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Living within our means

Image by abc.net.au

Joe Hockey says we should be living within our means. But what exactly does he mean? (Image from abc.net.au)

Last night I watched a giggling Leigh Sales interview Joe Hockey who vacillated between the laughing matesy wink wink buddy of the MSM and the sombre Treasurer telling us we must “live within our means”.

So what exactly does “living within our means” mean?

It can’t mean always spending less than you earn because otherwise most individuals would not be able to buy a house or a car or go on overseas trips. Businesses would not be able to start up and grow. Governments would not be able to provide infrastructure. Developers wouldn’t exist and banks would go broke.

So I guess it means being able to service your debt.

In the last budget, net debt in 2013-14 was estimated at $178.104 billion, around 11.1 per cent of Gross National Product, and net interest payments for the year of $7.835 billion. By comparison, the combined net debt for the world’s seven biggest economies is 92.6 per cent of their combined GDP.

The Gross Domestic Product (GDP) in Australia was worth 1520.60 billion US dollars in 2012. Even allowing for the changes in exchange rate and the deteriorating position since the budget, our interest payments are about 0.5% of our GDP. If you were earning $100,000 a year I don’t think you would find paying less than $10 a week too onerous.

But are we saddling future generations with a debt they will never be able to repay?

Well for starters, the Australian government has NEVER had zero gross debt. We have very occasionally reached zero net debt, but considering the global financial crisis, and the very low interest rates on offer at the moment, going into such comparatively low levels of debt to stimulate the economy and to provide jobs, services and infrastructure seems a wise investment.

For many of us, it is a goal to be mortgage/debt free by the time we retire, though that is unachievable for a lot of people. This is not the case for governments. They will never retire. They will always have an income stream. There will be boom times when they can save and reduce debt, and tough times when they must borrow to spend. Suggesting that we can ever maintain zero debt is just not realistic nor is it necessary.

There are some structural issues in the budget that need addressing to prepare for our changing demographic but the cost-cutting measures so far announced or hinted at by the Coalition do little to address these problems into the future. Their miserly savings of a few million here and there have come at the cost of many very worthwhile ventures.

But the really galling part in this tightening of our belts is what the government is choosing to spend money on.

There have been many stories about politicians rorting their entitlements, hiring private jets, and generally wasting a lot of taxpayers money. Their travelling and office expenses are huge. We are providing Tony Abbott with several places of residence and also apparently forking out for new bigger jets and a fleet of security cars, costing us hundreds of millions.

We are having yet another enquiry into the Home Insulation Scheme. Whilst it was a tragedy that 4 young men lost their lives, there have already been eight investigations which have detailed how and why it happened with recommendations on how to avoid similar problems in the future. Royal Commissions aren’t cheap and it looks like we will also have one looking into unions even though there is already the framework to investigate corruption and prosecute individuals by Fairwork Australia.

Whilst cutting $13.4 million from Indigenous legal services, they provided $2.2 million legal aid for farmers to fight native title claims.

The Federal Government withdrew support for a $16 million grant to South Sydney Rabbitohs for a high performance centre whilst retaining a $10 million funding promise for Brookvale Oval – located in the heart of Prime Minister Tony Abbott’s Warringah electorate.

I shudder to think what Operation Sovereign Borders is costing us. With two frigates at $207,000 a day each and seven Armidale Class Patrol boats at $40,000 a day each, along with numerous Customs vessels patrolling the seas between Christmas Island and Indonesia, the bill must be huge. It has also left us without the promised patrol of Japanese whaling. Combine that with the $3 billion we spent last year locking asylum seekers up in offshore detention centres, and the extra $1.2 billion allocated by the Coalition in MYEFO, this is a very costly exercise in inhumanity.

Saving a few million dollars by disbanding all climate change advisory bodies and sacking scientists at the CSIRO will not make a dent in the $2.55 billion over the next four years, followed by $1.2 billion a year until 2020, budgeted to pay to polluters, and the $811 million we are spending on a Green Army.

It is also widely agreed that Direct Action as planned, with an unrealistic $8/tonne abatement price, will go nowhere near meeting our emission reduction and renewable energy targets. Under an emission trading scheme we would have the flexibility to source abatement overseas if the price is right so we would meet the target through national and/or international reductions. Direct Action has no such plan if targets aren’t met and it also has no plan for beyond 2020.

