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How to pay for a war

The Treasurer said if Mr Shorten was “honest” about his promise of bi-partisan support for Australia’s mission in Iraq, he would pass budget measures currently stalled in Parliament. Is he suggesting that sick people, pensioners, students and the unemployed should fund the war?

I have a suggestion.

When Joe Hockey produced his first fiscal statement in December last year, the deficit over the forward estimates had grown from $54.6 billion in August’s PEFO to $123 billion.

Part of this was due to Joe spending an extra $11 billion in his first 100 days as Treasurer, the most significant payment being the unasked for $8.8 billion gift to the RBA.

But the greatest increases to the deficit (and future debt) came from just changing forecasts. Hockey told us that Labor’s predicitions were unrealistically optimistic, despite the independent PEFO coming up with the same figures.

In almost every parameter, Hockey lowered PEFO forecasts, often dramatically, for the performance of the Australian economy . He insisted on the worst possible forecasts in order to exaggerate the “mess” he inherited.

Real GDP forecasts from PEFO were 2.5% and 3%, written down in MYEFO to 2.5% and 2.5% for the years 2013-14 and 2014-15.

The quarterly national accounts figures show the trend annual real GDP growth of 3.2% which is right on the 25-year average and significantly higher than predicted in either PEFO or MYEFO.

The IMF expects the Australian economy to grow by 2.8 per cent in 2014 and 2.9 per cent in 2015.

As for nominal GDP, PEFO predicted 3.75% and 4.5% – Hockey’s MYEFO 3.5% and 3.5%.

He decreased nominal GDP forecasts to their lowest level since the global financial crisis. This has a massive impact on revenues, which are very sensitive to changes in nominal GDP growth. This had the effect of reducing projected revenue over the forward estimates to $51 billion less than projected in PEFO.

In fact our annual nominal GDP rose by 4%. This is less than the 25-year average of 6.1% but once again, significantly higher than predicted by Hockey and even higher than PEFO.

Joe’s predictions about construction were even worse.

In MYEFO, housing construction growth was reduced to only 3% rather than 5% as forecast in PEFO.

Private dwelling investment actually increased 3.2% in the June quarter and 9.5% in the past year, the strongest pace of growth recorded in the Housing Industry Association Performance of Construction Index nine-year history.

As these few examples have shown, and as was muttered at the time (or shouted loudly by some of us), Hockey’s predictions were unnecessarily pessimistic in an obvious attempt to artificially create the debt and deficit disaster you have when you aren’t having a debt and deficit disaster.

Change a couple of assumptions and hey presto, we’re rolling in money. Bombs away.

Speaking of which, did you hear that the ADF just threw away $400 million worth of missiles that don’t fit their new planes?

You wanna talk waste, start with a group who plan that badly.

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34 comments

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  1. Kaye Lee

    From August last year….

    The shadow treasurer, Joe Hockey, had said the forecasts and projections in the economic statement were “not credible” and the numbers “not real”.

    The Coalition will ask the Treasury to strip out what it claims are unrealistically optimistic and politically directed assumptions from the budget to reveal a true picture of the government’s bottom line, which it believes will be much bleaker than the official forecasts.

    Abbott said this was because “we want to get the best possible advice”.

    Wanna rethink that Joe?

  2. mars08

    First rule… the rule that should be heeded at all times… DO NOT negotiate with terrorists!!

    Lazy, useless, amoral Shorten didn’t even try to adhere to that rule. Once he announced the ALP bi-partisan support for this latest mystery tour, Abbott had him by the balls. Unless Shorten agrees to the Coalition demands (no matter how foolish or illogical) he will be tagged as forcing Australia to fight with one had tied behind it’s back. Once again Labor will be accused of not having Australia’s “national interest” as the prime priority.

    Labor is beyond pathetic!

  3. John Fraser

    <

    @Kaye Lee

    Is there a Link to the ADF $400 million "mistake" ?

  4. Kaye Lee

    John, I heard it on 2UE radio this morning. They had missiles that fit F111s which have been decommissioned apparently but they don’t fit whatever we fly now. I will look for a link.

  5. John Fraser

    <

    @Kaye Lee

    Yes, they were for the F-111 and most likely under Terms with the U.S. they were not able to sell them.

    The U.S. imposes this condition on most of the weapons, planes etc they sell to other countries.

    A bit of forward thinking on behalf of the RAAF could have seen them used for training purposes before the F-111s were decommissioned.

    In other words ….. wasted.

  6. marwill10

    The Treasurer said if Mr Shorten was “honest” about his promise of bi-partisan support for Australia’s mission in Iraq, he would pass budget measures currently stalled in Parliament. It is easy to see where this is going. The Labor Party will be accused of increasing the budget debt caused by this immoral war by not passing the budget. Couldn’t they see this coming? Bloody Bill Shorten should resign sooner rather than later. He doesn’t have what it takes to be a leader.

  7. Kaye Lee

    Kaye Makovec,

    I can only conclude that they think we are dumb as posts. Their manipulation of figures giving a misleading picture is most definitely on purpose. Playing with the numbers to fit the ‘under promise over deliver’ mantra without having to actually do anything.

