Jun 16, 2017

Australia’s gross debt has crashed through $500b. Which is the party of good financial management again?

Remember when the Coalition said it would solve Australia's debt and deficit problem? Tell that to the $500 billion debt, which is getting worse by the minute.

Alan Austin — Freelance journalist

Alan Austin

Freelance journalist

Tonight is the night. After most reporters will have knocked off for the week, Treasury will quietly announce that Australia’s gross debt has clicked over $500 billion. This will signal three things. Hardship for citizens ahead, a decline in Australia’s global standing, and monumental hypocrisy from the Coalition.

Before the 2013 election, Coalition MPs were scathing about Labor debt levels, cutting no slack for the global financial crisis (GFC) -- the worst economic downturn in 80 years.

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25 thoughts on “Australia’s gross debt has crashed through $500b. Which is the party of good financial management again?

  1. Ben Smith

    Good article, thanks for sharing. I’d say it’s a pretty safe bet Murdoch’s papers don’t make this front page news tomorrow.

  2. mike westerman

    Australia really is in a hopeless position until we get rid of these incompetent rent seekers. We need pollies, and particularly a treasurer and PM who understand maths: that you don’t get consumers consuming if they have no money, and that those with too much money spend it overseas or use it to raise debt that the poor pay for through tax loopholes. Neocon economics is not economics, it is simply deceit and poor management, nowhere better illustrated than Australia 2009-2017.

  3. BGas

    The ongoing furphy that the Coalition are better economic managers than Labor has beena brilliant scam by the Coalition for many years. There is bugger all chance the media will call out this bullshit for what it is. The question is why Labor don’t call it out. It’s pretty is to prove – the figures are all there.

    1. zut alors

      Figures/facts seem irrelevant as the Coalition will continue to falsely boast how fiscally clever they are – in contrast to the spend-like-drunken-sailors-ALP. The Coalition has painted that colourful image in the electorate’s mind, it’s their story & they’re sticking to it.

      Abbott called the “budget emergency” a few years too soon. He’s irritatingly vociferous re energy policy but is as silent as the grave on the government’s half-trillion blowout. C’mon Tony, nothing to say….?

  4. Nicholas

    These are bonds that the Australian government has issued in the currency which it alone can create. How are these bonds a problem for the government?

    1. mike westerman

      No problem creating them, but if there is no value created, they will put downwards pressure on the currency. If they were created to encourage growth in the size and efficiency of the domestic economy instead of subsidising offshore transfers by the wealthy, they would be wonderful, but they’re not: the simply embody ongoing growth of inequity and economic inefficiencies.

      1. Nicholas

        Issuing securities in its own currency isn’t even necessary for a currency-issuer. It does not need to borrow its own currency. The federal government should simply stop issuing bonds. Commonwealth Government Securities are corporate welfare, not an operational necessity.

    2. Charlie Chaplin

      Great question, Nicholas. Why is the government issuing debt at all? It can’t default on its own currency- it issues the stuff, creates it by the act of spending. Could it be debt issuance is simply a nice, safe, water tight investment opportunity for rent seekers?

      It would be laughable if it wasn’t so deadly serious, wouldn’t it? ” We won’t pay our rightful share of taxes. No effing way. Not happening. No need- we both know you don’t need to raise revenue to spend in the first place, anyway. You create the money by the act of spending it. But, we’ll kindly lend you the money we won’t pay in taxes. That way, we make MORE money on the money we make not paying taxes, and you get your bridge or whatever, while we both preserve the ridiculous fiction that a currency issuing government can run out of money and needs to tax or borrow to finance its spending. Keeps wages down. Keeps the labour underutilisation pool big enough to drown a whole fleet of submarines in. Keeps the people afraid. Win/win. And the R&D on those self devouring robots is coming along beautifully. We’re almost there. They’ll consume themselves a little bit at time and use their UBI to replace the bits they ate. Liberals assure us the robots WILL get the UBI: discriminating against intelligence just because it’s artificial is WRONG. Deplorable. Morally repugnant. In fact, the robots will receive a much higher UBI than humans – compensation for all that awful redneck discrimination they’ve suffered, poor things “

  5. klewso

    Same ol’ Slomo – but never fear, the hare apparent of the remains of the latest incarnation of that Bambino of clowns that have occupied the Treasury benches for 15 of the last 21 years has a cunning new plan…. Baldrick?

