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Tag Archives: PEFO

Message of the day

As Lenore Taylor reported on Friday, every morning the major parties send out the “messages” of the day. These aren’t really super-secret documents since ministers and MPs dutifully recite them into any available open microphone.

At the media briefing after the Coalition’s party meeting the assembled journalists were told, “The prime minister said 2014 had been a very good year for the government and he’s confident next year would be at least as good if not better.”

And last night on Lateline we saw Steve Ciobo dutifully relaying the “message”.

The Abbott government’s plan is THE ONLY PLAN to improve economic growth and repair the budget – regardless of what question is asked, this is to be the reply.  They are to repeat over and over again, what a good year it has been.

Look how Scott has stopped the boats.  (But don’t look at the offshore gulags where children are locked up in appalling conditions.)

Look at how many Free Trade Agreements Andrew has signed.  (But don’t ask for the detail about what we sacrificed for those signatures.)

Look at Julie – isn’t she pretty? (But don’t ask us for foreign aid or any contribution to global action on anything that doesn’t involve bombing people.)

Look at Matthias – there’s a man who knows how to repeat the lines (But any deficit blowout is most definitely not his fault – it’s Layboor’s debt and deficit disaster and when you get sick of that it’s Joe’s fault for not selling the message).

Ciobo slipped right into the script we knew was coming.  He said that the Coalition has already cut Labor’s debt by over $300 billion.

That would be a spectacular feat if true since gross debt when they left office was about $280 billion.

PEFO showed that gross debt was expected to climb to $370bn by the end of 2016/17.  In Hockey’s MYEFO that figure had grown to $430 billion and then to $450 billion in the budget, and by all accounts it is still growing as we shall see in Hockey’s next MYEFO in a couple of weeks.

So where is Ciobo getting his figures from?  This little piece of number gymnastics from Hockey’s budget.

“The published 2013‑14 MYEFO face value of CGS on issue figure of $667 billion in 2023‑24 did not include a cap on tax receipts. The projection for MYEFO in Chart 1 includes a 23.9 per cent of GDP cap on tax receipts, increasing the face value of CGS on issue projected to $748 billion in 2023‑24.

In comparison, at 2014‑15 Budget CGS on issue is projected to be $389 billion in 2023‑24, an improvement of $359 billion. By 2024‑25, the projected end‑of‑year face value of CGS on issue is expected to reach $362 billion.”

When Emma Alberice pointed out that using MYEFO as a basis of comparison was ignoring the Charter of Budget Honesty, and that it contained Hockey’s spending and revenue cutting measures like gifting the RBA almost $9 billion and foregoing the revenue from the carbon and mining taxes and wasting billions on Direct Action, Ciobo just spoke over the top of her saying Labor had left the RBA in a vulnerable position.  Tony Burke then tried to point out that the Coalition had taken $1.24 billion in dividends from the RBA this year, something they roundly criticised Wayne Swan for doing, he also was interrupted and spoken over.

The first instalment, over $600 million, has already been paid back to the government in August.

As reported in Crikey:

“When Wayne Swan took a dividend of just $500 million from the RBA in 2012-13, he was accused of “raiding” the bank, by Hockey among others. It was subsequently revealed that Treasury, after consultations with the RBA, didn’t believe there was any imperative to increase the Reserve Bank’s capital buffers. But if $500 million is a raid, over $1.2 billion looks more like open plunder. How dearly Swan would have liked being able to get another $700 million that year. So as some of us predicted back in 2013 Hockey, having blown out the 2013-14 deficit with his $9 billion gift to the RBA and blamed it on Labor, has got his first repayment to bolster the 2014-15 budget bottom line.

Curiously there is no mention of the dividend in RBA governor Glenn Stevens’ foreword to the report, despite discussing how the $8.8 billion had replenished the bank’s capital reserves; you have to go down to page 77 to get an explanation of the dividend. It’s particularly curious given that the dividend — whether one is to be paid or not, and how large it will be — is regularly mentioned in the forewords of previous annual reports. The omission doesn’t help the impression that the whole business of the $8.8 billion has undermined the perception of RBA independence.”

This politicising of independent bodies like the RBA, Infrastructure Australia, NBNco, the CSIRO, the AFP and the ABC, is a very worrying trend designed to keep even more information from the public.

So my “message for the day” is stop the crap Joe and co.  If MSM journalists are incapable of exposing the bullshit then step aside – you have made yourselves redundant.

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.

Chris Bowen misses an opportunity.

Yesterday Chris Bowen addressed the National Press Club to announce a Labor initiative to have the independent Parliamentary Budget Office prepare the forecasts to be used in government budget and fiscal statements to allow for greater transparency, accountability and rigour.

He started well by talking about the Charter of Budget Honesty and how Joe Hockey has manipulated the figures to inflate the debt and deficit. He mentioned Hockey’s decision to give $8.8 billion to the RBA which was designed to maximise the deficit, attribute it to Labor, whilst hoping for increased dividends in the future.  He also mentioned the effect of Hockey’s manipulation of assumptions about key projections like unemployment, inflation, terms of trade, and GDP growth.