    Take these words for example…

    “Treasurer Joe Hockey has labelled tax cheats “thieves” and vowed to give the Tax Office whatever laws it needs, despite the government having slashed millions from the agency’s budget and resisting a suite of Labor reforms.

    The opposition has slammed the government’s comments as rhetoric in the face of massive budget cuts to the Tax Office and the government’s failure to introduce a package of Labor reforms.

    “The Treasurer has backed down on $1.1 billion of Labor measures tackling multinational profit shifting,” shadow assistant treasurer Andrew Leigh said.

    “At the same time he’s slashed $189 million from the Tax Office’s staff budget, sending 3000 skilled tax officers out the door.”

    “So, in fact, Joe Hockey is giving the Tax Office neither the laws it needs to tackle tax avoidance, nor the resources to enforce existing ones.”

    http://www.smh.com.au/business/joe-hockey-says-tax-cheats-are-thieves-20141009-113heo.html

    The tax department was REALLY annoyed when they were instructed not to appeal the decision in favour of giving Rupert $882 million for having good accountants.

    Lending money to yourself (with a different hat on) is a great way to “legally” pay no tax.

  8. mark delmege

    We’ve been involved in wars in and around Iraq since the 1980’s Iran/Iraq war – wars that have killed maybe 10 million people and cost us as a nation maybe more than 10 billion dollars. We have only added horror to the horrific. Yet both Labor and Liberal fight on. And we vote for them.
    Smart aren’t we?

  9. mark delmege

    But don’t tell the stupid and the lying over at the ABC – you know the likes of Emma and Fran …

  10. Jane Salmon

    Ordinance gets old … yet $400m is rather a lot in these “cutting” times. Hate to think about the environmental footprint of such activity. The abuse of facts, the lack of corporate contribution to tax and the impact of austerity on a functioning economy are critical when analysing Hockey’s impacts. The ABS cuts and reduced precision also matters when tracking unemployment and other indices of economic health.

    Great piece. Many thanks.

  11. Wayne Turner

    I say we should just send the whole Lying Liberal party pollies & ME TOO Labor to this war.If they want this fight so much,step forward LYING LIBS & ME TOO Labor…

  12. Wayne Turner

    Sadly Bill Shorten couldn’t see this coming because he’s a GUTLESS MORONIC BORE.Labor knows how to pick the leader and follow them 🙁 IGNORE THE MAJORITY OF “GRASS ROOT” MEMBERS & instead pick a no substance,no personality,no passion,NO GUTS (Except on screwing over the Labor party to become it’s so called leader),MORONIC BORE,who is TOO RIGHT WING,and no idea.Instead of a more progressive person like Albo.

  13. Wayne Turner

    Also to mars08 on Bill Shorten – Sadly spot on.

    Shacking up with Abbott on ANYTHING is a joke,with the way Abbott treated Labor when he was opposition leader and all of Abbott’s continued LIES.

    Shorten is both GUTLESS & STUPID.

  14. Terry2

    Mr Hockey, if we can’t afford to get involved in this adventure in Iraq then just say so, tell Tony and our allies,bring home our hardware and our troops and let’s hear no more of it, but just stop playing politics.

  15. kerrilmail

    Given Hockeys fiscal stupidity as demonstrated in your article Kaye Lee, we had better hope his budget doesn’t get passed. If Hockeynomics on prediction alone is this bad imagine how much worse it will be in practice???

  16. my say

    do we or dont we have a budget emergency,
    on one hand you have the government cutting money to patients with cancer
    and on the other you have ABBOTT giving TEN MILLION DOLLARS to south sydney football club,just to buy votes ,where is the fairness in that

  17. stephentardrew

    God two more years of this crap. One sits in trepidation at how much more damage these fools can do.
    Their seems to be no limit too their illogicality and rabid conservative primitivism.
    They have no coherent policy framework other than to screw as many of us as possible while padding the lives of their corporate sponsors.
    A simple strategy for simple people and a gullible public.
    This time in our history will go dawn as one of the most divisive and irrational.
    The lords of the manor will be reviled by the new order of rationality, logic and coherent planning for the good of all Australians.
    One can only live in hope.
    Thank heavens for the voice of reason of those who and write and blog on this site.
    There are clear foundations for a rational challenge that seems to escape the eye of Labor.
    The fact that they cannot clearly articulate some form of oppositions is farcical.
    Minimum profile while our fellow citizens suffer is a cowards and cynics game.
    Only those with the courage to stand for demonstrable truth will bring about change. All else a wishy washy compromise.
    Thank heavens people on this site tend to facts and truth rather than political expediency.

  18. stephentardrew

    A few facts from the Capitalist Horses mouth.

    Banned TED Talk: Nick Hanauer “Rich people don’t create jobs”

    I used to admire TED until the refused to post this talk on their web site after complaints form financial backers. Expedient avoidance of facts by the oligarchs. The power of these folks is just frightening.

    I have seen a documentary by Nick Hanauer who is friends with Richard Reich. He is a very wealthy and successful businessman with an exceptional social conscience.

