Tag Archives: surplus

Can the Federal LNP deliver its Flatter Taxation Scales in a Slowing Economy?

October 17, 2019
Written by: The AIM Network
14 Replies

By Denis Bright

Just four months out from the federal election, current indicators do suggest that the federal LNP is fumbling the future of the investment sector of the Australian economy to achieve its short-medium term budget projections and to appease the erratic policies of the Trump Administration.

The IMF data on economic growth trends in Australia confirms the state of flux relating to federal budget projections and delivery of planned tax cuts for higher income earners. These trends will not be unscrambled until the release of the Mid-Year Economic and Fiscal Outlook (MYEFO) by early December 2019.

Finance Minister Mathias Cormann is still optimistic about future delivery of a fiscal balance for 2019-2020 without depressing economic growth projections or causing unemployment levels to rise further.

A key variable in this balancing act is the strength of the public sector spending at both state and federal levels as well as positive trend-lines for commodity and service exports. This favourable mix is marred by data for private sector capital investment over the last two quarters. Release of the September Quarter data on 28 November 2019 will be eagerly awaited. A continuation of the negative trends will be bad news for budget strategies for 2020-21, rather than in the current financial year.

Australia Private Capital Expenditure

To meet its budget targets, the federal LNP is now reigning in the growth in public sector. Probono Australia has revealed the benefits of under-spending on National Disability Insurance (NDIS) to the federal LNP’s efforts to maintain current budget surplus projections for 2019-20 (Luke Michael, ‘NDIS underspend helps return budget to the brink of surplus’, 20 September 2019):

The federal government spent $4.6 billion less on the National Disability Insurance Scheme than expected because of delays getting people into the program, new budget figures reveal.

Treasurer Josh Frydenberg on Thursday announced the final budget outcome for 2018-19, showing a deficit of $690 million – $13.8 billion less than what the 2018 budget predicted.

This improved financial position – which leaves the budget on the brink of surplus for the first time since 2007-08 – was built on the back of underspending in areas including the NDIS.

The government says this underspend is a result of a slower than expected transition of people into the NDIS, but critics argue the money should be spent fixing various problems plaguing the scheme.

Frydenberg said the NDIS was a “demand driven system”, meaning that a slower uptake of the scheme resulted in less money being spent.

“This is in part because of the delays in some of the states coming on board, and also because it’s taken a bit more time for the service provider market to develop sufficiently to meet the available demand,” Frydenberg said.

Caution with the delivery of future Newstart increases and the delivery of NDIS will assist in the extension of taxation relief that is skewed to middle- and upper-income households as promised in the 2019-2020 federal budget.

Support for market-oriented strategies of the federal LNP came from the US Secretary of Commerce Wilbur Ross on his Australian visit with one important policy recommendation (The Australian, Geoff Chambers, ‘Tax cuts key to driving revival, says Wilbur Ross’, 10 October 2019):

US Secretary of Commerce Wilbur Ross has suggested Australia could increase its global competitiveness and attract direct foreign investment if it replicated Donald Trump’s corporate tax cuts.

Speaking to The Australian on Wednesday, Mr Ross — one of Mr Trump’s closest advisers — said the US company tax cuts combined with regulatory reform had worked “very, very well”.

Wilbur Ross should have added a note of caution to his Aussie Allies Down Under as shown by the latest data from his own Bureau of Economic Analysis (BEA) in his own US Department of Commerce as released on 24 July 2019:

Direct Investment by Country and Industry, 2018

The U.S. direct investment abroad position, or cumulative level of investment, decreased $62.3 billion to $5.95 trillion at the end of 2018 from $6.01 trillion at the end of 2017, according to statistics released by the Bureau of Economic Analysis (BEA). The decrease was due to the repatriation of accumulated prior earnings by U.S. multinationals from their foreign affiliates, largely in response to the 2017 Tax Cuts and Jobs Act. The decrease reflected a $75.8 billion decrease in the position in Latin America and Other Western Hemisphere locations, primarily in Bermuda. By industry, holding company affiliates owned by U.S. manufacturers accounted for most of the decrease.

The foreign direct investment in the United States position increased $319.1 billion to $4.34 trillion at the end of 2018 from $4.03 trillion at the end of 2017. The increase mainly reflected a $226.1 billion increase in the position from Europe, primarily the Netherlands and Ireland. By industry, affiliates in manufacturing, retail trade, and real estate accounted for the largest increases.

