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The Coalition money shuffle

One of Joe Hockey’s first acts as Treasurer in 2013 was to gift the RBA $8.8 billion.  The main reason for this was to make Labor’s deficit look bigger.  As a side bonus, it allowed the RBA to invest in the forex market, banking on the Australian dollar losing value as the mining boom subsided.

And that is exactly what happened allowing the government to draw…wait for it…$8.8 billion in dividends over the last six years.  That’s all very well (if we ignore how the Coalition screamed like stuck pigs when Labor took a one-off dividend of $500 million in 2013) except Hockey borrowed the $8.8 billion so we are still paying interest on it.

We have also paid a fortune in “fees for banking services” as investment banks have raked in hundreds of millions in trading fees.

Had Hockey not engaged in this political chicanery, we would be billions of dollars better off.

And then there are the six Future Funds which contained $198.8 billion as at June 30 this year.

The direct cost of managing these funds was over $1 billion for the last three years alone.

The DisabilityCare Australia Fund had $16.4 billion sitting in it, which must be aggravating to the many people still waiting to access services or those who have had their services reduced.

The Aboriginal and Torres Strait Islander Land and Sea Future Fund (ATSILS Fund) was established in February 2019 with a capital contribution of $2 billion transferred from the Aboriginal and Torres Strait Islander Land Account.

The purpose of the Indigenous Land and Sea Corporation, to whom the fund will make payments apparently at the discretion of the Minister if the investment mandate targets have been met, is to acquire and manage land, water and water-related rights so as to attain economic, environmental, social or cultural benefits.  One wonders how much will actually be handed over for that purpose now that Peter Costello has his hands on it.  I am sure the mining companies would prefer that money to be tied up rather than used.

In July, the government deposited another $7.8 billion into the Medical Research Future Fund.  As we were still in deficit, this was a pretty amazing feat which must have come at the cost of other research cuts and/or interest costs for the borrowed money.  It’s interesting how they can find a lazy $8 billion when they want to.

The Education Investment Fund, originally intended for new facilities in the higher education sector, had payments frozen in 2013 and it has been accumulating funds since.  These have now been taken to create the government’s new $4 billion Emergency Response Fund.

Then, on 1 September 2019, the assets of the Building Australia Fund were transferred to the newly created Future Drought Fund.

The original Future Fund was established in 2006, funded in part from budget surpluses but mainly from the sale of Telstra.  As at June 30, there was $162.6 billion sitting in it.

Kevin Rudd, as Opposition leader, suggested using $2.7 billion of it to invest in a National Broadband Network with profits being returned to the Future Fund.  The Howard government screamed blue murder, claiming that Labor intended to “raid” the Future Fund for their own means.  Gee, that has worked out well for us hasn’t it.

While legislation permits drawdowns from the Future Fund from 1 July 2020, the Government announced in the 2017-18 budget that it will refrain from making withdrawals until at least 2026-27.

What on earth is the point of sitting on that pile of money when only 20% of it is invested in Australia?

The ten year return has been 10.4% for the Future Fund which might sound good until you look at Infrastructure Australia’s High Priority Project list where every project has a cost benefit ratio of better than that.

We could be employing people in productivity enhancing infrastructure construction. We could be increasing primary healthcare and reducing hospital waiting times to save money and improve quality of life.  We could be investing in research and education, both of which bring a far greater return than 10%.

But the Coalition are obsessed with accumulating cash and apparently have zero understanding of the value of actually using the money for the benefit of our economy and our citizens.

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12 comments

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  1. Keitha Granville

    It is the whole wealth thing, they are obsessed with putting money aside for the future. Same as the rich who save all their cash offshore while people on meagre incomes starve and go without. And what is the point? The way they are screwing the planet there won’t be a future.

    King Midas springs to mind . . . . simply replace his daughter with all of us

  2. New England Cocky

    More evidence that the Scummo Liarbral nat$ misgovernment is developing the worst this world export economy in the OECD for the benefit of foreign owned multinational corporations plus their shareholders and workers living overseas.

  3. James Cook

    Why is it that not a single Labor MP is exposing the Coagulition’s lies about the economy. What on earth are they waiting for? Are their strategists telling them to bide their time? Or are they afraid to stick their heads over the parapets? FFS Labor. Get angry, get ammunition and get off your arses!!!!

  4. Lawrence S. Roberts

    To James Cook,

    Tha A.L.P. is probably in on it. Or the three shell trick is possibly beyond them.

    Either way its grand larceny just in management fees. Add kickbacks on the Indue welfare card to The LNP
    and we have a cash cow of some magnitude. Labor will always be the poor relative in this parliament.

