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The Minister for Lost Opportunities

You have to hand to him. Joe Hockey would have to be the eternal optimist. He says that we are on the threshold of Australia’s greatest era. Really? He says his plan is to fix the budget and pay down the debt left by Labor. The debt he is referring to, is the ongoing sale of government treasury bonds issued since 2008 (approximately); these are the ones that protected Australia during the Global Financial Crisis (GFC).

He’s a man on a mission; you can see that. The problem is, he can’t see where the missionaries need to go. We should not forget that he was part of the Coalition in opposition that opposed those stimulus measures Labor used to avoid an economic catastrophe. One can only wonder if a Coalition government were in power at the time of the GFC and failed to act, in other words, did nothing, where, and in what condition, our economy would be in now.

The likely outcome would have been up to 2 million unemployed, small business’s going bankrupt, a massive reduction in bank depositors’ savings, a serious reduction in tax revenues and a gigantic ex nihilo (money created from thin air) programme to save our failing banking system and drag us out of the depression that would have ensued.

This imaginary Coalition government would have attacked social programmes to minimise the structural deficits that would have followed. But, having patted themselves on the back just two years earlier for falsely claiming to have paid down debt when they were in government, they would have found a new way of describing the debt they had now reluctantly created. They might have opened a special account and called it the Fiscal Expansion Account, or The Asset Minimisation Account and denied that it was debt at all.

debt But we, as a nation avoided all of that thanks to Labor’s economic management and now all Hockey has to do is manage those bonds. As of right now, he’s not doing it very well. As of right now, those bonds that totalled $280 billion at the end of August 2013 are $337 billion in September 2014 and growing. That is an additional $57 billion which translates to just under $5 billion a month of bonds issued in the first 12 months of a real Coalition government.

That’s slightly faster a rate of borrowing than Labor did in 6 years. Compounding Hockey’s problems is the reality that current tax revenues are not meeting expectations. That will mean further bond issues to cover a continuing shortfall. I’m almost feeling sorry for him.

Joe could easily fix this annoying little matter by opening a new account. He could call it the Asset Recovery Account and create $10 billion ex nihilo a month to pay out each bond issue as it becomes due. At the same time he could continue to issue further bonds to meet expenditures without impacting on inflationary pressures. It might also have the effect of putting downward pressure on the Australian dollar.

That would do wonders for our export industries and create opportunities to get the unemployment rate down. Then he could re-visit his pathetic first attempt at constructing a budget and try restructuring it to reflect a fairer balance of the heavy lifting. Little things like removing mining subsidies and tax minimisation schemes like negative gearing would do wonders.

trains With all that now under sound management he could wave the green flag for all those infrastructure programmes to tackle unemployment; the ones his boss wants to be known for. But he won’t do this because, he’s too busy looking back at what Labor did instead of looking forward at what he could do. His boss wants to be known as the Infrastructure Prime Minister but neither of them know how to go about making that happen. Neither can see the bigger picture. Instead, they will let this false debt accumulate and continue to blame Labor.

Joe could, if he knew how, become a Paul Keating Mk 2 and continue reforming our monetary system. But he doesn’t know how, and even if he did, his ideologically bound party, not to mention their masters, the IPA, would not let them. They would much rather have us running off to Iraq to help save the world from a handful of fundamentalist nut cases who like beheading westerners. That’s money well spent; a new Crusade, how original.

missed opp They would also like us to return to the Reaganomic and Thatcherite slash and burn monetary policies of the 1980s; the same policies that led us to the GFC thirty years later. They say what goes around, comes around. And in the process, guess what? Another forward looking, nation building opportunity goes down the toilet. Forget about Abbott being the Infrastructure Prime Minister. Joe will become the Minister for Lost Opportunities.

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37 comments

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  1. Lorraine Stansfield

    I am so angry that we are stuck with such a useless government.

  2. Jennifer Meyer-Smith

    I’m angry also, Lorraine. Idiots like Hockey and Abbott are only good at playing politics, backstabbing and other dirty tricks to get into their roles. Once there, they don’t know how to do the job of making real improvements. Anybody can slash and burn; that doesn’t take any intelligence.