US Investment plays a relatively minor role in the Asia Pacific Region compared with commercial interactions with Britain and Europe as well as countries in the American Hemisphere from Canada to Central and South America:

Making America Great Strategies have resulted in a decline in US Capital Flows across the Asia Pacific Region between 2017 and 2018. Australia is an exception to the regional trends and provides the US with highly favourable surpluses for trade in commodities and services as well as capital flows.

Days after this visit to Australia by Wilbur Ross, President Trump announced new compromises in his trade and investment war with China that undercut our own export gains in the Asia Pacific Region in favour of new export incentives from the US farm lobby.

The honeymoon after the last election may still be in session. As the rhetorical euphoria continues, it is time for Aussies to do a fact check of our unfavourable commercial relations with the USA. The Trump Administration has left Australians high and dry in a slowing global economy as the Trade and Investment War is replaced by a new Lovefest with China to the cheers from the US farm and resource sector lobbies which are our real competitors on the world market.

It’s surely time for our federal LNP leaders to show a spark of independence in defending Australia’s commercial sovereignty within the Australia-US Free Trade Agreement as President Trump focuses on his re-election strategies for November 2020.

Denis Bright (pictured) is a member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to citizens’ journalism from a critical, structuralist perspective. Comments from Insiders with a specialist knowledge of the topics covered are particularly welcome.

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The Miser’s Apprentice

June 26, 2014
Written by: Kaye Lee
18 Replies

I recently came across an article from 2009 called The Howard Impact which compares Australia’s performance against seventeen other advanced democracies including the United States, Canada, Japan and the countries of Western Europe. Whilst I have no desire to live in the past, the facts from the Howard era are chillingly relevant as this government is driven by an even fiercer version of the same ideology that created many of today’s problems.

On several central measures of macroeconomic performance (economic growth, unemployment, productivity) Howard’s government scored comparatively well. On some of the achievements trumpeted most loudly at home, such as inflation and interest rates, its performance was actually worse than the average of the selected countries.

Household debt in relation to disposable income almost doubled during the Howard years due to a sharp increase in housing prices. Home loan interest payments were higher than when housing interest rates peaked at 17 per cent in 1989. Despite the relatively good economic growth this created financial stress for many people.

Cutting capital gains tax and giving tax concessions for negative gearing exacerbated a problem already being fuelled by unmet demand, low interest rates and easy availability of money from lending institutions. The influx of investors into the property market, competing with property owners looking to upgrade, drove prices up and the rate of home ownership among those under thirty-five dropped.

Under the Howard government there was an increased emphasis on private delivery of what had previously been public services, often with the introduction of a public subsidy delivered by tax rebates, for example. This was very much the case in health, in child care and aged care. But the most glaring example was in education.

From 1995 to 2005, the private share of education spending rose to be the third highest among the selected countries and the public share fell to 12 points below their average.

The public subsidy of private providers led to a growth in private schools to the degree that one-fifth of Australian public spending on education went to private institutions, almost double the overall average of 10.5 per cent, a particularly high figure when it is remembered that private universities had a negligible presence in Australia.

Spending on tertiary institutions was even worse. During that decade the public share had dropped to less than half, 48 per cent, and Australia was then 26 points below the average.

“This reflected an increased emphasis on private funding, but also –uniquely among these developed democracies – a reduction in real terms in public spending on tertiary education. In 2005, Australia spent 0.8 per cent of GDP compared with an average of 1.1 per cent. In other words Australian expenditure would have had to increase by around 35 per cent to bring it up to average. In the other countries for which we have data, public spending on tertiary education was up by 30 per cent in real terms over the decade 1995–2005. Only Australia’s decreased.”

The article concludes by asking how Howard will be viewed in ten or twenty years’ time.

“As with all governments, the Howard government’s economic management and foreign policy decisions will be central to any assessment. In addition, the aging society, health care, the challenges of the information economy and society, and the environment will be central concerns. In each of these areas, the government is likely to be marked more harshly in the future than it was when in office.”

Well here we are, almost 20 years on from 1995. Arguably the greatest problems facing us are climate change and environmental protection, income inequity, housing affordability, falling education standards, and increasing financial stress for families. These problems were exacerbated by Howard’s policy decisions and will be sent into crisis by the Abbott/Hockey idea of government.

To deal with health care and the aging society, Abbott has chosen a user pays model – the antithesis of everything we have gained over the years to provide these services to all. He wants to cut payments to welfare recipients – make the poor poorer. Make pensions harder to get but tax concessions will be huge for those of you with millions.

