There was an interesting line about Reserve Bank dividends buried in Budget Paper No. 1 on page 5-18.

“Total dividends are expected to decrease by $1.6 billion (38.4 per
cent) in 2004-05, largely due to a decline in RBA dividends. The
decrease results from lower estimated earnings due to lower world
interest rates and the re-building of RBA foreign exchange reserves.”

The word “re-building” is interesting. Does that suggest the Howard
government has recklessly run the foreign reserves down to prop up its
budget and claim bigger reductions in national debt?

Australia has one of the smallest piles of official “foreign reserves”
in the world and we are shamed by our more responsible Asian
competitors who dwarf our miserable sub-$30 billion in reserves.

Yet you never hear the Federal government talk about it. The only
measure the Howard government uses to trumpet its fiscal management is
Federal debt and the annual deficit. When considering the financial
strength of the federal government there are three other very important
indicators to get an accurate overall picture of the Commonwealth’s
financial health.

1. Official foreign reserves held by the central bank.

2. Assets owned by the government.

3. Unfunded superannuation liabilities owed to current and former public servants.

On all three counts the Howard government has performed poorly.
Privatisation has certainly helped reduce official debt by almost $70
billion but there is not much left to sell apart from Aussie Post, 51
per cent of Telstra and Medibank Private. Government assets have falled
by more than $50 billion.

We know that unfunded super has blown out by $13 billion to $87 billion
over the first eight years of the Howard government, but the latest
forward estimates show the Treasurer Costello is happy to sit back and
let the situation deteriorate.

The unfunded liability is forecast to surge from $87.87 billion as at June 30, 2004, to $98.5 billion by the end of 2007-08.

Therefore, the government is claiming it will produce a collective $7
billion surplus over the next three years but this does not include the
$7.35 billion increase in unfunded liabilities over the same period. In
other words, they have blown the entire surplus for the next three
years if you assume that superannuation liabilities are maintained at
the current level over that period.

No private company could get away with claiming big profits whilst
refusing to put enough money aside to cover the superannuation
entitlements of employees but the financially reckless Howard
government has been doing it for years.

The smell surrounding the most profligate budget in Australian history gets worse by the day.

How the banking cartel has propped up the budget

Whilst the Federal Government keeps claiming that they are providing
great value for taxpayers by cutting taxes, there have been a number of
battlers complaining about increases in the cost of living.

The one area which has increased more than any other under the Howard
government is the cost of banking. The average Australian now pays
about $400 in banking fees and charges a year, often out of after-tax
dollars.

The banks are now reaping almost $8 billion a year in fees and this has
sent their shares and profits soaring over the past eight years.

The banks are all licenced by Federal Treasurer Peter Costello who also
appoints all the key banking regulators – the ACCC, APRA and the
Reserve Bank. Cozzie therefore has enormous power to control the way
banks operate.

Company tax receipts have soared from $15.59 billion in the final full
year of the Keating government to a forecast $38.76 billion in 2004-05
– an increase of 250 per cent.

And which sector of the economy has delivered the largest lump of the
increase? The licenced banks, of course. Bank profits have soared from
about $5 billion to more than $12 billion over the course of the Howard
government and this means that Cozzie is reaping an extra $2.5 billion
in company tax revenue because he and his merry band of weak-kneed
regulators have sat back and allowed the cartel to gouge Australian
consumers mercilessly.

Of course, the Government gets none of the grief at the ballot box for
this, but can claim credit for the tax cuts and bribes the tax bonanza
on banking profits deliver in an election budget.

Isn’t it time that Costello was held to account for his subservience to
the banks, which, by the way, have donated more than $5 million to the
Coalition over the past decade?

Peter Fray

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