The Daily Telegraph's $1 trillion ineptitude

Fri, 13 Feb 2015  |  

The Daily Telegraph has maintained its standing as an inept and incompetent publication with the page one splash today –

Australia's debt crisis is a staggering $1 trillion nightmare.

It read: AUSTRALIA'S mounting federal government debt will be $1 trillion by 2037 if urgent action is not taken to rein in the federal budget.

The story has as its focus, a quote saying "without dramatic changes to government spending and a reversal in slumping revenues, they predict Australia's government debt ratio to GDP will surge above the 50 per cent mark within 10-15 years."

Ok, let's assume the headline point that net government debt will be $1 trillion in 2037 is correct (a big assumption I know given the track record of the Tele in policy matters and the economy).

Is sounds big and scary for government debt to reach such a big amount of money. It is like the nasty monster that lives in the bottom on most people's garden, or at least is imagined to by little children when they are unaware of worldly issues.

But why don't we have a look at how that $1 trillion will look in 22 years.

Let's start from a point where 2014 nominal GDP is $1.600 trillion, which is basically a given since we have three quarters of data for 2014 already in. If we work on the assumption that nominal GDP grows at its long run trend (the average over the past 20 years which is 6.3 per cent), GDP in 2037 will be around $6.52 trillion. The $1 trillion of net government debt will therefore be 15.3 per cent of GDP.

Mr Hockey's MYEFO document confirmed just a few weeks ago that net government debt in 2015-16 will be, wait for it, 16.7 per cent of GDP!

Debt as a proportion of the economy will be smaller in 2037 if it does rise to $1 trillion!

I need to use exclamation marks and use bold font because the story is exasperating, so dreadfully researched and prepared and suffers from the money illusion that a large number, $1 trillion, is scary. There is no context. I am going to be 150 years old in 2113 unless something happens in the interim. 

I, for one, reckon Australia will be doing really well in 2037 if net government debt is $1 trillion, because it will probably mean the budget has travelled on a sustainable path for two decades, the AAA credit rating will likely be intact and hopefully, the Daily Telegraph will be a in the archives for media studies students to ponder how such incompetence and ineptitude could have ever been published in a major daily newspaper.

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The weak economy is turning higher

Mon, 15 Jul 2019

This article first appeared on the Yahoo Finance web site at this link: 


The weak economy is turning higher

In the space of a couple of months, the rhetoric on the economy has gone from strong to weak.

Curiously, both assessments are wrong.

The economy was actually weak during the first half of 2019 and, if the leading indicators are correct, late 2019 and 2020 should see a decent pick up in economic activity.

It is not clear what has caused this error of judgment and the about face from so many commentators and economists, including importantly the Reserve Bank. A level-headed, unbiased look at economic data confirms that in late 2018 and the first half of 2019, the economy was in trouble. There were three straight quarters of falling GDP per capita, house prices were diving at an alarming rate, there was a rise in unemployment, wages growth remained tepid and low inflation persisted.

These are not the dynamics of a “strong” economy.

Only now, in the rear view mirror look at the economy, are these poor indicators gaining favour, leading to generalised economic gloom.

Australia needs ‘fiscal stimulus', but what does that actually mean?

Wed, 10 Jul 2019

This article first appeared on the Yahoo Finance website at this link: 


Australia needs ‘fiscal stimulus', but what does that actually mean?

With the economy down in the dumps and the per capita recession now extending to nine months, there is a frenzied call for the government to implement some spending and tax policies to stem the bleeding.

The calls are coming from economists, journalists, the RBA Governor and a bevy of commentators who are demanding a fiscal policy boost from the government to support economic growth. This is all fine and there is a strong case for policy makers to work together to do something to lift the pace of economic expansion.

But there is a problem with the generic “fiscal policy stimulus” demand given that none of the calls have been accompanied by even vague details of what the stimulus means and the areas of spending that should be ramped up or what taxes should be changed.

Sure, there is a suggestion of more spending on ‘infrastructure’ but that is never defined or specified.