The challenges of the information economy and society will be met with aging copper wire.

The environment – isn’t that the place where mines live?

When in doubt, privatise. Who needs profitable assets?

But hey, we may have a surplus in ten years. A surplus is just a number on a piece of paper but it’s WORTH selling everything we own, destroying the environment, cutting funding to health and education, making sick people pay, cutting benefits to pensioners, saddling students with crippling debt, cutting off all income for 6 months of the year to desperate people and all that other heavy lifting our sick, old, young, and unemployed are being asked to do for the good of the country (otherwise known as the grubs).

Society is not a dirty word. It is also not a synonym for economy. The economy is the means by which we achieve the society we desire. It is utterly insane to sacrifice our society for the end goal of nothing more than an accounting term.

The miser’s apprentice has put on the hat but has no control over the power he now has. The puppet masters are in the ascendency … for now.

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Who are the real whingers?

June 2, 2014
Written by: Kaye Lee
216 Replies

Australia is a wonderful country and we are blessed to live here. We have challenges that need addressing but the heartening thing is that we also have the means and the time to do that.

What I do not understand is why our government is telling us we have a crisis and making people feel afraid.

They say we have a budget emergency and that the primary goal of this government is to reach a surplus. What difference will a surplus make to your life? It’s a number on a fiscal statement.

They say our debt is increasing faster than anyone else’s. There is some truth in this in percentage terms (the only time they use percentages you will note) but it is because we are starting from such a low debt. As I have said before, if I spend $10 this week and $20 next week, my expenditure has doubled.

To say our children will have to repay our debt, and to even give it a per capita figure, is a ludicrous spin deliberately designed to scare ordinary people. No-one will come knocking on your door with a bill from the government accompanied by a foreclosure notice. That’s not the way it works so why portray it that way?

We have been made to fear asylum seekers (though, sadly, it is they who should be fearful of us). Some think they will impose their laws on us, some think they will kick back having a fat old time on welfare, some think they will take our jobs, and some politicians are concerned about them clogging up our roads and hospital waiting rooms.

Neither of the major parties have any credibility or decency on this issue. They should be thoroughly ashamed for not condemning these cowardly, greedy, xenophobic, racist, selfish attitudes let alone pandering to them.

Tony Abbott also used fear in his campaign against the carbon tax. Towns will be wiped off the map, lamb roasts will cost $100, the cost of living will skyrocket, pensioners will not be able to afford to heat their homes. None of this eventuated, many low income earners were better off due to the compensation packages, polluters were contributing to the cost of their pollution and being encouraged to invest in more sustainable practice, demand dropped partly due to dirty industries closing down and partly due to more energy conscious behaviour, and investment in renewable energy was increasing.

The mining tax was a no no because it would halt investment in the country and we would go into recession. That didn’t seem to happen either.

We were told the NBN had no cost benefit analysis and would go over budget and over time and would be a huge waste of our money. It appears Malcolm’s is forging ahead without a CBA and unfortunately his inferior offering will be over budget and over time and slower than promised.

In the midst of this funding emergency we are able to find countless billions for roads that, contrary to promises in Opposition, need no CBA nor approval from Infrastructure Australia as a priority.

Tony’s slogans and campaign were designed to make his constituents fearful, and anyone who tries to disagree is silenced or called a whinger.

Well who are the real whingers?

The mining companies squealed like stuck pigs when asked to pay a small contribution to us for the right to make billions digging up our finite resources.

The polluters did not want to take any responsibility for the cost to society of their profit-making ventures. Even though the most trade-exposed industries were given assistance to help transition to cleaner practices, they chose instead to mount a climate change denial campaign, rather than help in any way with co-operative action.

Ask developers to comply with environmental safeguards and listen to the complaints about paperwork. No-one seems to remember the amount of paperwork that was thrust upon small businesses with the introduction of the GST.

The salary sacrificing and car lease companies had a huge dummy spit when the government had the temerity to ask that people justify their car business usage claims. We can’t ask people to tell the truth…this tax dodge is an entitlement I tell you!

When the richest 16,000 superannuants were asked to pay a small amount of tax on anything they earned above $100,000 pa it was class warfare! They had worked hard to avoid paying tax on that money and were entitled to reap the rewards of having good accountants. The superannuation companies backed their cries saying “it would be too hard to administer.” When I suggested to Joe Hockey’s adviser that it could be administered by the ATO through a simple tax return he said “that is not my area of expertise”.

