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Sunday, 8 March 2015

Intergenerational report: assumptions about government spending are a confusion of idiocy

Intergenerational report: assumptions about government spending are a confusion of idiocy

Intergenerational report: assumptions about government spending are a confusion of idiocy

The report happily assumes that the government would not change any
spending policy for 40 years and debt by 2055 would reach 122% of GDP

Australian passport

The intergenerational report estimates net overseas migration will grow by 215,000 per year. Photograph: Dan Peled/AAP

Intergenerational report released on Thursday is a document so weighed
down with imagined economic assumptions made for partisan political
reasons that it is barely worth reading, let alone being the basis of a
“conversation” with the Australian people about the next 40 years.

Intergenerational reports are always political documents, but they are not supposed to be partisan. Joe Hockey,
betraying perhaps an insecurity about his own performance as treasurer,
has decided to act as though he were in opposition and has made the
report as much about kickingLabor’s economic performance than attempting
to paint a picture of the challenges for the next 40 years.

Every intergenerational report is only as good as the assumptions on
which the predictions are based – especially those pertaining to
demographics. And while some of the predictions about the ageing
population and the implications that will have on employment
participation and economic growth are worth considering, the assumptions
about government spending over the next 40 years are pretty much a
farrago of idiocy.

For no good reason whatsoever, Hockey has decided for the first time
to include in the report projection based on policies of the former
government. But he takes as the ALP’s “previous policy” that represented
in the 2013-14 mid-year economic and fiscal outlook(Myefo)
– a document produced by the Abbott government and which saw the
2013-14 deficit increase by $10.26bn due to “policy decisions” taken by
the Abbott government.

2013-14 Myefo was itself designed to make it appear the ALP had blown
the budget, and thus using that as the starting point to predict budget
deficits over the next 40 years is a fairly dodgy exercise.

But from this beginning, the report happily assumes that under the
scenario the government would not change any spending policy for 40
years, debt by 2055 would reach 122% of GDP.

Yeah, right.

To get to that figure, not only does it assume there will be no
changes in spending, but even more stupidly, that while the deficit grew
ever more over the next 40 years, governments would be cutting income
taxes at the same time.

As Jeanie Bueller would say, dry that one out and you could fertilise the lawn.

The report estimates that from 2020-21 tax rates will be capped at “a
constant 23.9% of GDP”. This level was picked because it was the
“average of the period 2000-01 to 2007-08”. Why this seven year period
was chosen for the average however is left unsaid.

To keep the tax ratio at that level in the face of increasing wages,
which would see income tax receipts rise, the report implicitly suggests
taxes would be cut – all the while debt rises to 122% of GDP?

Yeah ok, seems legit.

There is no logical reason to keep the tax rate fixed at 23.9%. There
is no optimal level of taxation. If we look across advanced economies
from 2001 to 2007, Australia’s level of taxation across all forms of
government was quite low:

That this arbitrary tax level is chosen just highlights the political
nature of this document. It does not suggest that if government
expenditure is growing that revenue must grow to match – but rather that
expenditure must be cut.

It also ignores some quite massive social implications.

Nowhere is inequality mentioned, despite the report assuming that
Newstart will rise only by CPI for the next 40 years, while average
weekly earnings are assumed to rise by 1.5% above inflation.

This would see those on Newstart in 2055 receiving around 10% of average earnings, compared with around 17% now, and just below 25% in 1990.

It also dismisses climate change as no big thing.

Absurdly it contains no budgetary or economic impacts of climate
change beyond 2020, and the document is at pains to make it clear one
nation cannot change the climate.

The report enters levels of satire when it boasts (without any
evidence) that the government’s Emissions Reduction Fund will achieve
“verified domestic emissions reductions through incentives” rather than
simply drive “domestic production offshore — a process which would cost
Australian jobs for no decrease in global emissions”.

Oddly however, given the government specifically compares the impact
of the ALP policies in the 2013-14 Myefo with its own current policies,
it doesn’t compare the costs and impacts of the carbon tax with direct
action out to 2055 – perhaps because after 2020 the government hopes
climate change will go away.