  5. Zathras

    I wonder how many farmers recall the Farmhand scheme/scam, during the Howard era to placate them over the sale of Telstra?

    https://www.smh.com.au/opinion/why-farmhand-has-so-much-appeal-20021009-gdfpgo.html

    Rather than investing in farmers, the Telstra money was used to establish the Future Fund which is intended soley to ensure the economic viability of paying Public Service (and Politicians’) pensions in perpetuity.
    Since the sale the mug taxpayer now has to pay Telstra to fund their Community Service Obligation in maintaining the network and to establish improved mobile coverage – items once funded in-house by Telstra itself.

    Years later and the farmers are still waiting for the implied promised benefits and living on piecemeal handouts, the taxpayers are being bled for additional funding and the telecommunications network is in decline – but they still vote for the same party.

    This new government is as “mean and tricky” as was Howard’s.

  6. Vikingduk

    Aren’t we lucky duks though, at least 2 plus years of treason, lies, hate and general shitfuckery to go. Just think how much more these oozing pustules of the lnp will root Australia. I remember when there used to be an opposition, investigative journalists, even when cruelty, hate and deceit weren’t desirable character traits.

    Can we really afford the patience and fortitude to endure more of this horror show?

  7. Pete Petrass

    I would suggest having all those billions sitting there, out of sight and out of mind, it would be incredibly easy to slip a few billion out here and there for their own purposes. But hey, they are supposed to be the better economical managers aren’t they???

  8. Bronte ALLAN

    It is beyond comprehension just how fucking deceitful ALL of these fucking so-called “liberal” pollies are & have been & are still doing to “our” money! They have no compunction in lying, obfuscating etc etc in regard to anything to do with money. The BASTARDS! and THEY STILL maintain that they are the only “good” managers of money here in OZ! WTF!! Of course we ALL know just how “bad” ALL the Labor lot are with money management-after all the fucking libs continually inform us of this! BASTARDS, again! Yet another fine & true article Kaye!

  9. Wobbley

    When Howard was in office it was all his governments money……, same now different fascist.

  10. Richard Allan

    Fascist playbook 101

  11. Ferretqueen

    The Govt “giving” the Federal Reserve Bank “money” is the greatest neoliberal joke that I have EVER heard.
    Ask yourself the question….. where does money come from?
    Well……. from the Federal Reserve Bank by order of the Parliament.
    So it goes like this…
    (Treasurer) Er…. Reserve – I want $8 billion today – and why? Oh….. to give back to you.
    All these so called “future funds” are simply smoke and mirrors. All the Govt needs to do is order the Reserve to pay $X into whatever account held at the Reserve that it wishes to invest in. This could be my Pension account – it could be to build a dam or two (which it IS doing for Private Enterprise….) It DEFINITELY has been to buy WEAPONS…. (we are now the second highest weapons importer in the world).
    The Govt is not limited by revenue – doesn’t need our taxes. It produces all new Australian money which is injected into our economy – well it USED to be injected by now it is sidelined into Big Business projects like paying the Polluters….. The Govt spending is only limited by the real resources available for it to purchase. And it ISN’T – and CAN’T be in debt in its own money (the debt is repayable Govt Bonds……).
    Yeah.
    Anyone who says otherwise is either deliberately deceiving you – or has absolutely NO IDEA how our macro economy works. Just follow the money trail.

  12. Kaye Lee

    “All the Govt needs to do is order the Reserve to pay $X into whatever account held at the Reserve that it wishes to invest in.”

    Whilst that may be theoretically possible, it most definitely does not represent how things are currently. What they could do is allow the RBA to buy government bonds, which would kind of amount to a similar result, but they are currently precluded from buying them direct – they trade in them but they don’t issue them and can’t buy them direct.

    The RBA legislation allows for a strictly limited government overdraft which is rarely used and must be extinguished as soon as possible. They issue notes and coins but not bonds which are largely held by foreign entities. Bonds are issued by the dept of finance to cover deficit spending.

    It is fair to say government spending is not constrained by revenue and that they can spend to utilise spare resources – but there are definite conditions on that – full employment would be great but only if jobs were actually productive and meaningful and beneficial to the community for example. It very much depends on what money is spent on as to the impact it will have. Buying everyone a Rolls Royce would boost GDP but cause all sorts of problems elsewhere. And what happens to the exchange rate if we just keep spending money into existence”?

    The potential of MMT is one thing. The reality of the way our government and RBA currently interact is entirely another.

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