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.

comments powered by Disqus

THE LATEST FROM THE KOUK

The Dangers Of A Sluggish Household Spending Rate

Fri, 29 Jul 2016

This article first appeared at the Adelaide Review website at this address: http://adelaidereview.com.au/opinion/business-finance-opinion/dangers-sluggish-household-spending-rate/#.V5k-QyDuwq8.twitter 

---------------------------------------------- 

The Dangers Of A Sluggish Household Spending Rate

One of the disappointing aspects of the performance of the economy over the past few years has been the moderate and frankly unimpressive rate of growth in household spending.

To be sure, households are continuing to increase their purchases of goods and services, but the growth rate of that extra spending has been mediocre and is one reason why the overall economy is muddling along rather than registering stronger job-creating growth. The reasons for this sluggishness in spending have several causes all of which are important.

Recall that households need funds or access to money to be able to spend. In its most simple form, they can use their income, run down savings or they can increase their borrowing to fund extra spending. Indeed, there are no other sources of funds by which to lift spending.

Why is Australia's inflation rate so stunningly low?

Thu, 28 Jul 2016

This article first appeared on the Yahoo7 website at this link: https://au.finance.yahoo.com/news/why-is-australia-s-inflation-rate-so-stunningly-low-021727792.html 

------------------------------------------------------

Why is Australia's inflation rate so stunningly low?

Australia’s inflation rate is stunningly low. At just 1.0 per cent in annual terms, it is well below the bottom of the RBA target band of 2 to 3 per cent and it is low for reasons that are not all that favourable. In simple terms, the economy is too weak and the unemployment rate is too high.

There is a simple and well established link between the strength of an economy and the rate of inflation. It suggests that when an economy is strong with people spending at a rapid pace, businesses ramping up their investment and the unemployment rate falling, inflation is high or rising.

It is high because in these sorts of strong and optimistic economic times, businesses feel that they can edge up their selling prices without driving away customers. This is, by definition, inflation. The optimistic customers are willing to pay the higher prices because their financial circumstances are favourable.

What usually happens in these circumstances is interest rates go up. In lifting interest rates, the Reserve Bank wants to discourage borrowings and encourage savings and those people with debt will have to allocate more of their otherwise disposable cash to pay interest on that debt. This means they have less spare cash for elsewhere in the economy and as a result, the economy slows and with a lag, inflation falls back.