In the 7:30 report, Joe Hockey, when asked about assistance for struggling company SPC Ardmona, replied that the

“parent company of SPC Ardmona, Coca-Cola Amatil, which is an Australian company, in the first six months of this year had a profit of over $215 million …. I think you can understand why we are being very cautious, very careful about handing out taxpayers’ money to companies that are profitable.”

During the election campaign, Abbott flew to Tasmania and blithely handed a gift of $16 million to the Cadbury chocolate factory. Cadbury is owned by a multinational firm that had reported a 64 per cent rise in its profit to $74.9 million last year. It’s probably just a coincidence that they are major sponsors of Tony’s pollie pedal ride.

Speaking of pollie pedal sponsors, they include three pharmaceutical companies – alphapharm, Roche and Pfizer – as well as the world’s largest biotechnology company AMGEN. Bob Gosford wrote a very informative article in the Northern Myth about AMGEN. Tony’s close association with pharmaceutical firms and his haste to sign free trade agreements doesn’t auger well for our Pharmaceutical Benefits Scheme which will no doubt be immediately targeted for lawsuits for restricting profitability.

Joe Hockey also said last night, when asked about a possible $6 co-payment for bulk-billing doctors,

“Well, no, we’re not ruling things in or out. We are dealing with all of the suggestions that have been put forward on a methodical basis. I want to emphasise – I want to emphasise: this not a choice for government. It has to be done. We need to live within our means. We can’t keep hitting taxpayers, we can’t keep hitting families, we can’t keep hitting employers, employees with new taxes to pay for the largesse that Labor left. We can’t do that. We’ve got to live within our means.”

But apparently they can hit us all to fund their rolled gold Paid Parental Leave Scheme which is estimated to cost $5.5 billion a year and is hugely skewed to favour the wealthy.

Mr Hockey has also cost us several billion by abolishing certain taxes:

  • $1.8 billion fringe benefits tax crackdown on cars
  • $313 million in tax on super pension earnings above $100,000 for 16,000 wealthy people
  • $266 million by removing the $2000 cap on tax deductions for work-related self-education expenses.
  • Another three taxes, including one aimed at stopping multinationals shifting profits overseas, will be watered down, at a cost of $700 million.

Through direct subsidies and tax concessions, the mining industry receives over $4.5 billion a year from the government. The average rate of corporate tax is about 21 per cent, the mining industry only pays 14 per cent.

This year the government will provide $7 billion for the private health insurance industry. $5.6 billion will be in a direct subsidy to the industry. There will be another $1.4 billion in income tax foregone by the Commonwealth Government.

Excluding deposits, Australian taxpayers are handing over benefits worth $2.1bn to $7.2bn a year — up to $763 a taxpayer — to the big four banks, which is conservative because the Financial Claims Scheme insures deposits up to only $250,000.

Mind you, the banks don’t even pay for the explicit insurance, which the Reserve Bank governor said recently was probably worth “a few basis points” of insured deposits, or somewhere around $250 million a year.

There are many more examples showing the priorities this government has for its spending. MYEFO projects that we will not reach a surplus until 2023-24. From everything I can see, it is only the poor who are being asked to tighten their belts so the rich can grow richer in the misguided hope that this increased wealth will somehow trickle down. It seems to me that if you instead increased the wealth of our poorest people then that would create a tsunami of demand that would indeed “lift the tide” for all.

37 comments

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  1. MargL

    I watched that interview and was appalled by the way Leigh Sales conducted herself – so unprofessional. I am also appalled at this stinking government’s gall at telling us we have to tighten our belts while they blithely rort and fund all their big business buddies. They are a disgrace to our nation.

  2. Richard

    She no longer asks the hard question directly to Hockey …you increased the deficit by $500 billion. It is not rocket science.

  3. Stuart Dean

    Leigh Sales is snuggling up to LNP in the hope that, when the ABC is privatised, she will be given a plum new role in the new order.
    By the way, does anyone remember that website johnhowardlies.com? It disappeared just before the 2007 election. Bought out? I happen to have saved several pages if anyone is interested.

  4. boombi

    Leigh Sales has been visably partisan for a long time , but now she doesn’t have to cover it up. It was even worse on the 7.30 report when Chris Ullman was also on board . Could never understand why Sales was lauded as a good journalist . I have never been that impressed by her. Suggest we write complaints to the ABC . I do .

