commensurate with the size of the dollars at stake.

    Among recent developments, the “big four” accounting firms – the architects and promoters of profit shifting – lifted their collective contribution to political parties, mostly the Liberal Party, by almost 20 per cent last year to $551,498.

    PricewaterhouseCoopers and KPMG were the most enthusiastic, collectively doubling their “contribution to the democratic process” during 2013-14.

    Moreover, the push to shut down proposals for greater tax transparency proceeds apace. In its submission to the inquiry, peak accounting body CPA Australia has called for the government to abandon plans for increased disclosure. Incredibly, its argument is that disclosure leads to uninformed public comment.”

    http://www.canberratimes.com.au/business/tax-haven-explosion-puts-hole-in-corporate-tax-20150213-13dnh8.html

  5. John Kelly

    Our somewhat inept treasurer’s claim that the 10 year projected debt of $667 billion will be reduced by $170 billion by 2024 under his management is pure fantasy. On present trends as per the RBA ‘s growth estimates, the original estimate of $667 billion will be reached by 2019.

  6. Aortic

    Some time prior to this mob of clowns being elected SMh published a letter of mine dreading the fact that our one and a half trillion dollar economy could actually end up in. Hockey’s hands.He said he has sleepless nights worrying about the economy. I said better he have the odd sleepless night than the rest of us have eternal insomnia. Sadly my words had some prescience.

  7. richardw1953

    By failing to pursue the loopholes for the ‘big end of town’, Abbott, Hockey, et al have missed out on billions of $’s of potential income whilst selling the Australian public down the river into ‘generational slavery’ under the yoke of the Trans Pacific Partnership as decreed by the liberal bosses, the Institute of Public Affairs [I.P.A], also known as the Institute of liberal party Policy. I shudder to think where this country is headed under the Clown Government.

  8. stephentardrew

    I choke on my muesli and womit my coffee when faced with the deplorable lies of these rouges.
    All those fined and jailed bankers made a marvelous difference to the financial sector.
    Hang on a minute it didn’t happen.

    And what about those new laws to restrain the banks and financial sectors internationally.
    Oops we just weakened them.
    Austerity is a proven failure but don’t you worry about that we will fix it with more austerity.

    We have gone from trickle down, to trickle up, to oh what the hell let’s bloody grab the lot built upon the lie that it is you worthless plebs who are sucking up all the profits and destroying the economy.

    But where are the media spreading truth of deceit by Abbott and Hockey.
    Insiders this morning was the usual lame excuse for journalism as they try to be fair to the greedy and corrupt.
    You know balance and all that.

    Ever heard of reduced wages and increasing productivity?
    God it’s good to see we are getting our just rewards.
    More good old lies, blame and vilification.
    During a time of record profits its all the bloody unions fault.

    Am I a little unreasonable or is there more than just a little hypocrisy, lying and deception going on here?
    Oh but I am just one of the ignorant misinformed swill at the bottom of the garden.
    Thank’s for the confidence fellas while families drown in the type of debt you claim is anathema to growth and survival.

    You know that family borrowing thing to pay of the capital asset that thing called a house.
    It’s on the big banky credit card mate just like government expenditure in capital assets.

    But, but the family budget is different because it is balanced debt.

    Can’t go on anymore I’me off to play on the train tracks.

  9. Phi

    I feel palpable anger and debilitating frustration in being a citizen who feels essentially powerless in the face of these all powerful lobby forces brazenly corrupting our democracy – and they do it right in our faces with the arrogance of mafioso ‘untouchables’.

    We are fobbed off, with monotonous repetition, with the lie that the ballot box is our opportunity to wield people power. But the periods in between elections are when the lobbyists ‘influence’ has it’s nefarious way.

    The argument that we are a representative democracy is a worn out bald-faced lie – it holds, if at all, only for the few weeks leading to an election, then the winning party dumps all that waffle and admits to it’s lies about how important we are and transforms into the multi-headed beast that is all ears and open pockets for the lobbyists and donors once again.

    Corporate political bribery has one objective – to buy influence and thus determine policy agenda to favour the ‘donor.’ The accounting firms in this article are but the tip of a gigantic iceberg.

    Yet here we are still talking about stopping the corrosive practice of political bribery when it should have been laid to rest decades ago.

    Two questions for Kaye and/or John:

    1. what can we ordinary citizens do in the face of these lobbyists unobstructed ability to set our national agenda and line the coffers of our representatives?

    2. Is there evidence to show that the conservative side of Australian politics (i.e that side with predominantly business interests as primary focus) features more prominently in political funding/lobbying fraud?

  10. Kaye Lee

    Phi,

    We need a federal ICAC.

    As an aside, I just spoke to a current affairs tv journalist who I will not identify. They told me that programming has been changed because “something is going down week after next”. Interesting…..

  11. Peter Anson

    ” I despair that the Liberal Party of today is not the Liberal Party I joined 20 years ago ” Malcolm Fraser said something similar about 6 years ago and then resigned his membership.

  12. Anne Jones

    spot on Phi…the frustration is dire and they are untouchable..unless by anarchy of some sort..but that wouldnt be australian would it!