The report also suggests that “some economic effects (of climate
change) may be beneficial – where regions become warmer or wetter this
may allow for increased agricultural output – while others may be

Ahh wonderful – a perfect balance!

The economic growth projections which underpin the assessments about
budget deficits are based on some pretty odd assumptions about
population, participation and productivity growth.

The history of the assumption of net migration over the four
intergenerational reports highlights just how rubbery these “40 year”
predictions can be. Every report has increased the assumption of net
migration over that in the previous report. This year’s report is no
different, but the figure it used remains well below what is the likely

Migration is a very important aspect for predicting the next 40
years. The main challenge we face is an ageing population in which there
will be fewer prime working age people for every person retired. It
means our labour participation rates will fall because a smaller
percentage of the adult population will be working.

We’re already seeing this happen. In December 2010 a record high
67.7% of the adult population was participating in the labour force – it
is now 64.7%. In that time the participation rate of workers aged 25-64
is actually holding up quite well. But they make up less of the
population than they used to:

When predicting population growth you use two methods – fertility rate, and migration.

A high fertility rate is actually a cost on the economy and the
budget in the near term because children don’t work. Migrants however,
as the report make clear, “tend to be younger, on average, than the
resident population” and they “increase overall labour force
participation rates.”

The report also notes that “high levels of net overseas migration
might increase productivity, as the skills focus of Australia’s
migration program means that migrants may, on average, be better
educated than the average Australian”.

This is important because higher productivity is one of the great drivers of a higher standard of living.

The intergenerational report estimates net overseas migration (the
number of migrants minus the number of Australians leaving) over the
next 40 years will grow by 215,000 per year. That figure is higher than
the 180,000 estimated in the 2010 report, well above the 110,000
estimated in the 2007 report and miles above the 90,000 estimated in the
first report in 2002.

But even the 215,000 is below what the ABS estimates in its population projections. The median population projection assumed currently by the ABS is for 240,000 migrants a year.

It’s also worth noting that the Department of Immigration estimates net migration to increase from 225,800 last to 256,900 in 2018.

The report even estimates from 2007-2018 annual migration will be the
equivalent of 1.1% of the population, but will then for reasons unknown
fall to just over 0.5% from then till 2055.

The report notes that this 0.5% level was the average observed
between 1973 and 2006. Why that 33-year period suddenly became an
important benchmark for migration levels is unsaid. Why not the past 40
years? Why not 2001-2007 as was the case for tax?

The report thus assumes that in the face of an ageing population,
Australian governments would shrink the real migration intake – even
though that would exacerbate the problem!

The only reason you would make such an assumption is if you wanted to
be able to paint a picture of slowing growth, falling participation,
rising debt and deficits and weak economic growth – exactly the picture
Joe Hockey wants to suggest would have been the case under an ALP
government. And exactly the picture he wants to paint in order to
justify his proposed cuts to government expenditure.

To demonstrate how absurd this suggestion is, the report even notes
that if the net migration intake was estimated at 250,000 per year (i.e.
still less than is expected in 2018), then the improvement in real
gross national income per person by 2055 would be the same as if the
report assumed the unemployment rate for the next 40 years was 4%
instead of 5%.

program, Hockey suggested “Immigration is, you know, is a rather lazy
way to try and grow your economy. What we’ve got to do is increase our
output per hour.”

Yes we do need to increase our productivity, but given immigration
can assist with that Hockey is in essence arguing that we should ignore
that solution in favour of a tougher one!

Joe Hockey asserted in the past month that the report would make
people “fall off their chairs”. It shouldn’t. There’s nothing
particularly scary in it, and as the report itself notes, “the
projections in this report are very unlikely to unfold over the next 40
years exactly as outlined. Things will happen that are not anticipated
in the report’s assumptions, and government policy will change.”

Indeed. By 2055, this report will be nothing but an odd curio from our political history.