  5. Kaye Lee

    minbani, I have heard the banking conspiracy theory before. Whilst I agree that far too much wealth and power is concentrated in the hands of a few, I think sometimes these guys get a little carried away. Here is another view of the author of the article you linked to.

    http://rationalwiki.org/wiki/Michael_T._Snyder

  6. Geoff Of Epping

    Sales is no in depth reporter. She wears her partisanship on her sleeve for all to see. She has been the sole contributor to a huge number of viewers who have either stopped watching the 7.30 report or take her crap with a huge grain of salt.
    Like the vile Julie Bishop of Parliament she thinks simpering is an effective tool.

  7. Matters not.

    Good governments decide what they want to do and then decide how to raise the money. Bad governments take existing revenue streams as a given and then decide how to fit policies within those constraints.

    It’s the tail that wags the dog with bad governments.

  8. Trevor Vivian

    Another good discussion Kaye Lee.
    But I suggest that your writing whilst factual and professional has theme of questioning just what is Abbott about on his latest role as accidental PM of OZ.
    It’s plain as day and night that with Howard as Abbotts mentor were in for Howard’s way part 2/3 with a nasty twist.
    Where Howard bribed his way to electoral longevity Abbott is just going to carve a swathe through the known and bad luck for the victims.
    It’s a picture of all things being upended and the chaos and confusion resulting provides ample cover for the spin of blame.
    Look at 6 months worth and multiply that for a view of what’s coming.
    There of course is room for seeming random dynamics like a LNP upheaval but cretin credlin and hubby run the Doberman patrol.
    The maths, the figures, the inputs and outcomes are to be figured in such a way that Labor, unions , bludgers, weak knead bosses, etc etc ad infinitum are wearing the blame.
    3yrs till next we get our chance at participatory democracy.
    The ability to have input went with Labor.
    But I sense that Labor is lost and the silence from them is deafening.
    Where does this all lead to. For now it’s not gunna be a pleasant look as the wreckers wreck.
    What will be rebuilt? I don’t think that Abbott et al have that answer.
    They have a policy of getting rid of everything they think is at fault but after that, well all get to see.
    I’m not being pessimistic nor optamistic as the politics in oz are and have been for the past 20 odd years defined to me as a picture of a clenched fist clenching tighter.
    Them that’s in charge are not about to let you me or anybody outside to have influence.
    Abbott et al deals in the dark arts and looks like a grinning idiot to boot
    This country has been here before. It’s detailed in the history. White Australia has history of evading its own outcomes.
    And yes it was the lucky country but what is it now?

  9. minbani

    Don’t complain – that time is well past! Know what is happening and why. You can’t fight an enemy unless you have identified who or what it is. That is why we have the “war on terror” – it can’t be identified clearly – very evil manipulation. Knowledge is the key to our future. Read here and please, follow the links.

    http://theeconomiccollapseblog.com/archives/world-bank-whistleblower-karen-hudes-reveals-how-the-global-elite-rule-the-world

    I was shocked to learn just how closely embroiled with the Catholic Church Tony Abbott is. Follow the links and share the knowledge.

  10. Carol Taylor

    I’ve found that Leigh Sales often performs the following – swan dive, precisely executed or a belly flop with pike. I therefore agree with Stuart Dean and,

    Leigh Sales is snuggling up to LNP in the hope that, when the ABC is privatised, she will be given a plum new role in the new order.

  11. TechinBris

    Gawd! It’s been ages since I saw this type of interview. I used to watch interviews like this on DDR1 (East German Television) in 1988 to 89 to try to understand the methodology of controlling and dominating a people’s existence. So is The 7.30 report and Leigh Sales the Australian equivalent Der schwarze Kanal?
    Leigh is lowering herself into a sewer from which she may come off worse, in the long run.

  12. edward eastwood

    Good article Kaye. The ‘living within our means’ is the great neo-liberal lie that enables them to side-step public responsibility and push it into the private sector for profit to be garnered by multi-nationals.
    Just a couple of finer points to your article; Governments cant save their own currency, they can only issue it and therefore are never constrained by ‘debt’ – they simply issue more- ‘deficit’ To control inflation they can then decide whether to raise taxes or rein in spending in the public sector and outsource it to the private sector. If and when economic conditions improve, the government resumes spending in the public arena which in turn overflows to the private sector and the overall conditions for the community improves and strengthens.
    Nor do governments have to borrow to spend, as they cant run out of their own money! These are simple economic principles and apply to both Keynesian or ‘supply side’ economics. The difference in their use lies in the ideology of their use.

