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:
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State government paper on issue has increased by some 40 per cent over the past five years and some 66 per cent of it is sold to offshore investors.
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:
Because of the additional resources to be held by the Australian Office of Financial Management, the Government will change its investment powers to allow it to invest in a broader range of assets than under its current mandate. At present the AOFM invests in term deposits with the Reserve Bank.
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:
Mr Swan is the first treasurer in history with no commonwealth debt to cover. There is no borrowing to pay off.
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”