‘Utterly desperate’: Why Scott Morrison wants you to ignore government debt

Thu, 07 Nov 2019  |  

This article was written on 14 October 2019: It was on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/ignore-government-debt-225040404.html 

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‘Utterly desperate’: Why Scott Morrison wants you to ignore government debt

When it comes to government debt, the Morrison government is desperate for you to keep your eyes and ears closes and ignore the facts.

Utterly desperate.

These facts are likely to be defined by Prime Minister Morrison as being ‘in the Canberra bubble’ and therefore not worth talking about.

So what is happening with government debt? You know, the government debt that when the Liberal Party was in opposition and Labor were in power was “a disaster”, that was “undermining our kid’s future” and threatened to “ruin the economy”.

When in Opposition, the Liberal Party promised to return to the budget to surplus and to “pay off Labor’s debt”. It was a promise that created and then reinforced a perception, at least in the mind of some voters, that the Liberal Party is a better economic manager than Labor. This perception has been a critical factor in the Coalition winning the last three elections in 2013, 2016 and most recently in 2019.

Last week, updated data on government debt were released which allowed for an up to the minute assessment of how those promises on debt reduction are going.

In terms of gross government debt, data from the Australian Office of Financial Management shows it reached a record $565 billion as at 11 October 2019. At the time of the September 2013 election, gross government debt was just $273 billion.

This means that in a little over six years, with six budgets and countless policy changes and reforms from the Coalition, gross debt has increased by $292 billion or 107 per cent.

When Mr Morrison is talking about “strong growth” I assumed he wasn’t referring to government debt!

According to Department of Finance data, net government debt reached a record $399 billion at the end of August 2019. At the time of the September 2013 election, when the Coalition was swept to power, net government debt was a paltry $161 billion.

Net government debt has increased by a massive $238 billion or 148 per cent in the six years the Coalition has been in control of spending and taxing policies.

This $238 billion addition to net debt in the six years under the Coalition government compares to the $215 billion rise in net debt under the Labor Party in the six year period from 2007 to 2013 when it was last in office.

Labor’s addition to debt occurred when the world economy was floundering in the deepest recession since the 1930s Great Depression and was driven by both fiscal policy stimulus and a loss of revenue as economic growth slowed.

How has the debt been mounting?
The extraordinary thing about the debt blow out in the last six years under the current Coalition government has been that is has occurred when the global economy has been growing strong and commodity prices have been booming. The Coalition government is banking on getting the budget to surplus this financial year and in the process, it is hoping to stem the rise in debt.

At the time of the last budget, delivered in April, the 2019-20 budget was forecast to register a surplus of $7 billion. It is too early to be absolutely sure whether a $7 billion surplus is still on track. Providing a massive windfall in revenue to the government is the still robust level of commodity prices, particularly iron ore, but this is being offset by the chronic slump in private sector demand which is lowering wages growth and consumer spending.

Data last week from the Department of Finance shows that for the first two months of the financial year (July and August) the underlying budget balance is running $664 million below the assumed run-rate from the budget figuring.

The monthly budget numbers are hugely volatile (for example company tax being paid on the 1st of the month rather than the 31st of the prior month) but if this trend continues, the $7 billion surplus will be under threat and that will spill over to the level of government debt.

Either way, the Coalition has failed in its promise to reduce government debt and this may yet be an issue when the 2022 election rolls around.

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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: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   

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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.