  13. Stephen Tardrew

    Certain Christians seem to love disenfranchising the poor while putting in tenders for welfare programs in a viscous cycle for disenfranchising the poor by handing much of the welfare system over to the lowest ideological bidder. The deep connections between religions, government and politicians is disturbing. Abbot, Hockey and their tribe are undemocratic ideologues with little regard for the poor or freedom of religion. I am sick of middle class bullshit. We are all workers. Go to Church for religion. Get into government to help all people regardless of belief or class. Separation of Church and state is an absolute requirement of a democracy. What we now have is an economic and ideological oligarchy. Hint, the poor do not want to be poor, the homeless do not want to be homeless. Some may be befuddled and have poor reasoning skills through no fault of their own. Common lets get some more blame and rettribution to prove the poor caused the financial crisis. These are horribly cruel and insensitive apologists for rampant greed. This performance by Hockey reeks of Reagan and Thatcher. Mommy I want to throw up.

  14. diannaart

    Excellent writing Kaye Lee.

    Just something I have been considering, the LNP has not stopped their election campaign – not because they can’t think of anything else (although it’s possible) but look at their actions:

    Royal commission in unions – attempting to completely sever ties from a significant Labor support base.

    Not supporting some of our industries – car manufacturing & fruit growing – with the always added admonishment that employers have only themselves to blame for providing ‘generous’ conditions for workers. Nothing about products not selling (as for cars) or the seasonal variation that is a natural occurring problem for farmers – perhaps what is needed is an investigation into how Coca Cola treats its suppliers. I haven’t had the time to look into SPC – but I don’t think just giving reasonable conditions to workers is the reason for their problems.

    Blaming Welfare beneficiaries – for losing their jobs, getting ill or not being able to find work. Reliable old piece of hate-mongering blaming victims.

    All this action and more going towards ensuring the neutering of Labor before the next election. The Abbottoir will not let the voter forget – it was all Labor’s fault; look at the hard measures they (the LNP) are forced to take to repair the damage done by Labor. Also it does not matter how Abbott presents himself internationally – his naive sounding speeches aren’t for world leaders; he is staying on message for the folks back home.

  15. Paul

    Kaye Lee you have a tougher stomach than I have.
    The very first time Uhlman and Sales appeared on 7:30 was the last time I watched it, last night I almost watched some but then could not stomach it and hit the off button instead.

  16. deknarf

    Nice piece on our sleazy NO Coalition government. Thanks for the info.
    The tragedy is that Oz voters voted this bunch of sleazy liars into power, and Labor did its best to assist them!
    Poor bugger my country!!

  17. scotchmistery

    I was pleased that they panned the cameras away from Leigh as her head disappeared below the desk, at the same time fat Joe Hockey started that slimy smiling “I don’t believe this, are you watching, Peta?”

    We are hoist on our own petard and ALP has NO answers.

  18. Stuart Dean

    Softly, softly, catchee monkey…

  19. 'george hanson'

    australia is being run by the catholic church and its underhanded minion -‘opus dei ‘ [ look them up if you want a sleepless night ]. I’ll bet that opus dei numeries and supernumeries have infiltrated our government on both sides , and up to the highest levels. One was even premier of n.s.w.

  20. lawrencewinder

    Sales’ was again, a bloody disgrace as a interviewer / journo… “pat-a-cake, pat-a-cake” Q’s to “Cereal-SPC-Killer” Hockey.
    No wonder people ask about bias at the ABC! And all jolly-cutesy baby talk at the end (…what, she’s hoping for, a monetary extension to the PPL as well as ABC, Union entitlements).
    Will she call it Rosemary, if it’s a girl? And as I said in a recent comment, Sales for Liarbril candiditure after the baby’s weaned!
    Cheap shot I know but… these people are not worth manners.

  21. mark delmege

    One good show a night is all I want from TV – its not sales – I’ll tell ya that.

  22. Martin Connolly

    Get that down to three words and Australia might understand it.
    That’s a big part of the problem at the moment. Everything is reduced to headlines and slogans that Murdoch can promote and the vast majority lap it up in front of their TVs, drinking their beers, watching footy … Sad.

  23. mark delmege

    Martin how about ‘up yours, Maate.’

  24. Matters not.

    Everything is reduced to headlines and slogans that Murdoch can promote and the vast majority lap it up in front of their TVs, drinking their beers, watching footy

    Can’t disagree with that. But why?