Wednesday, 4 March 2015

The Intergenerational Report is redundant. Hockey should abandon it | John Quiggin

The Intergenerational Report is redundant. Hockey should abandon it | John Quiggin

The Intergenerational Report is redundant. Hockey should abandon it

The idea that budget deficits constitute ‘robbing our children’
remains a staple in calls for reform. In fact, intergenerational
inequity was resolved in the 1990s

‘Hockey’s transparent manipulation would be a benefit to Australian
public debate if it led to the IGR being abandoned, once and for all.’
Photograph: Mick Tsikas/AAPIMAGE

The 2015 Intergenerational Report, released on Thursday, had been pre-announced by treasurer Joe Hockey
as a piece of political advocacy, designed with the specific aim of
making us “fall off our chairs”. Of course, nothing is easier than to
make a forecast look scary when you are projecting 40 years into the
future and you get to choose the parameters that suit your case.

The point of this exercise, as Hockey openly admits, is not to
provide the Australian public with a considered view of our fiscal
policy options over the next four decades. The real time frame is closer
to the next four weeks: first, to keep Abbott and Hockey in their jobs
that long; and second, to set the scene for debate leading up to the
budget in May. The release of the Intergenerational Report (IGR) was
legally required in early February, well before the budget session, but
it has been delayed in the hope of maximising its political impact.

Hockey’s transparent manipulation would, however, be a benefit to
Australian public debate if it led to the IGR being abandoned, once and
for all. The report was originally proposed as an assessment of the
relative distribution of fiscal benefits and costs across generations,
but it has never delivered on that promise. Rather, it is yet another
example of how the dead hand of the political generations of the 1980s
and 1990s continues to dominate Australian politics.

To see why intergenerational issues were of such concern to the
political class at that time, it’s necessary to look at retirement
incomes policy as it stood in the late 1970s. The age pension was
available to women at 60 and men at 65. There was no assets test, only a
very generous income test applicable to those under 70. As a result,
77% of the age-eligible population received the pension.

those in white collar jobs, retirement was even more appealing. The
standard mode of defined-benefit superannuation was income based,
providing retirees with an indexed benefit based on their final
salaries. These benefits, heavily tax-subsidised then as now, were
available at 55, which was increasingly seen as the ideal retirement

And of course, people were living longer. When the age pension was
introduced in 1909, a 60-year-old woman could expect to live another 18
years, and a 65-year-old man another 11. Those numbers have increased to
27 and 19 respectively.

Meanwhile, increased access to education meant that young people,
most of whom had previously begun work at the school leaving age of 15,
were now staying longer at school and university, often into their 20s.
The potential result, it seemed, was a society in which workers aged
between 25 and 55 would simultaneously bear the private burden of
raising their children, and supporting the previous generation over a
retirement that might easily be as long as their working life.

In these circumstances, issues of intergenerational equity were of
serious concern. But the direction of public policy and the labour
market changed from 1978 onwards. First, income and assets tests were
reintroduced. Then, beginning in the early 1990s, defined benefit
superannuation schemes were replaced by defined contribution schemes,
which put the burden on workers to plan the retirement investments on
which they live.

The final step, beginning in the late 1990s, was a progressive
increase in the age of eligibility for retirement incomes of all kinds.
The pension age for women was increased gradually to 65, a process
completed last year. Further changes in 2009, began the process of
increasing the pension age to 67 by 2023.

In the 2014 budget, a further increase was foreshadowed, to the age
of 70. When this process is complete, it will have cancelled out a
century’s worth of increased life expectancy for women, and most of the
increase for men. Ages of early access to superannuation benefits are
also being raised. Given these changes, there is no longer any serious
issue of intergenerational equity facing Australia, except perhaps for
the excessive tax subsidies for superannuation.

In fact, by the time the first IGR was released in 2002, the problem
had already been largely resolved, and the remaining measures were
generally anticipated. The resolution of the intergenerational fiscal
problem was a major public policy achievement of the reform era of the
1980s and 1990s. But a political class still fixated on the most
ideological version of the reform agenda, in which cutting public
spending is desirable in and out of season has refused to drop the club
of intergenerational equity. The idea that (very modest) budget deficits
and public debt levels constitute “robbing our children” remains a
staple in calls for “reform”.