Bowen briefly ran over the comparison of PEFO projections with MYEFO – the former being prepared independently by the secretaries of Treasury and Finance, the latter being a propaganda sheet prepared by Hockey and Corman.

I was optimistic for once. This is exactly what needs to be highlighted in the media because it is what this government is basing all its rhetoric on.  The attack on the ‘leaners’ is necessary to avoid saddling our children with an unpayable debt.  Apparently we don’t mind burdening them with an unpayable personal debt to pay for their tertiary education but we can’t have public debt because…ummm…we are the knights of No and we want a surplus.

But it went downhill from there.

Instead of continuing in this vein, Chris Bowen then went to great lengths to explain that this was not a criticism of Treasury for whom he has the highest regard. He backed away from direct criticism of Hockey’s lies, concentrating on what the PBO would do and who they would collaborate with.  This was what stuck in people’s minds.  The introductory part of the speech, by far the most important aspect, was forgotten and not one question by the ‘journalists’ afterwards related to Hockey’s deceit.

Straight afterwards on ABC24, Lyndall Curtis interviewed Matthias Corman who had already been out that morning pre-empting Bowen’s speech. In his usual fashion, regardless of what he was asked, Corman repeated his preprepared lines like a doll having the string in its back pulled.  “Layboor’s debt and deficit disaster leaving us with $123 billion in deficits, debt spiralling to $667 billion, and no credible path back to surplus.”  Despite Chris Bowen’s introduction, Curtis, like all other journalists, allowed this to pass without question.

So there we were, back where we started with Corman’s mantra ringing in our ears.

Bowen’s answers to the questions that were asked was entirely inadequate.  Having admitted there was a budget problem, Bowen was asked how Labor intended to address it.  His response – “I’m not going to reveal our policies today.  We are in the process of carefully developing them and rest assured you will all know them well before the next election and they will be fully costed.”  What a fizzer.  Where was the vision for the future?  Where was the promise of a better way?  Where were the ideas even if the detail was still to be determined?

When asked about negative gearing, Chris nearly got a hernia twisting away from the question and talking instead about housing affordability whilst making it clear that he was not suggesting specific changes to taxation. When pressed further about the very low numbers of first home buyers, he waffled on unconvincingly about stamp duty and construction.

The speech was the wrong way around. He should have started with the changes he wanted to make with the PBO and then outlined why he wanted those changes by listing the duplicity engaged in in the preparation of MYEFO.

Just for the record:

PEFO gives independent predictions using Labor policies. MYEFO gives Hockey’s assessment using Coalition policies.

PEFO shows a cumulative deficit of $54.6 billion over the forward estimates with a predicted surplus of $4.2 billion in 2016-17.

MYEFO shows a cumulative deficit of $122.7 billion with no surplus predicted over the forward estimates.

PEFO states, in 2013-14, net debt for the Australian Government general government sector is estimated to be $184.0 billion (11.7 per cent of GDP) and is projected to return to zero in 2023-24.

Hockey’s MYEFO predicts, nay BLARES, a debt of $667 billion. This figure is quoted ad nauseum every time you press the button on Matthias Corman’s belly.  This is a projection of the GROSS debt in a DECADE under COALITION policies.

Let me make that absolutely crystal clear…this is a projection of the future with the Coalition’s decisions to axe the carbon tax which, according to MYEFO, “will reduce receipts by $6.3 billion over the forward estimates period” and the repeal of the minerals resource rent tax which “reduces receipts by $3.4 billion over the forward estimates period”. Add in the decisions to repeal the changes to the FBT and superannuation taxation and to gift $8.8 billion to the RBA, and also the payment to Rupert Murdoch of $882 million from the tax department, as well as the PPL that won’t go away and billions for Direct Inaction, and I would contend that Hockey and Corman OWN that projected debt.  Increased spending on defence, searching for missing planes, attending memorial services whenever and wherever you can…these are all discretionary decisions made by this government.

Gross debt was approx. $280 billion when the Coalition took over. It is now $337.686 billion.  Since September 30 2013, they have been borrowing over $157 million extra a day.

This article quotes the numbers presented in recent fiscal documents. I wish Chris Bowen had rammed it home a bit harder because Joe is setting us up to say “look how much I have saved” when the numbers tell a different story.

To my local member

Karen McNamara and Lucy Wicks (Image from dailytelegraph.com.au)

Karen McNamara and Lucy Wicks (Image from dailytelegraph.com.au)

Dear Ms Lucy Wicks,

Thank you for your recent unsolicited advertising pamphlet.  Unfortunately it contains a great many errors which I am sure you would prefer to know about rather than spreading incorrect information to your constituents, particularly since we are paying for your advertising.

You state that “Labor’s last Budget” projected a deficit of $50 billion in the 2013-14 financial year with no surplus over the forward estimates.  This is entirely untrue unless Mr Hockey is a member of the Labor Party.

The last budget delivered by Labor in May 2013 projected a deficit of $18.0 billion.