  3. DanDark

    Smokin joe is a fraud, a cigar chomping fraud,
    he does not have the skills, nor the ability to count past 11
    I give up, it’s depressing that’s for sure, after watching the jabber jaw on late line last night, just harp back to labor and they have been in gov 12 months, it’s like listening to a broken record very monotonous now, and even Lee said “we are not talking about labor you have been gov for 12 months” he talks shit and in riddles old Smokin joe, like Arfur Alzheimer….
    It’s like when you go on a date and all they do is talk about their ex, boring, and shows their lack of character tooooooo blame others constantly, no second date is required because they are blamers and make poor dinner dates 🙂

  4. kerrilmail

    As a retired secondary teacher I am continually reminded of all those cliched excuses.
    “The dog ate my homework!”
    “It’s in my other folder!”
    ” I forgot it! ”
    “I slept in!”
    ” It’s wasn’t me Miss, it was them! ”
    Or excuses that amount to
    “I can’t be bad because he/she is much worse!”
    The bottom line with most excuses is the person is just not up to the task!
    And worse the transparent excuses usually amount to how much they are kidding themselves!
    We need them gone ASAP.

  5. keerti

    While it is clear that the “debt emergency” is a figment of somebody’s imagination (I’m not sure whose given that liberal shows little in the way of imagination or creativity) it is relevant to recall that in the early 2000’s, when we had the first mining boom, that the then Liberal government kept handing out the extra tax monies received as vote buying, middle-class welfare. At the time it was obvious to anyone with half a brain and even a minimal amount of business and budgeting experience that when you have extra money you don’t immediately run out and spend it. A wise, money manager be they in business or managing a household, would have recognised that this was extra and invested it for another time when it might be needed. If we are to believe hocky’s debt story than that time is now. Therefore by definition the Liberals over time have proven themselves, to be at best, inept.It is also clear looking back at labours record in managing the economy that both before and after the Howard government that its economic management and success was internationally acclaimed.

  6. Jennifer Meyer-Smith

    The Liberal Neanderthals are only good at spin that makes them look like they are good money managers. Voters see through Abbott’s 3 word slogans now. Next step is to kill off other repetitious language that they use. Just coz they say lies repetitiously, does not make them truths.

  7. dafid1

    Excellent article and replies. Nothing to disagree with here

  8. Wayne Turner

    He’s a delusional LYING moron aka like Abbott.

    The world’s worst Treasurer!

  9. Carol Taylor

    My biggest problem with the Abbott government is that they intend to remake Australia according to very much outdated ultra-conservative, right-wing theories – and do not care who they crush along the way. Egotists Supreme, they consider that some theory which they learned sometime in their lives can be enforced to put things *in their rightful place* with those who they consider ‘worthy’ ruling those they consider less so. And it all revolves around money – note how Abbott’s assessment of ‘women of calibre’ rested solely on their income rather than traits of character.

  10. Don Winther

    He still believes the world was created in seven days what did we expect. Lucky we still have a strong manufacturing industry to get us through the mining downturn and Abbotts war on the world. We can almost make anything in Australia except, fridges, washing machines, cars, steel, aluminum, glass, petrol ( very little ) leather, movie films, ships, submarines, Aircraft, trains, trams, knives and folks, blankets TVssetc. Even our Australian army is wearing uniforms made in China. Hang on I just got the sack, time to get into Politics for a nice cushy life.

  11. Möbius Ecko

    John Kelly you don’t need to imagine what the Liberals would have done if in power during the GFC as Hockey laid out their policy, which was more or less to follow the US/Euro models, the ones that failed and are still causing hardship to this day.

    Hockey’s costings for his measures were either two or four billion less than Swan’s stimulus yet Hockey’s plan was to immediately throw 200,000 to 250,000 jobs onto the scrap heap and bail out wealthy businesses.

  12. Neil of Sydney

    “One can only wonder if a Coalition government were in power at the time of the GFC and failed to act, in other words, did nothing, where, and in what condition, our economy would be in now.

    That is easy. The budget would be in surplus and the debt would be about 5% of GDP. I suspect that debt is now a runaway train incapable of being stopped.

    Labor govts are nothing but economic vandals. They always trash the budget. Always. Hawke/Keating is as good as it gets for Labor and debt went from 6% of GDP to 18% of GDP in 13 years.

    This country could not take another Labor govt for many years.

  13. hilderombout

    I think Neil of Sydney is really Joe Hockey in disguise. He shows the same character and intellect flaws.

    Great article John, as always, thanks.

  14. DanDark

    Neil of Sydney is A bott, he is a robot propaganda machine for the LNP
    I think Neil has a thing for Labor because he is always talking about them whenever he can
    Deep down he can’t forget labor and has a real love affair going with labor, because if he didn’t he wouldn’t even mention them, come on Neil admit you luv labor or shut up, cos it’s confusing always comparing Labor to the coal ition 🙂

  15. Möbius Ecko

    That’s it DanDark, I never thought of it that way. Neil adores Labor and loves everything they do, whilst he hates the Liberals and eschews their policies and programs. Why go on and on and on about Labor whilst almost completely ignoring the Liberals.

