Peter Costello was back at his fiscal fibbing best yesterday when he unveiled the government’s healthy cash flow for 2007-08 and declared “this would be the strongest fiscal position probably in the developed world”.
How an earth can a government with a negative net worth make such a claim? The Singapore Government has net assets of more than $200 billion and have even pumped almost $30 billion into Australia, such that a foreign power now owns more of Australia than our own government.
While the Howard Government is constantly berating the states for proposing to borrow $70 billion to fund infrastructure investment over the next five years, there is no such counseling to Australian citizens who are living way behind their means, borrowing with their ears pinned back to fund consumption.
Now that we’re dealing with a global credit crunch, it is time for the government to declare that everyone, not just the federal government, should focus on improving savings.
Total Australian credit has rocketed from $515 billion to $1.63 trillion over the past decade and household mortgages have soared by 320% to a staggering $873 billion. The majority of this has come from borrowing offshore and this money has only been provided because our interest rates are higher than most other developed countries.
At least Cossie didn’t claim world leadership when compared with developing nations because the likes of Russia and China are absolutely leaving us for dead in terms of savings and balance sheet strength.
Chinese citizens have a staggering $US2.2 trillion deposited in banks and this is on top of the equally staggering $US1.33 trillion in foreign reserves accumulated by the government as at 30 June, 2007.
Yet here we are enjoying the best terms of trade in 50 years and we’re still running a dangerously high current account deficit of $50 billion when the rest of the world’s commodity exporters have large and growing trade surpluses.
Even after a staggering four year boom, we’ve still got $50 billion in federal debt to pay off which the Government pretends doesn’t exist.
Rather than setting up all those politically motivated funds, the Government should have continued paying down debt and directly funding federal super. Why wait until 2020 to get Federal super covered when you could do it by 2010 with a little bit of fiscal discipline.
The Future Fund currently has $42 billion in cash and securities with yesterday’s promise of another $7 billion imminently and then a further $7 billion from the second instalment of T3, next May.
The 2.1 billion Telstra shares it holds are worth $9.1 billion so that makes total contributions of $65 billion – still less than the $69 billion unfunded liability it inherited from Labor. The only problem is that unfunded liabilities have now risen to $103 billion and will hit almost $118 billion by 2011 and $210 billion by 2046.