In August Penny Wong and Chris Bowen released an updated Economic Outlook with a projected deficit of $30.1 billion moving to a surplus of $4 billion in 2016-17.

PEFO produced by Treasury and Finance in August agreed with the figures in the Economic Statement with a slightly larger projected surplus.

Three months into your term, Joe Hockey produced the MYEFO which estimated a deficit of $47 billion.  To quote:

“The deterioration in the underlying cash balance since the 2013 PEFO is $16.8 billion in the 2013‑14 financial year and $68.1 billion over the forward estimates.

The deterioration in the budget position since the 2013 PEFO reflects two key factors:

– the softer economic outlook; and

– essential steps to address unresolved issues inherited from the former government.”

Your projections about a “softer economic outlook” have proven unfounded, as many thought they would, with growth continuing at a better than expected rate.

The “essential steps” you talk about were spending decisions made by the Coalition:

  • an unsolicited $8.8 billion gift to the RBA (with the $300 million a year in interest that loan will cost)

  • another $1.2 billion for offshore processing to go into the hands of security firms that maim and kill refugees.

  • restoring the $1.2 billion offered by Labor to the States who wouldn’t sign up for Gonski but hung out to sign up with you so they didn’t have to commit to increased State funding or performance evaluation.

  • some money into the Contingency Reserve for future superannuation liability for universities (sitting money in a slush fund for a rainy day while we pay interest on it).

  • giving up $2.9 billion in revenue including $1.8 billion in tax revenue from people who fraudulently claim business usage on their cars and $900 million in taxation from people drawing over $100,000pa from superannuation

We then move on to Mr Hockey’s budget brought down in May where we see that, since coming to office, you have borrowed an extra $50 billion – the gross debt has grown from $270 billion in September to over $319 billion.  Your claim to be “reducing Australia’s debt” is rubbish as are the figures you use.

Now I have no problem with increasing the debt per se.  What I DO have a problem with is you continuing to rail about debt and deficit as you continue to borrow money for the things you choose to spend money on.

And that is by far the greatest problem – not the spending but the priorities.  You are inflicting dreadful harm on the most vulnerable in our society while choosing to spend a great deal of money on things we don’t need like school chaplaincy programs and marriage counselling vouchers and fighter jets and very expensive paid parental leave and Royal Commissions.  These might be desirable in your opinion but they are hardly more important than education and health and welfare and jobs and affordable housing and childcare.  You have cut funding to these most essential services and abolished advisory bodies.

You show your priorities by creating a highly paid job for Tim Wilson to be the Human Rights Commissioner in charge of repealing the racial discrimination laws while sacking the Human Rights Commissioner for the disabled.

You take money away from the Royal Commission into institutional child sex abuse to fund your pink batts political witch hunt.

You cut wage increases for aged care workers to provide bigger subsidies to the providers.

You cut wage increases for child care workers and cut the childcare rebate that parents will receive.

You make changes to the aged pension which, in the future, will increase inequity.

You give drought relief packages to farmers while disbanding water management groups and defunding research into irrigation and delaying the Murray-Darling buyback scheme, with no credible action to address the climate change that will send these very farmers to the wall.  The photos of your party laughing and high fiving at the repeal of carbon pricing are looked on in disgust around the world.

You want to pay employers $10,000 to take on workers who are over 50 while telling our young unemployed that they must find a job or face 6 months a year with no income at all and cutting all the programs designed to help them find a job or suitable course.

You defund research causing many amazing programs with huge potential to be cut and scientists to leave our country.

You conscript a Green Army but then defund Landcare, the perfect people to oversee this group, and choose instead to give “service providers” tens of thousands of dollars per team and a free workforce who has no workplace entitlements.

You have slashed funding to Indigenous programs.

You have slashed foreign aid.

Yet you seem to have unlimited resources when it comes to searching for a lost Malaysian plane or fishing boats carrying a few refugees.  And the defence budget just keeps on growing so fast they don’t know how to spend it all.

You promise me that my electricity bills will go down but I just got a letter saying prices will go up from July 1.

You say you are helping small business by reducing regulations.  Tell that to small businesses involved in the health industry who will now have to administer your co-payment as well as GST.  Will they have to fill in cards for concession customers and children to keep count of how many times they have paid a co-payment?  Will you be developing and  distributing the software to support this?

You claim to be saving $1 billion through cutting red tape for small business…could you tell me what you have done and how you came up with that figure?  You cost us all money with the phasing out of the $6,500 instant asset write-off but I am yet to see anything that will help.  Reducing company tax doesn’t help sole traders.

You say you are helping apprentices by allowing them to go into debt but you took away their tool allowance.

You say a new Commonwealth agency will open in Gosford bringing 600 new jobs to the coast.  For starters, these aren’t “new” jobs as many people from the ATO have been sacked or will be offered relocation.  Secondly, I notice you have steadfastly refused to answer any questions about this including why you are apparently building new premises when there are so many vacant already, and when this is likely to happen.