  16. Choppa

    Amen Neil – a blind sailor could’ve steered that ship through the GFC……but only a dumb blind sailor would come out the other end in debt. Still no polite thank yous to the mining industry? Which if you havent noticed – kept many more companies ticking than any economist chooses to include in their analysis of companies directly linked to the mining industry. Hopefully Kaye Lee will re write some her mining articles – she looks more than a bit foolish now!

  17. All's Not Lost

    I’ll thank the “mining industry” when and if they thank me first.

  18. Jennifer Meyer-Smith

    Good afternoon Choppa! Don’t compliment the mining industry please. I don’t see any of their $000,000,000’s of unpaid taxes coming the way of the needy in the community that your LNP nutters choose to kick even harder.

    Tell your mate Jovial Joe Hockey to admit defeat. He’s a useless Treasurer. As for Abbott, he’s just an embarrassment.

  19. June M Bullivant OAM

    It is amazing that last week we were broke and in debt, this week we can order submarines, airplanes and go to war at what cost.

  20. Möbius Ecko

    Choppa if a blind sailor could have steered us through why did Hockey advocate a policy that failed in the rest of the world and advocate 100,000’s of unemployed along with shutting down 1000’s of businesses?

    If Hockey would have done such a great job why is he such a failure now? He’s added 69.5 billion to debt in one year. That’s his spending, waste and loss of revenue, no one else’s. Even Peter Costello, who Neil thinks is the greatest Treasurer who ever lived, had yet another go at Hockey’s mismanagement the other day. How many times is that in one year, three?

    And in a further irony Howard, who Neil believes is the greatest human being who ever lived, had another go at Abbott’s leadership.

  21. stephentardrew

    John:

    The latest regarding Hockeys big bad debt and austerity. Twenty six economist could’t be right could they compared to one miserable sniveling loudmouth ignoramus. Poor didums is going to have a big sooky fit and tear down some more of those nasty, bad, ugly windmills while happily digging some more of those great big gorgeous polluting holes in the ground. Then make those leaners pay for it by loosing more of their over generous benefits.

    Pure bloody genius bozo.

    http://www.theguardian.com/world/2014/sep/18/budget-emergency-denied-by-63-leading-australian-economists

  22. Möbius Ecko

    http://www.canberratimes.com.au/comment/george-brandis-new-antiterror-law-allows-asio-to-torture-20140917-10i9hv.h

    When Paul Sheehan heavily criticises something this government proposes then you know it’s terrible. This is about as terrible as it gets. Brandis wants to condone torture, rape, destruction of property and even murder by our intelligence operatives.

    If anyone believes calling this mob fascists, or more accurately neo-fascists, is over the top then Brandis’s anti-terror laws proves they are as close to being fascist as you can get.

  23. DanDark

    Möbius E…… love is grand isn’t it…..lol lol lol rofl now….
    And Neil sure luvs labor he just can’t shut up, labor this and labor that, it’s always about labor with Neil 🙂

  24. DanDark

    So we will have our own Guntanamo bay,, geee goodie lucky us, this sure is the lucky country now..Not
    Brandis is a froot loop who happens to keep company with a bowl of froot loops who think they are above the law basically,
    Maybe Neil can apply to be chief of water boarding, sounds like it would be up his alley and employ Choppa as second in charge 🙂

  25. Neil of Sydney

    “If Hockey would have done such a great job why is he such a failure now? He’s added 69.5 billion to debt in one year”

    According to you lot that should be great. Lefties just luuuv debt.

    Fact is putting Humpty Dumpty back together again is not easy.

    In fact i think Labor from 2007-2013 created a runaway train.

  26. Roswell

    Why am I not surprised that they would condone torture?

  27. Roswell

    Was that a new comment from Neil, or did he just copy and paste one of his old ones?

    Sorry – the old one. Not one of. He only has one.

  28. DanDark

    He is a one trick pony ol’ Neil from Sydney
    He comes on here with the same old spiel
    He flaps on about his beloved LNP
    How good they have all bloody been
    Tone’s is the best PM we have ever seen
    Hockey can count all them beans

    Gee how have we survived all them years
    without Neils beloved LNP
    Well we did and the last party in power didn’t screw the majority
    Everytime they tried to fix the equality,
    the LNP screamed that’s Class Warfare
    We will not support that until we get in on Murdochs lies and spin
    and then we will get you back with the biggest war this country has ever seen
    We have the leaners and the lifters and those bloody lazy unemployed
    and those with disabilities will be paid way less more now

    We will give to the rich and take from the poor,
    and don’t think about going to the doctor no more
    We will screw this country well and truly
    Education isn’t free, its not what we said before the election
    but hey who cares not Neils beloved lying LNP