  6. Sue Marshall

    Stop all overseas aid. We have just given $40 million to the Red Cross. They have a shocking record for dishonesty just like the Sallies and Vinnies. Cut out aid to Catholic School as they charge high school fees. Churches can compensate the abuse victims not the taxpayer. Send terror suspects and their families back home. Don’t stop ISIS fighters at the airport let them go and not come back. Stop aid to World Vision. Contraceptives is what these charities need. Stop funding Domestic violence let adults work out their own problems the same as Druggies. The money could be spent on the sick children and adults who do not have self inflicted illness.

    1. mike westerman

      Oh Sue you pinko softy – stop all public spending: hospitals produce dead bodies, police stations – criminals, schools – drop outs, traffic – accidents. In fact women produce people who either die before they’re criminals or afterwards but what’s the difference, so stop all women breeding, send everyone home with a box of Ratsack – once people are all gone the world will be Eden again.

    2. no chiefs

      This is Trump-style neonationalist garbage. Public wealth is mostly being squandered on ‘overseas aid’ to the transnational corporate kleptocrats.

      ‘Stop funding domestic violence’
      I assume you mean stop funding anti-domestic violence programs. Your thoughts are disordered.

      ‘Let adults work out their own problems’
      … so you suggest encouraging households to settle disputes via backyard UFC competitions while the kids cheer on their favorite parent. Brilliant. Sue Marshall for PM.

  7. Paul

    As with all other thing we will die waiting for the Australian media to challenge Turnbull, what happened at the mid winter ball when they collectively had a orgasm at his brilliant wit and repartee demonstrates that.

    It is not only the Libs who should be held to account but there groupies and coat tail hangers on in the press gallery in particular and the media in general

  8. rossco

    The West Australian (print edition) covers this story with a 4 para piece on p9. The first 3 paras just report the numbers, no comment. The last para is
    “Treasurer Scott Morrison said it was the Labor Party that should apologise for the $500 billion problem, arguing it had run up the debt.”
    Thanks Scott for that contribution. After 4 years of Lib govt this excuse is more than a little threadbare.
    The on-line report does give a fuller story but who reads that.

  9. AR

    I wonder if the author would mind if some public spirited citizens printed this article and began plastering it all over the country.
    Spare, precise, almost no adjectival flourishes or rhetoric – just plain facts.
    Alas, when have facts or reality been the basis of people’s beliefs, prejudices or political ideology.
    As Bgas above wonders, the continuing mystery is that Labor does not campaign on this.
    It couldn’t be that they are equally beholden to the megacorps and BigAr$e end of town.
    Could it?

  10. alan austin

    Thanks for these comments. Appreciated.
    Mike W, Zut Alors, Paul, Klewso: agree entirely.
    Why do Labor MPs not attack more, BGas? Don’t know. Perhaps because they know the media will always bash Labor over economic incompetence and are reluctant to give them another opening. Perhaps because they know the turnaround to sustainable budgets will take many years, so don’t want to raise expectations. Would love to know.
    Sue M, do you believe that? Or are you mischievously channeling Tony Abbott?

    1. Charlie Chaplin

      You left out Nicholas, Alan. Here’s his comment again: “These are bonds that the Australian government has issued in the currency which it alone can create. How are these bonds a problem for the government?”

      And here’s where I think he’s coming from. Apologies to Nicholas if I’m wrong:

      “Fed Chairman Ben Bernanke admitted the central bank created $1.3 trillion out of thin air to buy mortgage backed securities.  This shocking admission came from the Joint Economic Committee hearing on Capital Hill last week.  I was dumbfounded when I saw Bernanke shake his head in the affirmative as Representative Ron Paul said, “Well, where did you get the money? You created this money. So you did monetize debt, and that went into the banking system.”  I was amazed he admitted this.  I looked up the original hearing on C-Span to make sure the clip was not edited.  It was not.”