You will also need to adjust your boast about no successful people smuggling ventures.  For my views on that I will refer you to Father Rod who was none too happy with the email you sent him from Scott Morrison on the eve of World Refugee Day.

“Firstly, I would like to say to Lucy Wicks that passing on this kind of misleading propaganda does your credibility no good.

Secondly, Mr Morrison has asked that I share this email. I do so gladly so that people may see this dishonest propaganda for what it really is. The use of language is interesting. The basis of this falsehood of that our borders are threatened. How can a few thousand weakened, terrified, dehydrated people threaten our borders? These Asylum Seekers are precisely that Asylum Seekers. They are not invading, or sneaking in or coming through the back door. The very nature of their journey means that the wish to declare their presence.

The entire foundation of the government’s policy is based on the lie that our borders are not secure. And this kind of propaganda is needed to sell the deception.

Not in our name Mr Morrison. You do not lie in our name.”

I have seen you asking Dorothy Dixxers in Question Time.  Is that what we elected you to do?  To read out lines you have been fed by others?  You refuse to answer any questions and gag anyone who posts facts on your facebook page.  Is your engagement to be limited to social functions, photo opportunities, and forwarding of party propaganda emails full of lies and distortions?

Your constituents deserve better than unthinking regurgitation.  Our children deserve better from the future than what your party is offering.  Do you feel no shame about leaving your children a society far worse than the one in which you grew up?

And before you start on the “Labor’s debt” line, I suggest someone in your party starts learning about Modern Monetary Theory and listening about the value of Job Guarantees and raising people out of poverty.  Let demand drive supply and provide jobs.  Your theory of trickle down economics is a proven front for those who facilitate corporate greed.

You disappoint me.

Kaye

“The visionary lies to himself, the liar only to others.”

liar_liar_pants_on_fire

The Charter of Budget Honesty was introduced to stop incoming governments from claiming the previous government lied about the true state of the nation’s finances.  The heads of the Treasury and the Finance Department are required to put out their own set of numbers, the Pre-Election Fiscal Outlook (PEFO), during the election campaign. This gives a neutral baseline against which we can assess the new government’s figures. PEFO is the only set of Budget forecasts that truly belong to the bureaucrats – all other documents (like the Budget) are issued by ministers.

The outlook in PEFO was remarkably close to the figures in the Economic Statement issued by Chris Bowen and Penny Wong just before the election was called. The public servants in PEFO projected the Budget balance out for a decade. They found that the Budget was on track, before the election, to return to surplus in 2016-17 and keep improving from there, eventually hitting a surplus of about 1% of GDP by 2023 with net debt approaching zero.

Despite the Charter and the neutral numbers in PEFO, Joe Hockey still played the Budget black hole card. The new government’s mini-Budget (MYEFO) contained dramatically bigger deficits than the bureaucrats’ PEFO projections, with no surpluses in sight.

The line Hockey has been pushing is that not only did Labor hide the level of deficits in the current budget cycle, but that it left a series of hidden spending commitments in the unpublished years beyond forward estimates.

“From 2017-18, payments are projected to increase substantially (a real increase of almost 6 per cent in just one year) because Labor back-ended expenditure in a number of key areas and hid it from the public.”

Strange….this member of the public was able to find all those figures without the aid of any staff.  In fact PEFO specifically says “Specific program estimates are included across the ten years for DisabilityCare Australia, the National Plan for School Improvement, and the Nation Building 2 and Nation Building 3 programs.”

Labor in fact revealed the funding for the National Disability Insurance Scheme in the budget last May, with new spending broken down out to 2019.

“The Australian Government will provide $19.3 billion over seven years from 2012-13 to roll out DisabilityCare Australia across the country. This brings the Australian Government’s total new investment in DisabilityCare Australia to $14.3 billion over the period.

The Australian Government will provide funding of $11.7 billion to DisabilityCare Australia in 2019‑20, the first year after full national rollout. This represents 53 per cent of the $22.2 billion total cost of running DisabilityCare Australia, with the States and Territories providing the remaining funding.”

This was to be funded by the increase to the Medicare levy.

Likewise the spending for the Gonski reforms was spelled out in detail as was its funding.

“The Budget provides an additional $9.8 billion over six years from 2014‑15 for new needs-based school funding arrangements.

To ensure that the National Plan for School Improvement will be fully funded, the Government has needed to make tough decisions — redirecting savings from higher education, self-education tax deductions and business taxation; and better targeting family payments.

In addition, a range of national partnerships for education will be ceased (or not renewed) and funding will be redirected to the National Plan for School Improvement. As well as helping pay for this historic reform, these saving decisions will also will help improve the position of the budget in the next few years.”

Labor copped a lot of flack for its proposed cuts to university funding, which were really a smaller increase rather than an actual cut.  The reason they are opposing these savings now is because they made the cuts to fund education reforms, not to spend on roads.

Hockey also bemoaned supposed hidden funding increases to foreign aid and defence.

“The fact is Labor’s left us with a massive forecast increase in foreign aid, a massive increase in defence – for example in one year, there’s meant to be a real increase in defence spending of 13 per cent, a 66 per cent increase in foreign aid.”