    So Australia be aware the LNP will wage Class Warfare any which way they can…..
    The only out of control train on the tracks now is Neils beloved LNP
    Heading straight for the biggest political defeat in our history 🙂

  29. guest

    Neil of Sydney has not been paying much attention. All he does is parrot Coalition propaganda. He should find out how many surpluses there have been since Federation and how useful they are. A surplus is just money unspent. And there are ways of achieving surpluses besides not spending, such as selling off the public furniture, or reducing taxes in a time of prosperity so that people think all is well. Meanwhile the churn provided money through the GST so that the Feds did not have to worry too much about funding the states. So now governments have reduced income from reduced taxes (now also including the repealed Carbon and Mining Supertax) and in times of hardship when people are not spending the GST does not supply enough revenue any more…and so it goes. Neil might talk about “blind sailors” but it is clear that in the wonderful Howard years, the drover’s dog could have managed the economy.

  30. Bacchus

    Perhaps “Choppa” could take a leaf out of Kaye Lee’s book and try dealing in facts for a change.

    FACT: The mining industry was losing jobs a a greater rate than any other sector of the economy during the GFC…

    https://www.qrc.org.au/01_cms/details.asp?ID=1737

    Kaye doesn’t look foolish…

  31. John Kelly

    Bacchus, you beat me to it. The mining industry claims it carried Australia through the GFC. Nothing could be further from the truth.

  32. Ross

    John Kelly is one of the very few people who have an idea how our Fiat economy works. If you can understand that the federal government is the sole issuer of the Australian dollar and is in no way financially constrained. i.e. it can issue as much as it likes, then you will know more than the Federal Treasurer. With this in mind please carefully read Mr Kelly on what government debt is.

    If people have the tech savvy to comment on blogs then they have the ability to research how the economy actually, as opposed to what Hockey says, works. It would help if more people did so and then you wouldn’t have to listen to the inane blathering of people who have no idea of what they are blathering about.

    As someone recently commented, Joe Hockey couldn’t recognise an economy if it painted itself purple and dance naked on a harpsichord singing “look at me I’m an economy”.

  33. stephentardrew

    John: Mining and the GFC demand a well researched critique in it’s own right.

  34. John Kelly

    Agreed, Stephen.

  35. John Turner

    Several people making neo-liberal type comments on this article do not understand budget and money theories as they apply to a currency issuing government. The Australian Government can purchase any labour or goods available for purchase in exchange for Australian dollars and never have a problem paying for what they purchase.
    If you don’t understand the practical application of this read the article written by J D Alt in August 2013 and blogged on the site of neweconomicperspectives dot org.
    Between 1938 and 1944 the USA went from being in deep depression to being the most productive and egalitarian society ever and the only money problem they had was that they had to defer private consumption to the period after WW2 when the war machinery was converted back to production of goods for domestic consumption. By 1948/50 and for 20 years the American economy could afford the Marshall Plan, to resuscitate Western Europe, and a mountain of other foreign aid, Then it over-reached with the Vietnam and other wars.
    The only time a currency issuing government needs to reign in its spending is if there is full employment and the booming economy is causing inflation.
    There are two types of inflation – inflation in the cost of consumable goods and inflation in the value of assets. Howard and Abbott rightly hate the first but the second benefits the well off in society to the detriment of the younger generation. The younger generation weren’t around to buy homes and shares when they were cheap.
    Thatcherism and Reaganism were disasters as was Howard’s attitude to capital asset inflation and to the mining boom.
    Minerals and coal are capital assets. Norway has shown what could be achieved. They set a high oil resource rent tax and spent the income to buy large stakes in foreign assets so the country will achieve large earnings of foreign currency, to sustain the citizens’ living standards, when the North Sea oil is exhausted.

  36. John Armour

    It gives me hope to see a number of comments here reflecting the insights of Modern Monetary Theory.

    And it’s all largely due to those 2 great articles by John Kelly back in June “The Ridiculous Debt and Deficit Scam” and “Do Taxes Fund Spending”, that lit up the switchboard.

    It might however be a good time for a bit of revision and remind ourselves that “the debt” is not actually a debt in the usual sense because the government, when it “borrows”, is merely exchanging the money it has just spent for another form of money (bonds) that pays interest.

    And the reason the government does this is to remove excess reserves from the banking system so that the central bank can maintain control of the overnight cash rate.

    In other words it has nothing to do with funding government spending.

    As Ross said above it would be helpful if more people made the effort to understand this stuff. It would pull the rug from under this benighted government, and not just the rug but the joists, bearers and floorboards as well.

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