The idea that public spending today places an unfair burden on the
younger generation is belied by even the most cursory examination of the
2014 budget cuts. Some of the biggest proposed cuts were imposed on
school (the abandonment of the forward commitments under Gonski) and
university students (fee deregulation and funding cuts).

As a community, we need to assess the extent to which we are willing
to meet social needs through public expenditure, which must ultimately
be financed by taxation. This is an issue which neither side of politics
has been willing to address honestly. Scare stories about future fiscal
disasters don’t help.

Sunday, 15 February 2015

Waste of space: Joe Hockey’s budget megafail all Abbott’s fault

Waste of space: Joe Hockey’s budget megafail all Abbott’s fault


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The most hypocritical government in Australian history?

Why has the Abbott Government’s first budget crashed so
spectacularly? Can the damage be repaired? In the first part of a
two part series, Alan Austin examines the Government's wasteful spending.

Treasurer Joe Hockey’s first budget by has failed on several levels.
It has not generated enough revenue. It has allowed extraordinary waste.
It has attempted to shift the burden from the middle and the wealthy to
the poor. And it has invited global derision.

These failures are entirely the Government’s fault. Attempts to blame
Labor, Greens, PUP, independents or anyone else are spurious.

Here is a wasteful spending Top 40. It is not exhaustive:

1. $8.8 billion given to the Reserve Bank

 The Bank said this was not needed. Treasury said it was not advisable. Michael Pascoe claims this was a trick to make Hockey look good.

2. Border protection

The excessive cost, including of disposable orange life boats, is impossible to measure precisely. It is multiple tens of millions per year.

3. Offshore refugee processing

According to the government's own Commission of Audit, it costs
$400,000 a year to hold an asylum seeker offshore, $239,000 in
detention in Australia, but only around $40,000 on a bridging visa in
the community while claims are processed.

This is the fastest growing area of government expenditure with costs
over the forward estimates projected above $10 billion. About 90 per
cent is wasted. 

4. High Court case on eligibility for a protection visa

The Government comprehensively lost last week. The exercise was a monumental waste of time, money and human resources.

5. Profligate Cambodia refugee deal

Australia pays $40 million per year plus all extra costs. For what?
Cambodia ‘might take in between two and five people under the pilot
phase’. Resettlement in Australia would be far less expensive and more

6. Military engagement in Iraq

Annual cost at least $500 million.

7. Anti-terrorism

An extra $630 million has gone to security agencies to deal with the threat of "home-grown terrorism" which Australia’s involvement in Iraq foments.

8. F-35 joint strike fighters

$12.4 billion has been allocated for these problem-plagued American stealth jets. Not the most cost effective option.

9. Marble for Canberra buildings

Defence is spending more than $500,000 on marble panelling. Carrara marble, from Italy.

10. Other bizarre defence outlays

These include celebrity speakers and a full tendering process to acquire a multipurpose knife for camping out.

11. Futile search for missing Malaysian aircraft 370

 Estimated at $1 million per day.

12. Royal commission into the pink batts

This vindictive political witch-hunt cost an estimated $20 million,
discovered nothing new and failed completely to explore the real
questions demanding answers.

13. Royal commission into trade unions

Another political vendetta squandered an estimated $61 million.

14. Direct Action Plan

This pays some businesses to reduce carbon emissions but frees others to increase theirs. The waste is about $2.55 billion over four years, plus costs incurred thereafter.

15. Religion

Money is now available to train priests and other religious workers and for school chaplains, while funding for non-religious counsellors is cut.

16. Pseudo-sciences

Federal funds are now available for homeopathy and Bach flower therapy.

17. Abbott’s new car

His $500,000 bullet-proof BMW is part of a $6.2 million outlay, vastly more than for Australian-made alternatives.

18. Travel expenses for ministers, staff and families

These have been rorted
shamelessly, with flights to a wedding claimed. Total blow-out is
unknown because the Government is withholding the information.

19. VIP jets instead of commercial flights

Ministers spent about $900,000 in just two months
in late 2013. Education Minister Christopher Pyne’s blithe assertion
that VIP jets were “probably cheaper” was shown to be blatantly false by an ABC fact check.

