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MYEFO will be interesting

The latest Monthly Financial Statement from the government raises some questions regarding their claim/aim to be in surplus and their assertion that they are “paying down Labor’s debt.”

The underlying cash balance for the financial year to 30 September 2019 was a deficit of $13,853 million ie in the first quarter of this financial year, we have spent almost $14 billion more than we have received.

And there are implications for the upcoming MYEFO as budget predictions are falling short.

The net operating balance for the year to 30 September 2019 was a deficit of $15,209 million, which is $2,681 million higher than the 2019-20 Budget profile deficit of $12,528 million. The difference results from lower than expected revenue and higher expenses.

The fiscal balance for the year to 30 September 2019 was a deficit of $14,650 million, which is $928 million higher than the 2019-20 Budget profile deficit of $13,721 million. The difference results from lower than expected revenue, higher expenses and lower net capital investment.

There have also been downgrades for expected wages and GDP growth.

When it comes to debt, as at 30 September 2019, net debt was $401,749 million.

I tried to access historical monthly debt figures to check what the net debt was when the Coalition won office in September 2013, only to find the site has recently been changed and, for some unknown reason, the entire 2013-14 financial year no longer appears.

From memory, net debt was about $161 billion at the end of August 2013, so any suggestion that the Coalition have paid down debt is absolute rubbish.  They have increased it by about 250% during a time of global economic recovery.

Whilst the government doggedly stick to their determination to produce a surplus this year, calls for them to increase spending are becoming louder.

We need our own firefighting aircraft.  We need to bring forward infrastructure spending.  We need to increase Newstart.  We need to build affordable public housing, reduce hospital waiting times, and properly resource our public schools.  We need to fix the mess the Nationals have made of water management.  We need to decarbonise our economy.  We need rehab centres and emergency accommodation, particularly in regional areas.

What we don’t need is to waste hundreds of billions on obsolete weapons of mass destruction, billions on consultants and government advertising, and politicians who think attending sporting matches is more important than their day job.

We don’t need a surplus.  We need someone who has a clue about how to invest in this country rather than their own political future.

 

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27 comments

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  1. Terence Mills

    What, No Cigars !

  2. Andrew Smith

    Surpluses are marketed to the electorate as good housekeeping, balancing the books etc. but mere linguistics or rhetorical games; governments are neither households nor as constrained.

    Demand for surpluses, aka libertarian and/corporatist ideology, will allow at some point in future further, probably corporate, tax cuts, then more cuts in govt. services to achieve ongoing surpluses and strangle governments (aka Frank’s ‘The Wrecking Crew’).

    Classical (economic ideology) wedge presented as good for the nation and/or voters when in fact it’s about catering to global and local corporates, overseen and enabled by the IPA, while the electorate become boiling frogs as benefits and services decline.

  3. Baby Jewels

    “I tried to access historical monthly debt figures to check what the net debt was when the Coalition won office in September 2013, only to find the site has recently been changed and, for some unknown reason, the entire 2013-14 financial year no longer appears.” I bet I know why.

  4. New England Cocky

    Uhm ….. would somebody be so kind as to advise this thread why a failed professional tennis player might know anything about economics or financial management at either a family business or national level? To a political skeptic, Treasurer Josh Friedeggburger appears about as successful in politics as he was in tennis; that is an inadequate performer.

  5. Matters Not

    Yes we may have lots and lots of needs but there is only one political imperative (and there’s no need to speak its name because if you don’t know it, you have been paying attention). Without realising that outcome, the misery of the widows and orphans will be so intolerable, so visible, that the citizens will rise in revolt.

    Seriously, there’s much credibility riding on it. So perhaps a new accounting system might be necessary. Try deferred payments as an opener and then perhaps adding anticipated profits, plus foreseen fines and penalities, minus payments not made to States with deviant policies.

    The possibilities are almost endless because come heaven or high water – there will be a surplus. ‘Tis the Prosperity Gospel of good (divine) economic management.

  6. Matters Not

    Kathryn, there’s the concept of debt and then there’s a related but separate concept of deficit. Probably worth checking out the difference. (And there’s no need to SHOUT.)

  7. Kaye Lee

    MN,

    This was the commentary after the 2018 budget.

    The federal budget is now due to return to the black a year earlier than expected, in 2019-20, but that wafer thin surplus wouldn’t exist if it wasn’t for $84 billion in “off-budget” investments made by the Turnbull and Abbott governments.

