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.