Hockey's Unhappy Dilemma

Hockey’s Unhappy Dilemma

By John Kelly on March 13, 2014 • 

Has
anyone noticed a change in Joe Hockey’s approach to the economy? It
seems we are not in a budget emergency after all. It seems the latest
national accounts figures suggest things are on the improve.


The latest national accounts figures
show a growing economy; 0.8% for the December quarter. That’s a much
better result than the September quarter’s 0.6%. The Treasurer says it
is still below trend of 3-3.25% per annum but he was being cautious.
Considering all the doom and gloom he was predicting prior to the
election one would expect him to be guarded in what he said but, given
this unexpected upturn, he must find the latest figures something of a
dilemma. He should be over the moon but he knows he can’t take any
credit for them because he hasn’t done anything yet. They belong to
Labor. And, if you multiply December’s 0.8% by 4 you get 3.2% per annum
which if it continues at that rate, is bang on trend. And none of it
will have anything to do with Joe Hockey. It will all belong to Labor.


This does not mean, however, that a surplus budget is just around the
corner. Far from it. Targeted spending by the previous government
produced deficit budgets to keep the economy moving. Labor’s four year
projections to 2017 will require more money than revenues are projected
to raise. That means the shortfall has to be borrowed and Hockey will
have to keep borrowing unless he cracks the jackpot at some fantasy
casino. Hockey’s dilemma is that he promised to stop the spending. If he
doesn’t, the forward projections, if left as they are, will likely
produce a national debt of more than $600 billion by 2017.


When
you consider that the national debt as at September 2013 when the
Coalition came to power was just $284 billion, you can see the problem.
Joe doesn’t want to see that figure climb up to $600+ billion on his
watch. What a dilemma; how to keep the economy growing and not continue
to borrow; how to make those horrible debt projections go away. It would
be easy to blame Labor all the way through to 2017. If you hear anyone
on the government side say Labor left them with a $600 billion debt,
this is how they arrived at that figure. They are talking about the
projected debt for 2017, but I doubt blaming Labor will wash with the
electorate.