    The reason this spending, which was $27.5 billion last financial year but is expected to fall to $20.7 billion next year, isn’t counted in the underlying budget balance is that it is “financial asset investment”.

    As the name implies, the Government sees this funding as an investment that will generate a return — not spending going out the door never to come back.

    But Mr Eslake said, like any investments, they carry risks if future returns don’t live up to expectations.

    “Well it could be that the investments which the Government is making in these corporations at some point in the future have to be written off or written down,” he warned.

    https://www.abc.net.au/news/2018-06-14/budget-contains-hidden-investment-timebomb/9835648

    Think NBN, Snowy-Hydro, inland rail, new coal-fired power stations, HELP debts ……

    I feel a rethink of their decision not to raid the Future Fund coming up.

  8. Matters Not

    Yes KL, from your link:

    due to accounting practices virtually unique to the Australian Government

    Yes there’s plenty of scope to create a new (accounting) reality. Remember when Swan went down that path in anticipation some years ago. Remember also (long, long ago) when the Queensland Government first went to accrual accounting. All sorts of opportunities to compare apples with oranges.

    Politically of course, the trick will be to get in early (set the stage, consume the political oxygen) and shout long and loud – We have achieved a budget surplus for the first time in X Years. All will rejoice. And Labor will be reduced to the lame claim – But their surplus is not as big as ours would’ve been.

    Oh, for a sensible political discourse. (From any – but preferably – from all sides.)

  9. RomeoCharlie29

    Man, “ minus payments not made to states with deviant policies”. ? This worries me a bit. Whose deviant policies and which, are we talking about? The NT government which, according to Kohler last night, is in recession, was subjected to enormous pressure from Canavan and others to approve fracking or potentially lose GST revenue. Is a refusal to frack, for example, a deviant state practice?

  10. RomeoCharlie29

    MN, “ minus payments not made to states with deviant policies”. ? This worries me a bit. Whose deviant policies and which, are we talking about. The NT government which, according to Kohler last night, is in recession, was subjected to enormous pressure from Canavan and others to approve fracking or potentially lose GST revenue. Is a refusal to frack, for instance, a potential deviant state practice?

  11. Matters Not

    RC29 a deviant policy is: any policy that the powers-that-be decide is deviant. Or if you don’t like that ‘deviant’ word let’s use aberrant or maybe atypical. Or perhaps, there’s no need to use any label at all in this hypothetical illustration.

    A surplus by any name or definition will be achieved. Just read the head-line and the first few paras for confirmation at the appropriate time. Just a prediction of how reality will be constructed in the future.

  12. Terence Mills

    Baby Jewels

    The data is still there : https://www.finance.gov.au/publications/commonwealth-monthly-financial-statements

    Net Debt as at July 2013 when Labor left office was an unsustainable $155 billion and you may recall that Barnaby Joyce scared the pants off the electorate in saying that there was every possibility that we would default on this massive Labor debt.

    Thanks to good economic management by the Coalition ‘Labor’s Debt’ as at 30 September 2019 stands at $401 billion against a budget estimate of $360 billion.

    Pheww ! we jumped the shark there – drunken sailors everywhere you look – had it not been for the coalition government we could be in real trouble : if only the Labor party would curb their out of control borrowing (from opposition too) !

    As Kaye says. MYEFO will be interesting.

    Can you create a surplus by borrowing ?

  13. totaram

    Terence: “..Barnaby Joyce scared the pants off the electorate in saying that there was every possibility that we would default on this massive Labor debt.”

    Time for everyone to understand that this is NOT possible unless the government voluntarily decides to default. It is the sovereign issuer of its own free-floating fiat currency, and all its debt is nominated in that currency.

    Too hard for most people to grasp that the gold backing of the currency ended three decades ago. Reap what you sow.

  14. Kaye Lee

    Terence,

    The data is still there for every year EXCEPT for 2013-14. I am assuming it is a mistake as they only changed the website a few weeks ago. It was Sept 7 when Abbott won. (It’s seared in my memory as one of the most disappointing days ever, along with the day Labor threw Julia Gillard under a bus) I was looking for August/September 2013. It has disappeared.

  15. Kaye Lee

    AGS on issue (gross debt) as at Nov 15: $557.3b

    Remember when the Coalition screamed blue murder when Labor raised the debt ceiling to $300 billion?

    Over the next few days….

