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The Classic Coalition Con

This episode of the Classic Coalition Con begins in 2011-12 when the RBA made a profit of $1.1 billion. Treasurer Wayne Swan decided to withdraw a dividend of $500 million and leave the remainder to bolster the RBA’s capital reserves.

The Coalition screamed blue murder, accusing Swan of raiding the RBA to try to achieve a surplus and implying that he was leaving the bank in a parlous state.

Within weeks of being elected in 2013, and despite a projected deficit for 2013-14 of $30 billion, Joe Hockey gifted $8.8 billion to the RBA, an expense he said was necessary to “strengthen the RBA’s financial position” even though they had not requested a cash injection and Treasury had not recommended it.

This, along with other policy decisions, caused the deficit to blow out to $48.5 billion, a result the Coalition blamed on Labor which was, of course, the main point of the exercise.

Aside from making Labor look bad, Hockey also realised that the Australian dollar was running too high and was, with the end of the mining boom, likely to depreciate relative to other currencies so he was hoping for a big windfall from foreign exchange speculation.

And it paid off.

In 2015, the government took a dividend of $618 million followed by $2.5 billion in 2016 and $3.2 billion last year. In other words, since Hockey made the $8.8 billion gift, the Commonwealth has subsequently taken $6.3 billion from the RBA.

But they were not the only beneficiaries.

When Labor was in power, the RBA financial statements showed no “fees received for banking services”. In the ensuing years however, “fees for banking services” rose from $67 million in 2014 to $76 million in 2015, thence $81 million in 2016 and $89 million in 2017. Investment banks have raked in well over $300 million in trading fees.

Underlining the Coalition’s hypocrisy, the latest annual report from the RBA shows that, despite recording “an accounting loss of $0.9 billion, reflecting valuation losses on holdings of foreign assets due to the exchange rate appreciation over the year [2016-17]”, they will absorb the loss and “a dividend of $1.3 billion will be paid to the Australian Government.”

It’s all part of the pea and thimble tricks played to maintain the fallacy that the Coalition are better money managers. Book up the expense to Labor and the returns to the Coalition. Make deliberately gloomy forecasts for economic parameters as soon as you take over and then claim the credit when they turn out to be wrong. Promise a surplus the year the future fund earnings become available. Sell some assets for a sugar hit. Spend heaps on defence to boost GDP figures. Impose taxes and then remove them before elections.

Hey there, hoop la, the Classic Con’s gone down.


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  1. Andreas Bimba

    “Joe Hockey gifted $8.8 billion to the RBA”.

    Is this the reverse of quantitative easing? The federal government increases its deficit by $8.8 billion which means that an additional $8.8 billion of treasury bonds and similar securities are issued whilst the RBA adds $8.8 billion to its reserves?

    Given the RBA is the sole issuer of Australian dollars and can issue as much as it wants if needed, this all appears to be without any useful purpose. Kaye’s explanation that this was just a shell game to make Labor look bad appears to be the only plausible explanation.

    What a farce.

  2. Kaye Lee


    The RBA tops up banknotes when necessary but they do not issue government securities which, under current legislation, must equal deficit spending as the RBA only extends a very limited emergency overdraft facility to the government on which it charges interest.

    “While the Reserve Bank manages the consolidation of the government’s accounts, the AOFM has day-to-day responsibility for ensuring there are sufficient cash balances in the OPA to meet the government’s day-to-day spending commitments”

    I am not saying this is the way it has to be, just the way it currently is.

  3. Möbius Ecko

    Howard was the master of creating crises and then “rescuing” them down the track by throwing bucket loads of money at them in election years, or promising bucket loads during elections. Rarely did the MSM pick up that Howard had created the can of worms in the first place. Indeed Costello went to court and won as “not in the public interest” to prevent the revelation of his actual spending as compared to promised spending on these drastic issues Howard supposedly rescued.

  4. Kaye Lee

    Yes ME. How quickly the debt and deficit disaster goes away if you don’t talk about it.

    Whoever wins government next time is going to have the windfall of drawing from the Future Fund earnings. It’s a significant boost though it will come towards the end of their term. The ten year return has been 8.5%.

    “Across five public asset funds, the Board of Guardians now invests $166bn”

    For some unknown reason, they are holding $21 billion in cash????

  5. Kronomex

    The LNP always reminds me of Adam Savage’s line from Mythbusters, “I reject your reality and substitute my own.” Where he was having a bit of a joke Trembles and company does not joke. They truly live in a different reality.

  6. Kaye Lee


    As they have reminded us time and again, from their attack on carbon pricing and their recharacterisation of ‘disastrous’ debt as ‘good debt’ to their eventual establishment of a banking RC, it’s all about the politics.

  7. Zathras

    The Future Fund is there to pay for Commonwealth employees’ pensions and superannuation – something the Government used to fund every year until Costello put it on the Government Credit card for several years in order to make his bottom line look better.

    It finally got to the point where Telstra had to be sold in order to keep those pension payments coming and to guarantee that former government employees (and ex-politicians) would have a secure income in their retirement.

    The income looks impressive but how much is being paid out, particularly when the number of Public Service members must be in decline, due to redundancies and outsourcing?

    The previous Commonwealth Super Scheme was a Defined Benefits scheme which guarantees an income based on a final salary and is not affected by what happens in the market.

    Get ready for a media avalanche of misleading information about the true state of the economy.

    It reminds me of when the media were getting too close to exposing Alan Bond’s true shaky financial position, he’d run out and buy some expensive artwork to throw them off the scent. Conveniently timed talk about generous tax cuts seems like the same strategy.

  8. Kaye Lee


    Public sector superannuation costs around $8 billion per year which is not much in the grand scheme of things and much less than the Future Fund makes, even with a conservative investment strategy. The capital is accumulating but is that the best use of such huge amounts of money particularly when much of it is invested overseas?

  9. diannaart

    Accolades where they are due:

    “The LNP and the Art of Creative Accounting” – Labor couldn’t invent this stuff – not deviant enough.

    Which is why the LNP boast is kind of true, Labor can’t “handle” the economy the way the LNP does.

  10. Roy

    I am in agreement with Andreas and Kaye as well as most others here, however I would also like to post out one point. In regards to the statement ‘ on which it (RBA) charges interest’ (to the Government. Thus the is charging interest to itself surely?. Am I wrong here?. IF the RBA was a singular entity and not controlled by the Government, why did it not simply REFUSE the $9 billion is didn’t need and simply Return To Sender (thanks Elvis).

  11. Kaye Lee

    The RBA, which is a separate entity to government, had a goal to increase their capital reserves (which are different to government operating accounts) but were happy to do that over time through investment profits. Hockey’s contribution meant they no longer had to worry about that and were free to speculate a little more. Counting this year, the Coalition will have transferred $7.6 billion back from the RBA capital reserve to the government operating account, a handy little top-up after booking the original gift to Labor’s account.

    When asked about Hockey’s gift, the RBA boss at the time said the capital reserves “aren’t keeping me awake at night”. But he isn’t in a position to overrule the Treasurer. The gift has been given back. It’s all in the timing.

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