The increase in foreign aid was also in the budget papers — it was actually a reduction on previously proposed spending, with the government’s Millennium Development Goal commitment to lifting foreign aid to 0.5% of gross national income put back another year to 2017. The government spelt out its planned increase in foreign aid up to and including 2017-18.

As Crikey pointed out in April,

“Labor invited the Prime Minister to spell out the government’s MDG policy, which he duly did: aid is to reach 0.5% of GNI when the budget returns to surplus. Which raises the question of why, in Hockey’s Mid-Year Economic and Fiscal Outlook in December, Hockey left Labor’s MDG aid funding increase intact, in defiance of the government’s own policy. The answer, of course, was that it would inflate the budget deficit for 2017 and beyond.”

And on defence, the budget tells us that defence spending for the 2014-15 financial year will rise by $2.3 billion to $29.3 billion, a real increase of 6.1%, with a commitment to building defence spending to two percent of GDP within a decade.  So it seems that wasn’t a nasty surprise either.

Interestingly, the Labor budget also said “Government has chosen not to offset the hit to revenue in the near term, as it would come at significant cost to jobs and growth.”

In a budget press release, Joe Hockey said

“While the former Government left Australians with $123 billion of deficits and no path back to surplus, our budget repair efforts have meant that deficits in our first four years are now projected to be $60 billion, with a surplus of well over one per cent of GDP projected by 2024-25.”

Ummmm, according to Treasury and Finance, Labor policies would have got us to surplus in 2016-17 with a surplus of 1% of GDP by 2023.

Hockey goes on to say

“Gross government debt is now forecast to be $389 billion in 2023-24, compared with the $667 billion left behind by the former Government.  This reduction in projected debt of nearly $300 billion also assumes that we provide future tax relief to address bracket creep.”

I am not sure why he keeps talking about gross debt, I assume because it is a bigger number, but he really should look at the government’s own website which says

“The August 2013 Pre-Election Economic and Fiscal Outlook (PEFO) estimated that net debt would rise to 11.7% of GDP in 2013–14 and peak in 2014–15 at 13.0% of GDP. These levels of net debt are not unprecedented in Australia. Between 1970–71 and 2011–12, net debt level as a percentage of GDP exceeded 10.0% ten times (mainly in the 1990s)..…compared with other advanced economies, Australia’s net debt levels are comparatively low, and have been for some time.

The PEFO projected a return to surplus of 0.1% in 2015–16.

Although Australia’s fiscal balance fell to a low in the context of the GFC, its structural budget balance is reasonable compared to other advanced economies.”

When Hockey says that Labor left us with a debt of $667 billion, he is quoting a figure from his own MYEFO document which included his decisions to cut revenue from the mining tax, the carbon tax, the 15% tax on superannuation income over $100,000 a year, and the Fringe Benefits Tax rort on novated leases.

It also included his inexplicable decision to hand $8.8 billion of borrowed money to the Reserve Bank. The sale of Medibank Private — a $4-5 billion contribution to the budget — will be spent on roads because Abbott wants to be an “infrastructure prime minister”, when it could cut the budget deficit or the debt. That could be $13-14 billion off the deficit and debt right there — or an interest saving of more than half-a-billion dollars a year.  Scrap the company tax decrease, scrap the Paid Parental Leave scheme, close a few corporate tax loopholes and tax concessions for the wealthy and we would be well on the way to addressing the challenges of the future.

So what it boils down to is that Hockey confected a large future debt to justify ripping the heart out of our most vulnerable so he can say he is being “responsible” by getting the young, the sick, the unemployed, the elderly, the disabled, the single parents, and anyone else who doesn’t have a voice, to pay for his claim that he might improve his own fictional bottom line in ten years’ time.

In the mean time we will give up the Gonski reforms, the real NBN, all action on climate change, environmental safeguards, research, renewable energy, hospital funding, universal healthcare, the ABC…all while sending a large percentage of the population into poverty.

The carbon tax doesn’t sound so bad now, does it?

“I’m not upset that you lied to me, I’m upset that from now on I can’t believe you.”

― Friedrich Nietzsche

Let’s get real here

Image source: brw.com.au

Image source: brw.com.au

“TONY Abbott and Joe Hockey are convinced the government will be punished electorally if it does not produce a tough budget, and they believe there is a “public appetite” for decisive action to get the economy back on track.”

Sounds good? Well let’s get real here. Nothing pisses me off more than getting lied to and you, Mr Hockey, are really pissing me off. Listening to you rail at Labor this week, exhorting them to tell the truth as you told lie after lie, nearly made me choke. There is a “public appetite” for the truth so time for a reality check.

Firstly, to label MYEFO as Labor’s last budget fools no-one. It was produced over three months into your term. You were elected because you said you could fix the problems. The blame game is over sunshine, it’s on your shoulders now and you have wasted one sixth of your term in office crying.

The PEFO report is an independent report by the Secretaries to the Treasury and the Department of Finance that provides updated information on the economic and fiscal outlook. These are the same people who advised you for your MYEFO report so to accuse Labor of lying about the figures is rot.