    MON 18 NOV Treasury Bond Tender $500m May 2028s
    WED 20 NOV Treasury Bond Tender $800m May 2030s
    THU 21 NOV Treasury Note Tender $500m 21 Feb and $500m 22 May

    ie, in the next few days we will borrow another $2.3 billion

    https://www.aofm.gov.au/

  16. Matters Not

    Re:

    borrow another $2.3 billion

    Often wonder if borrow is the best way of expressing it? Images of Cap in hand and all that. Better to be a seller or a borrower ? One a positive and the other a negative? Or is the emotion evoked (if any) just unimportant?

  17. Kaye Lee

    I understand what you are saying MN but a seller doesn’t have to give the purchase price back (plus interest)

    I do not think debt is a bad thing. Even if you look at the false analogy with a business, when interest rates are this low, there are many things the government could invest in that would bring a greater than even return. I am just over the bs rhetoric from the Coalition. They have NO idea about what constitutes a good investment in our society.

  18. Matters Not

    Suppose it depends on what meaning one gives to seller and issuer or related terms.

    As for:

    constitutes a good investment in our society.

    For most who subscribe to the LNP world view, the concept of society is not as important or (even) useful as the concept of the individual. The society concept involves the ‘other’ while the individual concept does away with that baggage. One limits while the other sets you free. So they say.

  19. Kaye Lee

    It seems to me that personal wealth can come with horrendous baggage while helping others can ‘set you free’.

    I look at James Packer and Gina Rinehart and I feel sorry for them. They will never know the contentment I know. I look at the Murdochs and I feel the same….all the plotting and scheming and jockeying for favour. Rupert marrying Jerry Hall is just downright humiliating – perhaps they love each other, but it is hard to take it seriously.

    And then I look at the people who have truly made a difference…some famous, most not….and I see people who, through making others happy, have found happiness/fulfillment themselves.

  20. Aortic

    And these grinning buffoons wouldn’t know an economy if it jumped up and exploded in their face. I usually watch Question Time in the House for my sins, but suffered a few days of the Senate hearings during the week.Mon Dieu, I really think the House is an utter waste of time but the SenAte fiasco was something else again. Obfuscation and prevarication from Cormann to rational questions from the Opposition brought me to screaming point. What an expensive and totally unnecessary farce. The blatherings of the LNP were only matched by the idiots behind them peering into phones and computers utterly unaware of what was going on. Mind you in hindsight they were the lucky ones. We must either be the luckiest country on the world or the most deluded or the most disconnected to put up with this utter rubbish.

  21. Kaye Lee

    Matthias Cormann reminds me of those dolls with a string in their back who, no matter what you said to them, would respond with the next phrase on the loop.

    Never trust a person whose eyebrows never move!

  22. Aortic

    You’re right Kaye, I would rather his eyebrows moved that his lips. At least we could interpret the nuances to our understanding because I am buggered if I can understand anything that comes out of his mouth, apart from the shortcomings of the Lieber Party. We are over governed by an overpaid and overrated bloated bunch of political opportunists whose complete disconnection from the wishes of your average punter grows increasingly wider every day. Gawd where are the Whitlams and Keatings, who were not perfect by any means but at least they had some VISION!

  23. Matters Not

    Politicians are relatively few in number and therefore any increase will have only a limited impact on the budget bottom line. On the other hand, the numbers on Newstart are large (and growing) and therefore any increase is noticeable – particularly if it moves the decimal point.

    Further, it’s unthinkable that Ministers are paid significantly less than the departmental CEO (under their nominal ministerial control). So when Ministers want a remuneration increase, the simplest path is to advocate for a CEO increase. Then let common sense work its magic.

    Lots of ways to skin the cat while staying out of the limelight. Then there’s the non-taxable allowances.

  24. wam

    The rabbott in ignorance lied by the truth so sincerely about debt that the electorate believed him in 2013. They believed him in 2016 and still believe the debt is labor. Gillard and swan never attacked the liar . Shorten never attacked the trinity of liars the rabbott, trumball nor scummo.
    The debt is labor the AAA is fryden and will remain so unless acted on by a force.
    You have provided the mass, kaye, and all albo has to do is make the noise to start the avalanche. Do a boobby and get the timing right, albo, we ^@^^@^ need action

  25. elmicko

    It seems to me that personal wealth can come with horrendous baggage while helping others can ‘set you free’.

    Can’t agree more Kaye.

    Some people are so rich, all they have is money,

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