  19. stephentardrew

    Another Nick Hanauer:

    Good to hear it from a one per-center.

  20. Kaye Lee

    my say,

    how very interesting. That funding was promised by the previous government then cut by Hockey in MYEFO. Apparently, since Souths made the Grand Final it was good publicity to give it back.

    From December…..

    “SOUTH Sydney’s dream to relocate to new high performance centre in Maroubra has been shattered after the Federal Government withdrew support for a $16 million package that was promised to fund the project.

    In awful Christmas news for the Rabbitohs, Treasurer Joe Hockey this week announced the money would be no longer forthcoming to pay for a state-of-the-art complex containing a gymnasium, pool, high altitude chamber, theatrette and indoors sports arena.

    Souths officials were further infuriated to learn that a $10 million funding promise for Brookvale Oval – located in the heart of Prime Minister Tony Abbott’s Warringah electorate – has been retained.

    Under the heading, ‘Heffron Park upgrade – contribution reversal’, it reads: “The Government will achieve savings of $16.0 million over two years by not proceeding with funding for the Heffron Park upgrade – contribution measure announced in the Pre-election Economic and Fiscal Outlook 2013.

    “The savings from this measure will be redirected by the Government to repair the Budget and fund policy priorities.”

    http://www.ozpolitic.com/forum/YaBB.pl?num=1387479181/all

    Come grand final time….

    http://www.smh.com.au/federal-politics/political-news/tony-abbott-anthony-albanese-hand-south-sydney-a-prenrl-grand-final-gift-10-million-20141002-10pgol.html

    These bastards have turned me into a very cynical person.

  21. Kaye Lee

    And you know why I hate MSM journalists,

    In the above story, James Massola says “Prime Minister Tony Abbott and Labor MP Anthony Albanese have put politics aside to hand $10 million to the South Sydney Rabbitohs before Sunday’s NRL grand final.

    Mr Abbott, a Manly fan, said the Commonwealth’s donation would “consolidate the operation of a number of community initiatives by Souths Cares and expand their community-based initiatives to support health, education and indigenous employment programs”.

    “This is an important community project that will provide positive social and economic benefits to the region,” Mr Abbott said.

    But did he mention that Hockey had cut $16 million in funding for this exact project in MYEFO? NOOOOOOO. Abbott turns up at Grand Final time for the photo op with the big cheque which was actually smaller than the amount Hockey had cut. And this idiot journalist says they are putting politics aside??????

    The whole damn thing is The Photo Games.

  22. PopsieJ

    400 million in missiles, wasted !
    How about Abrams tanks 700 million, now presumably chook pens !
    and in the future the useless F35 !

  23. PopsieJ

    And of course the present war foray into Iraq, a war we don’t know how long it will last, or how much it will cost or how we will pay for it against an enemy supported by unknown sponsors, in a country where we have no connections.
    Watch mission creep into Syria which will piss off the Russians, again.
    Watching this government is like watching kids play with razor blades !

  24. mars08

    “This is an important community project that will provide positive social and economic benefits to the region,” Mr Abbott said.

    But did he mention that Hockey had cut $16 million in funding for this exact project in MYEFO? NOOOOOOO. Abbott turns up at Grand Final time for the photo op with the big cheque which was actually smaller than the amount Hockey had cut.

    A fine display for Abbott’s greatest political strength… he is UTTERLY SHAMELESS!!

  25. Kaye Lee

    I also blame Albo for not seizing the opportunity. He had the chance to say to the whole country “This is a good start Tony towards restoring the funding Joe Hockey cut but to the Rabbitohs fans, rest assured I will be talking to Mr Abbott about reinstating the other $6 million, you deserve it – Go the Rabbitohs”….cheers

  26. Rob031

    Great photo of Hockey. Says a lot.

  27. John Kelly

    I still can’t work out why the RBA would need $8 billion from us when they could simply print it themselves.

  28. John Kelly

    The imposition of paying for the war effort through pensioners, students and the sick is entirely consistent with Liberal ideology. Like sending soldiers off to fight knowing that those sending them, I. E. politicians, will be safe from harm.

  29. Audioio

    “A bit of forward thinking on behalf of the RAAF could have seen them used for training purposes before the F-111s were decommissioned.”

    John Fraser, it’s funny you should say “on behalf of”. At first I assumed you were making a common grammatical error (instead of saying “on the part of”). But now I realise you’re right. Someone should be making these decisions for them. They obviously can’t.

  30. Kaye Lee

    Or not buy the stupid things in the first place. They never shot one of them…ever.

  31. Kaye Lee

    The RBA needed $8.8 billion because that made the deficit bigger and the interest bill bigger. Then when you get dividends from them in the future (hopefully) they can reduce the inflated deficit you caused but attributed to Labor. (And I know you know all that better than me John 🙂 )

    Tony said the other day that he had saved every one of us from $25000 debt. There are 4 people living in my house….I just checked my debt…no $100K bonus there. I want to know how my life will change if the bottom line on the budget is black instead of red.

  32. mark delmege

    Pretty much everything the MSM journos and politicians say about this war is a lie.

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