  13. Kaye Lee

    Whenever you are feeling truly frustrated, remember that many young people did not enrol to vote for the last election. It is very important that you talk to all young voters, encourage them to enrol, get them interested (if you can…mine think all politicians are lying scum)

    After a bad day listening to interviews and reading commentary, I listen to our young people, and then I don’t feeeeel so bad….. 🙂

  14. Terry2

    Phi/Anne

    As Kaye has noted there is something afoot, the economy is in a downward spiral, there is no plan, decision making is on the run, internationally our Prime Minister is seen as a buffoon and we as a nation have become a laughing stock : this government is terminal and even the staunchest Murdoch storm troopers are dropping the charade and conceding that this is the worst government in our history.

    I live in Queensland and it feels as though reasonable people are coming out of the fox holes after the Newman debacle and saying we can do better than this.

    At the federal level wise heads in the Liberal Party are recognising that Abbott neither has the vision nor the intelligence to provide the necessary leadership that this country is crying out for. Even if just to preserve this Liberal government (and the country) Abbott has to go. We can and must do better than this !

  15. Rosemary (@RosemaryJ36)

    Teresa Ganbaro is right – and brave!
    Kaye – Loved your video!
    It is time for the libs to realise they do not know how to govern, only how to destroy, and call an election.

  16. JeffJL

    “Our somewhat inept treasurer’s claim that the 10 year projected debt of $667 billion will be reduced by $170 billion by 2024 under his management is pure fantasy. On present trends as per the RBA ‘s growth estimates, the original estimate of $667 billion will be reached by 2019.” John Kelly.

    John, you misheard the Treasurer. The $667B debt will be reduced by $170B over the forward estimates. i.e. we will reach $500B in 2018. Remember they will deliver what they promise not what people think they hear.

  17. Kaye Lee

    Rosemary,

    Wasn’t the video great. Our kids are so clever. This is another one that I have linked to many times before but worth it for newcomers who may not have seen it. Our children are leading the way in objecting via music, drama, poetry, art, protest, and wit.

  18. Rosemary (@RosemaryJ36)

    Kaye – Tony is to issue a security statement on Monday week. Tampa all over! Pathetic! And yes – the other video is also really great! I wish I knew how to email them around.

  19. Kaye Lee

    Click on the youtube symbol (bottom right) to open link then copy the link from the address bar (right click copy) and paste it wherever you want.

  20. Möbius Ecko

    If you saw Insiders this morning you would have found out how Abbott staved off being thrown out, and no surprise to us it seems it was by lying. The vote was going to be a lot closer with more than the 39 against Abbott. Depending on who he was talking to he asked/begged that they either give him six months, more (unspecified) time or until the end of the year.

    He now denies that and said no time frame was mentioned or given.

    As the commentators stated this is typical Abbott where he will say anything to get votes with no intention of keeping to his word, worrying about the consequences later.

    The submarine contract is another example of it.

  21. Kaye Lee

    Andrew Wilkie and Tony Windsor have been out and about talking about Tony’s promises – give me the nod and I will give you the world. Both men, and Rob Oakeshott, did not trust him. One wonders why the Liberal Party did.

  22. Möbius Ecko

    Abbott back out doing stunts. Food van this time, supposedly out and about reconnecting with the people.

    Surely nothing says more to the people that Abbott is not a fit PM than him constantly engaging in opposition stunts. And if he believes they were a factor in getting him elected then he really is out of touch.

  23. paul walter

    shared.

  24. cornlegendcornlegend

    Yesterday the NSW Liberal Party asked their supporters to tweet a negative Valentines Day message to Labor using the hashtag #LaborGram.
    And gosh, the messages sure did start flowing. But it didn’t quite play out the way the Liberals had planned – with thousands and thousands of everyday people like you sharing comments like
    these:

    https://twitter.com/hashtag/laborgram?src=hash

  25. Kaye Lee

    “Warmongering and inciting panic over terrorism are the refuges of the desperate politician, and Abbott is already playing these cards.”

    Abbott’s epitaphs

  26. Stephen Putnam

    Ha ha ha. This from the buffoon who in characterising the proposed 60:40 split in Commonwealth/ State funding of health said the following:
    “So if an operation costs $10,000 The Commonwealth pays $6,000 and the State $4,000. But what if an operation costs $12,000?”

  27. Judith W

    Kaye, Thankyou for all the work you do to interpret numbers into meaningful arguments. Most of the time I instinctively know something’s wrong but don’t have the figures at hand to be sure. Any chance someone could provide some Graphs or even infographics as well?

  28. Terry2

    This article gives some clarity to the debt and deficit discussion that rarely gets balance from government sources :

    https://theconversation.com/factcheck-is-australia-spending-over-100m-a-day-more-than-collected-in-revenue-37172?utm_medium=email&utm_campaign=Latest+from+The+Conversation+for+16+February+2015+-+2447&utm_content=Latest+from+The+Conversation+for+16+February+2015+-+2447+CID_47fba74876d3a41c646295f8ae8dc1da&utm_source=campaign_monitor&utm_term=FactCheck%20is%20Australia%20spending%20over%20100m%20a%20day%20more%20than%20collected%20in%20revenue

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