It's now $61.15 billion of gross borrowing by the Abbott government

Fri, 21 Mar 2014  |  

The week ends with the Abbott government borrowing a further $700 million today, which brings the total of gross borrowing since 9 September 2013 to $61.15 billion.

$61.15 billion of bond and T-Notes that have been issued in just over six months as the government funds the budget deficit, covers maturing bonds and T-Notes and prepares to fund a range of its policy expenditure items.

As I have noted at nausium on the issue of government debt over recent years, the Australian government's debt level remains trivial, chicken feed, small beer and the campaign of the Coalition Parties to suggest otherwise was factually flawed and it still is.

Even in government, the Coalition bemoan the level of debt and pretend it is a major factor threatening to undermine Australian sovereign risk or some similar nonsense.

The credit ratings agencies, all which rank Australia triple-A with a stable outlook and have since 2011, suggest the level of government is low. So do foreign investors who own close to three-quarters of the government bond market and a huge proportion of the stocks listed on the ASX as well as an increasingly large holding of property. They do so comfortable in the knowledge that a government debt problem that would hurt the Australian dollar or bond yields is very unlikely.

The cumulative effect of the new borrowing means that gross government debt now stands at $310.1 billion, some $36 billion higher than when Mr Abbott convincingly won the 2013 election.

It was always obvious the promise to stop the borrowing and repay Labor's debt were false. The facts confirm this.

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THE LATEST FROM THE KOUK

House prices from hot to warm - cold just around the corner

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Here is some context.

In the seven months since the end of March, house prices have risen a moderate 3.8 per cent in total. This translates to average monthly gains of 0.5 percent for an annualised pace of around 6.25 per cent which, clearly, is nothing to be too worried about. Even the year over year rise reported by RPData has fallen to 9.1%, down from the peak levels around 12 per cent earlier this year. It seems likely, if not certain, that the rate of increase will ease further, especially if – or when- macroprudential rules come into place to dampen the sector.

As noted, the real heat in house prices was in 2013 and the early part of 2014 when, arguably, the RBA could have and should have hiked interest rates. Alas, it didn't take my advise and it failed to do so but thankfully, with the momentum in house prices is now off the boil, it can sit tight a little longer on interest rates and judge what happens globally, to the unemployment rate and inflation before changing.

For now, the RBA can rest easy knowing house prices are no longer rising at a pace that is all that concerning. A macroprudential tweak, if delivered, would likely see house prices soften further or even fall and this is when the RBA can move to cut official interest rates as it deals with disinflation pressures domestically and from around the globe.

Red tape pizzeria - why Joe Hockey is right

Thu, 30 Oct 2014

Joe Hockey is right! There is soooo much petty red tape in this great country of ours.

For our Treasurer, it was a pizza shop in Sydney. Thick-crust Joe went for a pizza a few weeks ago and as he arrived he saw a few friends. When he saw a couple of tables outside with three chairs on one table, four on the other, Pepperoni Joe went to put the two tables together so that the two families could be together. What could be nicer than sitting outside on a sunny spring evening, nibbling away at a Quattro Stagioni and a Hawaiian (extra pineapple)?

But there was a problem. The pizza shop owner came out and said "I'm sorry Mr Hockey, you're not allowed to do that, the council regulation prevents you putting the two tables together."

According to Meat Lovers Joe, "There were eight of us, so I went inside to get another chair and they said, 'Sorry Mr Hockey, they've said you can only have seven chairs [outside], not eight". This is when anchovy Joe "exploded."

Arrgghh. RED TAPE!