Ask Gina to pay tax and she moves to Singapore. Ask her to pay a decent wage and she imports slave labour. Ask her to give you your inheritance and you may end up in court.

Any inquiry into media ownership laws will hear howls that echo around the world. “Stalin”, “censorship”, “freedom of speech”, “attack on democracy”…Rupert has an absolute tantrum at the very idea that the media should be held in any way accountable in presenting the truth.

The introduction of gambling reform laws had the hotel and gambling industry donating millions to political campaigns rather than have their profits hurt by addressing this most destructive social problem.

Financial advisers from big banks, like those exposed in the Four Corners program the other night, point blank refused to accept transparency and regulation. Expecting them to disclose kickbacks or vested interests is apparently unreasonable.

Parliamentarians from both sides have been dragged kicking and screaming to repay claimed entitlements for personal pursuits.

This government is built on propaganda – slogans, ridiculous analogies, fear and lies. Call me a whinger if you like, but it seems to me the real whingers are the ones who can pay for lobby groups.

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Let’s be absolutely crystal clear about this

May 25, 2014
Written by: Kaye Lee
154 Replies

Photo by The Daily Telegraph

If you click on the official Prime Minister of Australia government page the first thing you will read is:

“Over six years, Labor ran up a $667 billion debt on the nation’s credit card.”

Aside from wishing that the Prime Minister of Australia had a more visionary or engaging opening line, it is a bald faced lie and that isn’t a good way to convince people to trust you.

You will be subjected to a rolling slide show of Tony, Joe and Matthias, photographed in various serious looking poses. Is anyone else getting sick of these photos of Tony sitting at tables with people surrounded by lots of booklets and oversize graphs? Is that supposed to convince me that he knows what he is doing? Because he has his photo taking wearing a white lab coat trying to look into a microscope am I to say oh well the $7 co-payment must be a good idea?

But back to the lie.

“Ran” indicates past tense – in fact Tony Abbott specifically states that this happened “over six years”. What he fails to mention is that the figure of $667 billion was a projection for possible debt in ten years’ time from Hockey’s MYEFO report produced last December, and it included increased Coalition spending decisions like the $8.8 billion gift to the RBA and all the interest that will cost us, and the foregone revenue from the carbon and mining taxes, and changed assumptions about future unemployment – in other words it was a political exercise designed to come up with as big a number as they could so they could then justify draconian measures as they claim to be reducing it.

Using the term “nation’s credit card” is purely designed to cause fear. The nation doesn’t have a credit card. In fact we actually print money and can do so if we have to as they have done in the US. Credit cards can get individuals into serious debt and the interest rate is crippling. Using that term makes people think of that rather than a sensible understanding of how government finances work.

While the Coalition continues to peddle this lie I will continue to remind people of the truth because the Australian people have a right to know the real state of our finances. And because nothing pisses me off more than getting lied to about important stuff.

So what is the truth?

The independent pre-election economic and fiscal outlook’s (PEFO) medium term projections, using long-standing methodology, show that on Labor’s policy settings the Budget reaches a modest surplus in 2016-17, surplus grows to 1% of GDP in 2020-21 and net debt returns to zero in 2023-24.

The latest Budget update shows net government debt for 2013-14 of $191.5bn, or 12.1% of Australia’s GDP (not $667 billion Mr Abbott). By contrast, net government debt in advanced economies around the world averages 74.7%, according to the International Monetary Fund.

Gross debt in 2023‑24 is projected to be $389 billion with surpluses projected to build to over one per cent of GDP by 2024-25. There are no surpluses predicted over the forward estimates, there is a higher debt, and surplus of 1% 4 years later than predicted by PEFO using Labor policies.

After the GFC hit, the deficit peaked at $54.5bn, or 4.2% of GDP, in 2009-10 – less than half the advanced country average. In 2012-13, the federal deficit was $18.8bn or 1.2% of GDP, compared to an advanced economy average of 4.9%.

The claim that Labor left “fiscal time bombs” and secret cuts and spending is another blatant lie. In the 2013-14 Budget, Labor took the unprecedented step of releasing 10 year figures for the National Disability Insurance Scheme and Gonski school reforms, demonstrating how they were funded over the long term. Those figures, as well as the efficiency dividends on the public service, were there for all to see. The fact is that Tony’s election promises were made knowing this but, as we saw, working out how to pay for his promises was not on his mind.