20. Jobs for Liberal mates

High salaries were secured for Sophie Mirabella, Tim Wilson, Alexander Downer and others.

21. Salary for nothing

A department axed by the Government continued to pay the top bureaucrat $7,000 a week for months until another role was eventually found.

22. Public service hand-outs

Fat cats receive outrageous bonuses on top of already bloated salaries.

23. Lease termination

Charges of $65,000 were incurred when Abbott refused to live in the Forrest house rented for him during the 2013 election caretaker period.

24. The Lodge

Lavish renovations costing a staggering $6.38 million were approved in December. That is double the original estimate and more than the cost of demolition and rebuild.

25. Department of Industry and Science

$10,827 went on a coffee table.

26. G20 table

Treasury spent $36,005 on a conference table for the November summit in Brisbane.

27. Table transport

That conference table was made in the ACT. So the Government spent another $26,298 shipping it to Brisbane. Why did the tender not stipulate assembly in Brisbane?

28. Chairs

After the table had been built and transported to Queensland, chairs were also bought in the ACT – for a staggering $68,525.

29. Koalas

$24,000 was then blown in a few minutes of G20 koala diplomacy.

30. High tech theatrette

Taxpayers paid almost $330,000 in September 2013 for a Canberra space
for Scott Morrison’s border protection briefings. It was fitted out,
including with an $800 door knob, but not used. Briefings were held in
Sydney until discontinued in December 2013.

31. Perks for MPs

These include $15,442 for Attorney-General George Brandis’ bookcase.

32. ‘Obscene’ long lunches

Joe Hockey spent $50,000 to fly a celebrity chef to Washington to cook one meal.

George Brandis is among other offenders.

33. Abbott’s 3-day PR exercise in Arnhem Land

This cost a poultice but achieved only disruption to an already stressed community. The Yolngu would have benefitted far more had Abbott stayed in Canberra and not slashed $534 million from their meagre programs.

34. Asset sell-offs

$11.7 million is available to prepare privatisation
of Defence Housing Australia, the Canberra mint and other
income-generating assets. With interest rates so low, this is the time
to buy and build assets, not sell them off. A double waste.

35. Focus groups

$500,000 was spent to help sell – unsuccessfully – changes to higher education funding.

36. Media blitz

Trying to defend the widely resented university changes cost $14.6 million.

37. Damage control

The strategic communications branch of the PM’s department employs 37 spin doctors
in a forlorn attempt to polish the PM’s image. Cost to the taxpayer:
$4.3 million per year. That is on top of the 95 communications staff
engaged on border control, costing at least $8 million annually, and many other spin merchants elsewhere.

38. News media monitoring

According to Fairfax, just seven departments spent $1.2 million on "market research" in four months last year.

39. Interest on government debt

This is up from $12.2 billion in 2012-13 to $14.7 billion in 2014. With more to come.

40. Commission of Audit

And finally, as if to underscore this administration’s grinding
incompetence, the commission set up to help cut Government waste not
only utterly failed there, but blew out its own $1 million budget by 150%.

They are just some areas of waste on the spending side. Outcomes have
been just as dismal on the revenue side, perhaps even more destructive.
Those failures and whether this Government can possibly fix things will
be examined in part two, coming soon.

Alan thanks colleagues Sandi Keane and Lyn Bender for valuable input into this series. You can follow Alan on Twitter @AlanTheAmazing.

Creative Commons Licence

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License

Saturday, 14 February 2015

The strange case of the smiling car salesman and the trillion dollar deficit. - The AIM Network

The strange case of the smiling car salesman and the trillion dollar deficit. - The AIM Network


The strange case of the smiling car salesman and the trillion dollar deficit.

Not content spewing forth the ubiquitous puerile bovine excretum from the pages of Labor’s debt and deficit disaster and other mandatory slogans,
Treasurer Joe Hockey last week apparently took complete leave of his
senses, going off-script and announcing to the world that Australia
would soon face a trillion dollar deficit. That’s right, $1 trillion. By
2037, based on our current debt trajectory, we will owe one thousand
billion dollars.