      Like us, the US is a currency sovereign. It can’t default in its own currency. It creates currency by the act of spending it. It is not revenue constrained. It does not have to borrow to finance its spending. A government budget is NOT like a household budget – unless you stupidly gave away your currency sovereignty. I’m looking at you, EU. Also like us, US banks create public money by crediting accounts in the nation’s currency ( aka loans/debts), though it would be better for most of us if public and private currency were separated. Bank dollars could be called chips or pieces of eight and come with a free parrot that sits on your shoulder and squawks ” Arrr, me hearties!” night and day. Those brave souls who like gambling and/or parrots could go for private bank dollars, the rest of us could go for public $AUD dollars at the national bank.

      So, as Nicholas asked: ” How are these bonds a problem for the government?” Other than the political fiction of budget constraints, that is?

      1. alan austin

        Thanks, Charlie, and Nicholas.
        Yes, modern monetary theory looks good on paper. But it fails to deal with some critical issues, such as when Australia sells bonds to foreign governments in Aussie dollars.
        This is what is happening in Australia today:
        Step 1: Foreign governments or corporations ask the Turnbull Government to allow them to take profits offshore without having to pay tax.
        Step 2: Government ministers agree – and accept in exchange large donations to the Coalition parties.
        Step 3: Australia then borrows from those foreign governments to fill the revenue shortfall.
        Step 4: Australia then pays those foreign creditors interest – currently A$32 million per day. Every day.
        Step 5: Those foreign governments use those Aussie dollars to buy up land or utilities or other assets as they come on the market.
        Step 6: Cash then flows straight offshore from Australian customers of the utilities or farms.
        Step 7: Company profits reach new all-time records.
        Step 8: Meanwhile, Australia’s deficits expand, the debt balloons, hours worked per person decline, wages stagnate and GDP growth stalls.
        Step 9: On retirement, Coalition MPs are rewarded for services rendered with high-paid directorships.

        1. AR

          Alan sshhhh, and watch out for black vans following you.
          Some truths are not to be spoken.

          1. alan austin

            It’s okay, AR, I live in France. Nothing to worry ab …
            Hey, wait a minute, why is that large black Peugeot 4007 with the tinted windows parked outside our villa ..?

        2. Alphonse

          1-2. Lib global plutocratic croneyism
          3. Our private sector incurs debts denominated in foreign currencies . Our federal government does not. Our federal government issues bonds that it can always roll over and on which it can always pay the interest with currency that it can issue without limit. It makes no difference in solvency terms whether the bondholder is a foreign government, foreign private entity or a local super fund or other financial entity.
          4. That “borrowing” is unnecessary. You believe the fed govt has to issue bonds to the exact amount by which currency creation by its spending exceeds currency destruction by its taxation. That is a flawed, if conventional, belief. A hangover from the days of pegged or commodity-backed currency. From before 1984 in Australia’s case.
          5-6. Yep. Ridiculous isn’t it. But the govt can disapprove acquisitions, tax landholdings, regulate activity, tax profits and resume land with its unlimited capacity to issue dollars. So none of this need be, either. It’s just more Lib global plutocratic croneyism but none of it is irremediable short of urban vandalism or environmental destruction.
          7. More plutocratic croneyism
          8. (and here’s the doozy) Australia’s hours worked per person decline, wages stagnate and GDP growth stalls not because our federal deficit is too high but because it is too low. I can’t believe you’re preaching expansionary austerity! Why on earth do you want to bleed the anaemic patient, the private sector, with decreased private surpluses? It’s already loaded with debt, real currency users’ debt, not currency issuer’s pseudo-debt, because of overly tight budgeting, especially during Costello’s run of federal budget surpluses. That private debt is being paid down instead of contributing to economic activity. We have what is not quite a balance sheet recession; just balance sheet stagnation.
          9, Yeah, it stinks. So why do you buy the fiscal ideology of these shysters?

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