    Perhaps it’s the ‘education system’ failing the ‘society’?

  25. whatismore

    Well, it looks like Sale’s birth is going to be more difficult than Joes’ budget delivery.Despite her best efforts to cozy up to Joe and in spite of the ABC cheering Abbott into power over the last three years, the Coalition are going to make sure that the ABC lives within its means. Yes, that’s the the thanks you get…….Leigh who?
    To quote Bushfire Bill, “Sale’s problem is that she is out of her depth. She lacks the talent and the finesse of a truly great interviewer. Leigh’s interviews are all about Leigh, not about informing the public …”

  26. Terry2

    If Joe Hockey is serious about living within our means and no handouts etc. the proof of the pudding will be how they treat the subsidies to Private Health Insurance Companies and the Paid Parental Leave Scheme: to be consistent, both of theses will be dumped.

    SPC were well advised to push their claim for a cash injection when they saw how easily Cadbury were able to get theirs and, of course they believed the government when they said they would be consistent.

    The reason this government want to shut up the ABC is because they will never ever get any scrutiny from 2GB and when you are in a policy shambles the less scrutiny the better..

  27. Marg Byrne.

    This is all so fascinating, when most people on the right are accusing the ABC of being left/green biased. If the ABC is offending everyone, is that a good indication that it is doing its job? Or is it just an indication that we see bias when the views don’t support our own or the interviewer isn’t tough enough on the pollies we don’t like? I only saw the end of the interview but I did see Sales challenge Hockey on the number of inquiries or audits and when they were going to come up with some actual plans. She did challenge his statement that they had only been in government a short time. I think it has been quite a long time since any interviewer, male or female, has really challenged politicians. Most accept a non answer and move on to the next question. At least, in the bit I saw, she did persist, even if Hockey refused to give an answer.

  28. Kaye Lee

    Marg,

    I am rather surprised at the number of comments about Leigh Sales. She wasn’t actually my focus in writing this article. I agree she asked some good questions but she didn’t really follow up on them. By and large she does a better job than many and even having a chance to watch and listen to MPs is worthwhile – sometimes how they say things is more informative than what they say. We also know that if you are too antagonistic then the Coalition just refuse to front up for interviews so it’s a fine line.

  29. Amanda

    Put it into context. The LNP wants to DEFUND the ABC. Any ‘perceived’ bias adds fuel to the Tony speakers (those who spread the word of the master in every social media site known to man) to scream: Lefties!!! Smart move Leigh.

  30. Jan Pascoe (@PascoeJan)

    Great article! Just the sort of information I am looking for. Mainstream press is sooo lacking when it comes to reporting meaningful facts and providing critical analysis.

  31. mikestasse

    “Businesses would not be able to start up and grow. Governments would not be able to provide infrastructure. Developers wouldn’t exist and banks would go broke.”

    Wouldn’t that be great……? It’d be the end of Climate Change………

  32. mikestasse

    “In the last budget, net debt in 2013-14 was estimated at $178.104 billion, around 11.1 per cent of Gross National Product, and net interest payments for the year of $7.835 billion.”

    Government debt maybe…….. but you left out the elephant in the room, NON GOVERMENT DEBT, which runs at 160% of GDP…..

    http://www.incrediblecharts.com/economy/keen_debt_gdp.php

  33. John Fraser

    <

    @mikestasse

    "Non government debt"

    That would be the debt, majority owned by the big 4 Australian banks.

    Perhaps you should stop screaming (upper case) and do a bit more research into all of the Australian debt because it is not unmanageable.

    Not by a long shot.

  34. mikestasse

    I suggest you do your own research and read what Steve Keen has to say about it on the link I posted John……. because it probably is already out of control, due to a little problem called INTEREST…..

  35. mikestasse

    Oh and “the big 4 Australian banks” owe a lot of money to foreign banks………. which if they call the debts in the highly likely event TSHTF overseas will crash our economy.

  36. John Fraser

    <

    @mikestasse

    1 economist sees a black and white cow.

    Another economists see a white and black cow.

    The real problem in Australia is not the debt it is how the debt is repaid.

    And with the Abbott gang I can understand your concern.

  37. mikestasse

    Steve Keen is NOT your regular economist………. in fact your out of the box economists are the ones who “sees a black and white cow…. Another economists see a white and black cow”

    Steve Keen sees red cows……. and yes I am VERY concerned about the Abbott gang, because they can’t see ANY cows……..

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