Give me strength.

The comment is absurd on so many levels and for so many reasons. The
idea that Australia needs to balance its budget or risk burdening future
generations with insupportable debt is utter nonsense for starters.
Australia is a monetary sovereign. WE PRINT OUR OWN MONEY. As long as we
don’t borrow in a foreign currency or go back to a fixed exchange rate,
Australia cannot run out of
money. The only way we can go broke is if inflation gets out of control,
or demand for goods and services overtakes supply.

I realise this idea may be difficult for some to come to terms with,
so let’s leave this aside for the time being and examine Hockey’s claim
at face value. $1 trillion sounds like an awful lot of money. The
announcement was no doubt intended to shock, but it shouldn’t, really.
Hockey’s argument is fallacious. Never mind the fact that the he has
doubled the deficit in a mere 16 months in office, nor that our ‘current
debt trajectory’ cannot be described in any meaningful way; The fallacy
is not in the figure itself, but in how we are meant to interpret it.
Hockey’s forecast doesn’t allow for inflation, nor is the amount
properly expressed as a percentage of GDP, which by my quick reckoning
would put it at significantly less than it is today.

Statistical analysis is bat-shit boring for most of us, so let’s just
look at some simple data points for illustration. 2037 is 22 years
away, a calculation which Mr. Hockey might find justifiably challenging
using just his fingers, but having achieved modestly in maths at public
school I was able to work this out in my head. Using the magical google
machine I was also able to dig up some relevant credible facts and

In 1993 Australia’s GDP was $312bn USD. In 2014 Australia’s GDP was
$1.52 trillion USD. That is 500% growth over a 22 year period.

In 1993 average weekly earnings were $AUD 592. In 2014 the indicator more than doubled to $AUD 1445.

I don’t expect someone of Hockey’s political stripes to be fully
caught up on modern monetary theory, but that’s not the point. Surely
it’s a reasonable expectation that someone appointed to the high office
of treasurer should not to be so challenged by simple arithmetic? If
you’re going to make projections 20 years into the future, would you not
look back at the last 20 years? Even according to the Liberal book of supply-side economics and associated lies and half truths,
a $1 trillion dollar deficit in 22 years time is unlikely to exceed
today’s 29% of GDP. For the love of god, strong liquor and loose women,
can somebody please hand the man a calculator?

I realise I have glossed over a lot here. There are plenty of numbers
that show how income inequality has increased over the last 22 years,
whether it be the obscene salaries of CEOs, or a hyper-inflated property
market pouring money into the pockets of the already wealthy. This does
not bode well for future growth. The mining boom is over. Primary
production will not carry us into the future. Coal and iron ore are a
dead end. Austerity is the path to poverty. Investing in redundant and
outmoded technologies is counterproductive. Good economic stewardship
requires investment in science, technology and innovation. People are
the most precious of all resources. Ultimately it is demand and not
supply which will create jobs. And a hundred million other gratuitously
poignant platitudes.

I was going to use this post as an opportunity to rant about zombie
economics and argue the case for bigger deficits and smarter spending,
but the more I think about this latest retarded outburst from our
dumb-as-shit treasurer, the more inclined I am to bang my head
repeatedly on the desk in front of me and lose my train of thought.

No doubt under Hockey’s mismanagement Australia could be expected to
go broke in a very short while. But not for the reasons he argues. To go
back to my earlier point, Australia can and will run out of money if
demand for goods and services outstrips supply. That’s why we need to
invest today in infrastructure to deliver goods and services efficiently
into the future. With the bond rate parked near 2% it’s a perfect time
to ‘borrow’ money to fund, say, 10 year projects. Of course I’m thinking
of projects like a full-fibre NBN (and I could argue at length why this
should take precedence over an 8 lane intra-city expressway.) The
greater shame tho is that our governments nowadays don’t seem to stick
around long enough to see these projects through. But I digress.

