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.

comments powered by Disqus


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

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


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.