The Greens oppose the CPRS not because it is too weak, but because it will point Australia in the wrong direction with little prospect of turning it around in the timeframe within which emissions must peak, says Senator Christine Milne.
The $25 billion debt expansion and tax cut that wasn’t in the budget
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The Rudd government took budget leaks and spin to a new level ahead of last Tuesday’s budget, but yesterday we discovered the media manipulation extended to actually delaying important debt and tax announcements until after the budget. Wayne Swan blithely slipped out this release yesterday revealing that Federal debt would be expanded from $50 billion to $75 billion and the 10% withholding tax would be abolished on state government debt. Think about it for a moment. Shouldn’t that announcement have been made last Tuesday night? Balance sheet management and tax cuts are the bread and butter of budgets but the Labor spinners clearly didn’t want any media focus on Commonwealth debt, let alone a $25 billion expansion. It worked a treat as the tabloids missed the yarn. The Australian’s John Durie was the only commentator who weighed in, including this telling disclosure:
So there you have it, the biggest contributors to Australia’s soaring $610 billion foreign debt in recent years have been Labor state governments and now they’ve got a much more expensive refinancing exercise given the global credit crunch. It’s hard not to see yesterday’s announcement as part of a continuing state government bailout. State debt is rising so quickly that we’re now seeing desperate privatisation moves in Queensland and NSW and increasing numbers of public private partnerships on hospitals, roads and other normal state government functions. The Building Australia Fund, along with the health and education funds, was Federal Labor’s first move to relieve the cash-strapped states of these burgeoning infrastructure bills, the sort of bills which come with a booming economy and fast growing population. Now we’re seeing tax breaks on state debt for foreign lenders at a time when the various Labor governments are going cap in hand like never before. Swan’s announcement also included this:
What odds that will include state bonds? Are the Feds borrowing an additional $25 billion that will be on-lent to their state Labor mates? At least the announcement will hopefully force journalists and commentators to admit the Commonwealth does carry some debt, rather than produce lines like this from George Megalogenis in The Australian last week:
Err, no. Labor left behind a $96 billion debt in 1996, Peter Costello paid almost $50 billion back and now Labor is pushing it back up to $75 billion. Sure, you have to also consider the asset side of the Federal balance sheet, but can we also please stop pretending there is no Commonwealth debt? Today’s Mayne Report video is called “Skinny guy, fat documents” |
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8 Comments
I cannot see how one could reasonably make the comment you have stuart. It was dishonest not to have announced this last Tuesday. It requires legislation to be enacted and they are not “minor” changes. Media management by the state labor government here in Victoria verges on being “creepy” and one wonders wether Rudd and more readily Swan have taken a leaf out of the Bracks/Brumby songbook.
Aaah no … the reason why the government is doing this is to maintain the govt bond market … an essential part of any financial system
If you want to focus on debt try private debt
Stuart, I’m not saying abolish government debt at all. Rather, let’s just be open about about debt management and disclose what is owed, when, what it costs and the investments it is funding. Government debt is perfectly fine, but there’s also an argument that you should be trying to reduce debt in the middle of a once-in-a-life-time boom. The same goes for public sector superannuation. Fund it if you can, but disclose the liability and use consernative accounting if you can’t.
Fair call disclose what you owe. Thats fine with me. But you cant manage the level of government debts when youre trying to maintain an interest rate. To keep the interest rate at a certain rate you have to take on as much debt as the market is willing to loan at that rate, otherwise the interest rate will fall and youre no longer in control of monetary policy. This is true whether in a boom or a recession. And with the cash rate increasing and the subprime crisis you have to expect goverment debt to increase, it simply reflects the fact that government debt is a good investment. To suggest that this is in some way a poor government policy (as this headline seems to) is false.
Cracking read I thought, high on the index too. Meglo is a very good journo, it’s human to err. I imagine we read a thesis in The Oz now, or a new book. Go Meglo - the Debt Decade.
Enough of Stephen Mayne’s “abolish government debt” already! Stephen, a simple fact. The government goes into debt whenever a bank buys RBA securities, the primary tool the RBA uses to control interest rates. To maintain the cash rate the RBA always has to be willing to go into debt and borrow money from banks at that rate. If the government were to abolish all its debts, or even put limits on the ammount of debt they hold, they would relinquish their ability to control interest rates. Therefore while the RBA is still independent, and discretionary monetary policy is still used the government will hold some ammount of debt.
Now please stop writing stories about it!
i agree with stuart. stephen mayne is being a teensy bit disingenuous in his reply i think coz his article implies labor govts always run up huge “debt” (bad thing) that it then requires a coaltion govt to clean up the mess (good thing). as others have pointed out there are valid and necessary reasons for debt. one being it pays for the building of infrastructure into the future that future generations will use and enjoy and can help to pay for. nothing wrong with that.
god knows we need a better broadband set up then we’ve got atm. americans and europeans have connections 10-100 times faster than ours. how will we ever compete with that? in a country this big it’s really only govt who can fork out the big bucks to do it. good on ‘em i say for doing it.
and let’s not forget that sm did work for kennet who privatised everything in victoria he could see and gave thousands of teachers and other workers the sack….
So, who runs the economy? The lenders, the RBA, or th Government? How much impact does private det have? What about savings? What about loan defaults? All of these are interrelated. It’s time to redo the system, but fat chance anything happening.
Economics is easy. The meaningless jargon they wrap it round is designed to make it sound hard.