PEFO showed the cumulative projected budget deficit for the years 2013 to 2017 as $38 billion. MYEFO, prepared under your watch, shows a deficit of $106.6 billion. To quote your own document

“The $68.1 billion deterioration in the budget position since the 2013 PEFO reflects two key factors:

  • the softer economic outlook; and
  • essential steps to address unresolved issues inherited from the former government”. (otherwise known as YOUR spending decisions).

You go on to say:

“Firstly, a softening in the economic outlook has resulted in significantly lower nominal GDP, which has largely driven the reduction in tax receipts by more than $37 billion over the forward estimates.”

In the face of falling taxation revenue how does the Coalition react? They forego $2.9 billion revenue in tax and superannuation measures announced by the previous government.

Getting rid of the moves to tighten the requirements around tax benefits associated with salary packaging a car under Fringe Benefits Tax rules cost us $1.8 billion. All that was required was for FBT claims of business use to be legitimate, verified by a log book filled in for 3 months once every five years – hardly an onerous task.

Joe and Tony said it would cost jobs in the car manufacturing industry. Well subsequent actions by the Coalition show that concern to be a sham as they went about dismantling the industry from their first day, so I can only conclude that they support fraudulent claims of vehicle business use as a legitimate form of tax avoidance.

Moves to tax earnings of more than $100,000 on superannuation pensions and annuities at 15 per cent instead of being tax-free have also been repealed. This move cost us $1 billion to allow the 16,000 wealthiest superannuation recipients to pay no tax at all on an annual retirement income of over $100,000. These would include the people that John Howard permitted to put $1 million into superannuation tax free in 2007 as a vote buyer.

The cost of tax concessions for superannuation continues to grow by about $5 billion per year and will soon top $50 billion.

The revised projections for revenue from the mining tax showed it raising $3.3 billion over the forward estimates. You may call that nothing but think what those charities you have cut funding from could have done with that. Perhaps the childcare and aged care workers could have got that pay rise after all. You cannot say, on the one hand, that it raises no revenue and then on the other, say it is a burden on business that is costing jobs and investment. All this at a time when record mining industry profits have outstripped growth in taxes and royalties.

The Coalition have also pledged to reduce company tax by 1.5% which will cost us $5 billion. One reason given for this is to offset Tony’s paid parental leave scheme levy. Tony and Joe assure us that PPL is fully funded by a 1.5% levy on businesses with a turnover of over $5 million – they neglect to mention that the country loses $5 billion which will now be diverted to pay wealthy women to breed. Let’s just imagine that we had someone sensible in charge, scrapped Tony’s PPL scheme, scrapped the reduction of company tax, and kept the 1.5% levy on the top 5000 businesses. We would have an extra $10 billion a year to spend on, oh I don’t know, renewable energy perhaps?

The carbon price raised $6.6 billion in its first year which was passed on to households, trade-exposed industry, and research and development grants. Repealing it could punch a hole as big as $7.6 billion a year in the budget. Compare that to the Coalition’s Direct Action fiasco which will not raise revenue and cost the budget $3.2 billion over the next four years. Instead of collecting about $30 billion and taking action on climate change we will be paying over $3 billion to polluters – makes sense, NOT.

Moving on from the revenue side to spending, MYEFO tells us that the majority of the $17 billion deterioration in this year’s budget is due to Coalition spending decisions.

As soon as Joe Hockey got the keys to the safe he borrowed $8.8 billion and gave it to the Reserve Bank of Australia in what has been described as a gamble on the foreign exchange market. The RBA certainly didn’t ask for Hockey’s $8.8 billion capital injection and didn’t think it was necessary. It wanted to rebuild its capital over several years by retaining its profits and not paying the government dividends. Hockey’s $8.8 billion injection this year means dividends will be paid to the government over the next few years.

So the truth of this exercise is Hockey wanted Labor’s deficit to look bigger and he is happy to blow several hundred million dollars interest a year in an attempt to make his performance as Treasurer look good.

After years of abuse about the cost of Labor’s asylum seeker policy, Hockey added an extra $1.2 billion for offshore processing. Presumably this will be spent on extra guards and orange life rafts and bribes to other countries to see to our problem.

An extra $1 billion was allocated to fund eight infrastructure projects that were to be funded from the former Government’s Regional Infrastructure Fund which was paid for by the mining tax. Instead of the MRRT providing the funds, they will now come direct from the taxpayer as the Roads Prime Minister fulfils his dream. And now we have Matthias Corman telling us that the possible $4 billion raised from the sale of Medibank Private will also be spent on roads. Enough with the roads already – we don’t want to become another Beijing. How about another airport for Sydney or high speed rail or urban public transport?

Hockey goes on to say that “Without any policy changes, the budget is projected to be in deficit in each and every year to 2023‑24.” A little further down the page we read that “The Government is committed to returning the budget to sustainable surpluses that build to at least 1 per cent of GDP by 2023‑24.” Ummmm, what’s the difference? Does that mean that you intend to make no policy changes, or that your policy changes will make no difference?