Australia is one of only 10 economies in the world with AAA ratings from all three agencies – in the company of other countries with strong public finances like Germany, Canada, Sweden, Singapore and Switzerland. This status shows our finances are considered to be stronger than those of the vast majority of advanced economies – including the US, the UK, Japan, France and New Zealand.

Despite headlines to the contrary, and ill-informed statements by the Prime Minister, the agencies have confirmed our credit rating with a stable outlook.

I hesitate to compare government finances with individual or business finances, but I will say this. When you go into significant debt, you usually aren’t looking to pay it off completely the next week. The decision to go into debt is made by looking at your assets, your ability to service the debt, and the value of the investment of the debt.

We do need to make some changes. There will never be a time when fine-tuning isn’t needed because we live in an ever-changing world with an often volatile global economy. Situations change requiring adjustments to be made.

We are not in any sort of crisis. We have the luxury to be able to do long term planning to meet the challenges of the future whereas so many other countries are having to make decisions for the short term as a matter of survival.

Tony Abbott is looking for a legacy for himself rather than for our nation. He wants to say the debt was huge and I made it smaller and he doesn’t care if he has to lie about figures to make this look true. If he really wanted to reduce debt why on earth would he stubbornly insist on his paid parental leave scheme? Why wouldn’t he look at negative gearing and superannuation tax concessions and capital gains reductions? Why would he buy 58 fighter jets that won’t be in service until sometime next decade?

The “Infrastructure Prime Minister” is building the Abbott Highway to Hell to speed up the path to destruction and he is more than happy to sacrifice anyone who can’t help him along his way.

Usually, they wait till you’ve signed the contract before revealing the fine print!

September 6, 2013
Written by: Rossleigh
17 Replies

Who else received a Contract from Tony Abbott? Just wondering, because I misplaced mine and I’ve been searching for it on the internet, and I can’t seem to find it there either. Perhaps, it was an individual contract…

”You’ll notice we haven’t said we’re going to get to a surplus by a particular date.” Tony Abbott

“But missing from the independent costings will be the analysis on three of the Coalition’s key policies: broadband, Direct Action and the plan to stop asylum seekers coming to Australia by boat.” The Sydney Morning Herald

Anyway, I was searching for it, because I couldn’t remember if it said anything about surpluses, but as I can’t find it, I guess he’s off the hook.

Still, I wonder whether it was such a good idea to send me a contract at all. I mean, I hadn’t asked for one. And if I was going to ask for one, I’d expect that I would be consulted as to what I wanted in the contract.

But I guess that was the idea behind WorkChoices – people being given contracts and told that was what they were getting.

And I wanted to check that it said that it was “A” contract, because if it was a verb and not a noun at the top of the page, it may have been what they expect to happen to the Australian Economy.

But I can’t seem to find the document anywhere. I did tell my wife that I wanted to keep it so that I could keep the Liberals to their promise to build “Modern” Roads, as opposed to the ones we’ve built in the past. And they intend to build more of them.

It’s unclear whether that’s more than we have now or more than are usually built in a given period. Or indeed, more roads than we actually need.

Likewise, it promised a “stronger” economy. Stronger than what? I would have like that cleared up before the contract was signed. Nietsche’s, “That which doesn’t kill me makes me stronger” comes to mind, for some reason.

The contract didn’t actually indicate what penalties would apply should Tony Abbott fail to live up to his end of the bargain.

Samuel Goldwyn is alleged to have said that a verbal contract isn’t worth the paper it’s written on.

I’m left wondering the point of giving someone a contract when all you can do is say that they broke a promise that they wrote down as opposed to something that was just said…

Oh, that’s right:

”I know politicians are going to be judged on everything they say but sometimes in the heat of discussion you go a little bit further than you would if it was an absolutely calm, considered, prepared, scripted remark,” Mr Abbott said. ”Which is one of the reasons why the statements that need to be taken absolutely as gospel truth [are] those carefully prepared, scripted remarks.”

If someone finds the Contract on the internet can they post a link in the comments?
I’d like to sign a copy and send it back to him.

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Tag Archives: surplus

Can the Federal LNP deliver its Flatter Taxation Scales in a Slowing Economy?

The Miser’s Apprentice

Who are the real whingers?

Let’s be absolutely crystal clear about this

Usually, they wait till you’ve signed the contract before revealing the fine print!