2014 saw car manufacturing leave our shores forever, leaving a $20bn
hole in the economy and up to 100 000 jobs on the chopping block. Holden
had asked for $500m to continue building cars in Australia, a paltry
sum for a guarantee of direct employment for 400 engineers and 2500
factory workers, plus indirectly providing jobs for tens of thousands in
the supply chain. Before being less than politely shown the door by our
smiling used-car-salesman-in-chief last February, Holden had promised
as a condition of ongoing funding to produce two new models by 2018.
Surely I am not the only one who greeted the release of the Chevrolet
Volt at this year’s Detroit Auto Show with a raised eyebrow? With
electric vehicle charging stations already being rolled out across our
major cities, perhaps Mr Hockey would care to tell us how shutting down
Australian car manufacturing was in our long term best interest, and why
he put a free trade agreement with Korea ahead of 100 000 Australian

Don’t talk to me about intergenerational theft, Mr Hockey. If
Australia finds itself unable to service a debt burden roughly
equivalent to today’s in 20 years time, it won’t be Labor’s fault. It
will be the fault of the short-sighted economic vandals who bled the
country dry and failed to invest in innovation and jobs right now.

For more on the subject of the deficit red herring, see this excellent article from Kay Rollinson:

Wednesday, 11 February 2015

Hockey on the Ropes - The AIM Network

Hockey on the Ropes - The AIM Network

Hockey on the Ropes

Have you noticed that Joe Hockey has been doing
the rounds of radio, television and print lately, moaning and groaning
about his problems with the senate? It appears the penny has finally
dropped and he wasn’t wearing steel plated boots. Ouch!

Back in December 2013 and again in February 2014, I wrote that it was unlikely that Joe Hockey would ever deliver a surplus budget. Finally, it seems, he agrees.
“If we can’t continue to reduce government expenditure we’ll
never get back to surplus, we’ll never be able to pay our bills, we’ll
never be able to live within our means,”
the Treasurer told 3AW from Canberra.

The first bit was right. As for never paying our bills and never being
able to live within our means, well, that’s just childish. There will
never be a time when we, as a monopoly currency issuer, could not pay
our bills.

The deficits will continue to rise, however, and sit around $50
billion a year as revenue continues to fall. The budget savings held up
in the senate are a trickle compared with what is needed. They total an
average of $7 billion a year over the forward estimates.

mitchell“And sooner or later we will run out of other peoples’ money,”
he told Neil Mitchell in the same interview. Well, if he continues to
think that we won’t be able to pay our bills and that we will run out of
money, he should be replaced. It suggests he doesn’t know how we pay
our bills.

He also made the rather extraordinary claim that it was, “fundamentally unfair for us to have a lifestyle today that our children will never have”.
What rubbish! Just whose children is he referring to? I suspect that
when Joe Hockey’s children inherit his family fortune, they will have a
much better lifestyle than he does today.

But for the children of the rest of us, well, that depends on how much
debt they accumulate; private debt that is, not public debt. At the
moment, private debt is the big worry. It is at record levels and
threatens to undermine any chance of enhancing our way of life.

It was Peter Costello’s much lauded surpluses that drove us toward record levels of private debt.

Joe isn’t bad at making emotive styled comments in public as if
trying to tug at our heart strings. But if he is so determined to rein
in spending, he has been told time several times he should focus on tax
expenditures like superannuation concessions, private health insurance
rebates, mining subsidies and the like. This is where the big savings
can be made.

So given the facts, his concern for our children must be taken with a grain of salt.

Interestingly though, on the savings issue, the government is now
pleading with Labor to help them through this difficult time. Labor have
said they are more than willing to help if the focus is shifted toward
tax expenditures. Why doesn’t the Treasurer engage with them?

chalmersDr Jim Chalmers, Labor opposition spokesperson for trade and investment said, “We’re
all up for a proper conversation about fiscal responsibility, but we’re
not up for a conversation that asks the most vulnerable people in
Australia to carry the heaviest load.”

Hockey has a simple choice here. Had he chosen the right one on
budget night last May, he might well have been a leadership contender
today. But he didn’t, and he isn’t. He chose to protect the big end of
town at the expense of the most vulnerable.

Just like his boss, all his problems have been of his own making.