Much has been made of the promised Commission of Audit. MYEFO stated that:

“The Commission of Audit will be guided in its work by the principles that government should:

  • live within its means;
  • have respect for taxpayers in the care with which it spends every dollar of revenue; and
  • do for people what they cannot do, or cannot do efficiently, for themselves, but no more.”

Considering what you are prepared to spend money on – fleets of joint strike fighters, submarines, unmanned drones and one-use orange life rafts, $10 billion to keep asylum seekers locked up, gold plated paid parental leave, grants to polluters, billions a year on fossil fuel subsidies, endless reviews, audits, white and green papers, and Royal Commissions, bigger new planes so Tony can accommodate the film crews in VIP luxury, a $70,000 pay rise for Campbell Newman, $16 million for Cadbury – I think it is YOU who should be fearful of what the Commission has to say.

Rather than telling all of US to tighten our belts and prepare for big cuts, how about you think about your priorities. You are throwing away money by your tax cuts and your spending priorities are crazy. I will be interested to see if the Commission of Audit agrees with me, or will those bits be excluded from the censored version? It’s amazing how this government, champions of free speech, refuse to release documents and information and when they do, they redact so much it reads like a tv guide.

At the risk of sounding sexist, perhaps having a few more women in Cabinet might help. They are often better at seeing the big picture and making the most of the income you’ve got.

Stop the theatrics Joe. We are on to you. The dispatch box is your stage, but your script of blaming Labor and giving misleading information is becoming very tired. Every time you and Tony spoke this week, in your softening us up for the budget, you said Labor left us with a debt of $667 billion and cried shame shame at the Opposition. Well shame on you for your purposeful distortion. To counteract your manipulation, and to make sure the public understands the truth I will once again quote from your own document.

“Net debt is forecast to be $191.5 billion in 2013-14 and reach $280 billion in 2016-17.”

Let’s get real here!

Worse than disrespect

On the face of it, Joe Hockey’s statement that talking about things like “costings” in this election campaign will bore everyone to death seems like run-of-the-mill disrespect for the electorate. After all, we’re in week two of an official election campaign, and spin and mistruths are par for the course regardless of your poison of choice. (Actually, this is not quite true: I cannot find any examples of egregious mistruth or deliberate spin in any statements by the Australian Greens. This may simply reflect that they have such a low proportion of the media coverage.)

An obvious reason that might explain their reluctance to pony up the details is that they don’t want to spend the next several weeks addressing and rebutting the queries and accusations the media and Labor might bring against them. If they had trust that their numbers were robust and correct, this would be about the only legitimate fear, but it’s a short-sighted one. Large swathes of the electorate are tired of continual negative politics, personal attacks, and three word slogans: not sufficient, but a decent proportion of the all-important swing voters. Defending your own policy position with trustworthy numbers could become a very good thing. Hockey’s statement – “…about costings, rather than about policies…” – seems to indicate that they want to keep the focus on their policies at a very superficial level. Naming a policy and giving a one-line abstract of it may be sufficient to get the immediate sugar hit of a positive attitude, but digging into the details and the numbers risks actually finding out the limitations and caveats behind every policy. I can see why they might want to avoid that, when they’re ahead in the polls.

But I think that the Coalition’s attitude towards revealing their costings to the Australian people (and the media) in advance of the election is about more than avoiding contention. Taken in combination with the coalition’s approach to climate change the NBN the carbon price/tax Labor’s budget everything, there’s a repeated and demonstrable pattern here. The real world doesn’t match up to the Coalition’s worldview; the facts are too inconvenient to be borne. So we don’t trust those facts, and we’ll instead rely on (or make up) our own.

As a scientist, I find this thinking to be actively offensive. As a member of Generation X, I find it to be profoundly arrogant. And as an Australian, I consider it to be morally repugnant.

It’s also astonishing that they’re getting away with it. When you’re driving towards a cliff, redefining your reality to insist that the road to riches continues forever  won’t save you from a crash. When you’re falling off that cliff, a blind insistence that there’s a truck full of mattresses at the bottom isn’t much help either. So by all means argue about the terms of measurement of the height of the cliff. Have your political argy-bargy about the effectiveness of the brakes and when you need to start applying them. But don’t discount the reality just because it’s inconvenient for your agenda.

In May, Joe Hockey said he didn’t believe the government’s figures in the budget: “they don’t tell the truth“, he said.

In July, Joe Hockey said he didn’t believe the government’s figures in the revised economic statement: “I don’t believe these numbers“, he said. The Coalition would not be drawn into revealing its costings. It needed to see the state of the federal budget – in numbers they could trust, and they didn’t trust anything the government had any involvement in.

Fair enough.

Even though Treasury Secretary Martin Parkinson went to some lengths to confirm that the numbers had not been influenced by the government, that the numbers in the Economic Statement (ES) would be the same as in the PEFO, the Coalition reserved their right to doubt the figures. Labor has no input into the PEFO and most analysts feel the revised ES was an attempt to pull the government’s figures into line with the Treasury numbers if had no control over, but the Coalition is within its rights to suspect that governmental interference is at least possible. Still, it’s starting to sound less like a reason and more like an excuse, but OK.

In August, Joe Hockey said he didn’t believe the Treasury’s figures in the PEFO: its policy costings will be based on “a range of other data“, he said.

Now the PEFO is out, and as promised, it’s virtually identical to the ES. And the Coalition has had it for almost two weeks (at the time of writing these words). Mr Hockey, your excuse just ran out of legs.

It’s no longer defensible to claim that the real numbers are not available. So the newest reason given for not providing the numbers is that people are bored hearing about the numbers. (Here’s a little tip, Mr Hockey: the people aren’t bored by the numbers. They’re bored by the continued discussion about the fact that we have no numbers.)

The alternative reason that the Coalition may not wish to reveal their costings is that they don’t believe in their own numbers. That they have no intention of ever putting their election promises into practice. Not trusting the ES and the PEFO is Hockey laying the groundwork, once the Coalition comes into government as they still expect to do, for the time-honoured “The state of the economy is so much more parlous than we had known that we have to go back to the drawing board for our policies”.

All parties in an election will make promises. Most will over-promise and find it difficult to deliver, or will deliver a cheaper/smaller version, or will deliver in tiny chunks that somehow require another term or two to complete. This is par for the course. But if an election is a game of one-upmanship, you need to play by the rules, and the rules include at least pretending to have done the numbers to make your promises affordable. Once you remove the requirement to show that your promises can be funded, you can promise just about anything, and that does not lead to an edifying or fair election.

In an election, the people are entitled to the facts. The parties in contention must be on a level playing field. Once one party starts redefining the facts to fit their own worldview, that playing field is lost. In this case, elections are won and lost on emotion, invective, and the money spent on advertising. This is an assault on democracy, and as democracy is defined as government by the people, you could view it as an assault on the people themselves.

“You are entitled to your opinion. But you are not entitled to your own facts.” — attr. Daniel Patrick Moynihan

First posted 15/8/2013 on the Random Pariah.

Playing Political Football with the Economy

Political football. Getting rid of the ball as soon as possible.

Political football. Getting rid of the ball as soon as possible.

Usually in an election campaign the leader of the party makes individual policy announcements and is supported by the relative minister. In the 2010 campaign Tony Abbott (as if to confirm Costello’s opinion of him as an economics illiterate) shirked the presentation of his party’s economic policy and hand balled it to Joe Hockey. Now Joe wasn’t up to the task making a complete balls-up of presentation so he in turn hand balled to Andrew Robb. He decided to give the assembled press an economics lesson and in doing so confused both himself and the press. Watching it on television was excruciating and that cringe factor came over me. You know the feeling one gets when you watch someone making a fool of themselves without knowing it. Andrew did such an appalling job that he had party advisers giving him wind up signals from the back of the room.

As if to make matters worse they then neatly side stepped treasury and had their policies costed by some fifth tier accountancy firm in WA. It in turn was a balls up of monumental proportions and a black hole of even greater proportions was picked up. They were later fined for their incompetency.

All this brings me to Joe Hockey’s latest announcement that he intends to again side step the Treasury Department because in his words ‘he cannot trust them.’ Instead he says he will use a variety of outside sources (all assuredly sympathetic to his parties world view of economics) to cost his parties policies. This is of course totality unprecedented and raises questions of ‘’what is he trying to hide?’’ And if he cannot trust them now, how would he do so in government.

As we say in Australia. It all sounds a bit sus. I mean it was their own economics champion who founded this “Charter of Budget Honesty” so why won’t he play by the rules?

Is he seriously saying that the Coalition will not recognise the Treasury Finance statement, PEFO?

In other words, he is preparing to reject the statement from the only authorities that have possession of the facts. It is a rejection of the umpire’s call. He seems to be running away from the rules the Coalition instigated itself. That being the disclosure of honest national policy costings and budgeting.

One cannot help but think that this is a deliberate attempt to muddy the policy waters. He is seeking to reject the department’s figures so as to allow him the flexibility to make things up as he goes without scrutiny. In other words he is asking the public to trust the people he anoints to cost his policies and reject the official body that has all the facts at its disposal and is giving the same advice to both parties.

Two months ago, Hockey said: “We have always said that the only numbers we can actually rely on are the numbers released by the secretary of the Department of the Treasury and Finance, 10 days into the election campaign. Because they belong to the public servants rather than these numbers which belong to the government.”

Sorry but Joe is simply not credible. We should be demanding that Mr Abbott deliver his party’s economic policy and that Mr Hockey stand beside him with properly documented and costed policies according to the charter of honesty that his party introduced. And I might add in plenty of time for the electorate to digest it.

There is really no excuse. The Government is expected to release an economic statement late this week and it will be backed up by the PEFO report 10 days into the campaign. Common Joe give us the truth. It does matter.

Otherwise it’s all a bit sus.

 

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