Robb makes AAA goose of himself


Andrew Robb has appeared on the ABC this morning to denounce Australia’s AAA rating:

“I remind you that Lehman Brothers, the collapse of Lehman Brothers, which started this global financial crisis, on that very day, they still had a AAA credit rating. What does a AAA credit rating really amount to? What I’m saying is you can’t place enormous store in the rating agencies. They do get things very badly wrong, and they totally missed those major firms and economies that were driving and the reason for the GFC. Relative to other countries our debt position is lower than many of the European states and those that have grossly gone into debt to the point where they’re finding it very difficult to find a point of recovery. But meanwhile they are misleading. It’s smoke and mirrors. What the Prime Minister is not telling people in those ads is there is red ink as far as the eye can see.”

As I’ve written extensively, I think the AAA rating is shaky for a number of reasons but politicising it is hardly in the national interest.

Moreover, the Coalition is clearly going to be wedged on the debt issue as Rudd&Co ramp up the post-China boom narrative and this plays exactly into their hands, showing the Coalition up as austerity obsessed to the point of internecine politics.

Rob was responding to this Kevin Rudd’s new debt ad in which he says:

“We’re hearing a lot from the Opposition about Australia’s debt.  You may be surprised to know that Australia’s debt per capita is one of the lowest in the developed world… Ask yourself this: If our debt levels are so bad, why are we one of only eight countries in the world with a AAA credit rating, a stable outlook from all three credit agencies?  These are the real facts and no amount of negative political spin can change that”.

Responding to allegations of negative spin with transparently negative spin that risks damage to the nation’s reputation is not smart.




David Llewellyn-Smith


  1. I get the feeling the Libs won’t be happy until we’re bankrupted and overrun by boat people so they can say “I told you so”.

    And once again, no plan, nothing they’ll do differently, just plenty of whinging.

  2. So, Robb telling the truth about AAA ratings is “hardly in the national interest”, but Rudd’s seeking to allay the public’s anxieties about ever-rising public debt (with a $13 billion pa usury bill) by a taxpayer-funded TV ad campaign that dishonestly cherry-picks a “per-capita” public debt comparison whilst scrupulously avoiding any mention of our world-beating private debt levels, banking sector housing exposure, etc etc etc, is not worthy of denunciation in the same space?

    Yes, I know. MB points out those ills all the time. Which only further suggests that this particular piece is little more than anti-LNP flame. Especially given that what Robb (the subject) said is the truth, this is beneath the otherwise supreme quality of this blog.

    How about a little balance within the same piece?

      • Not sure that its irresponsible to challenge someone’s fallible opinion on credit. Perhaps its irresponsible not to.

        Rudd is also being deceptive as it looks like he’s comparing federal debt levels which doe snot include state debt. So by labeling “Government” Debt surely that is irresponsible?

      • Exactly! I haven’t shouted at the TV for a while but this ad triggered it!

        And good on Robb we need a few spanners thrown in the works.

      • Yes, everyone at MB knows both “sides” never mention the elephant in the room. That’s not my point.

        You’ve lambasted Robb for telling the truth about AAA ratings, and in the same breath, given Rudd a free pass on his deliberately dishonest avoidance of the real killer issue in a publicly-funded TV propaganda campaign.

        What Robb said was the truth, and he should be applauded for saying it.

        What Rudd said was dishonest by omission, and he should be denounced for it.

      • Meh. Rudd’s point is basically right, though I accept Deep T’s point.

        Robb did not explain private debt. He didn’t put a measured case for why he thought government spending needed to be balanced against anything.

        He just put down the one thing that holds the whole dam edifice together for political gain.

        We have room for more public spending, it is limited by private guarantees. When someone makes that case I’ll praise them.

        On the limited discourse of this exchange Rudd is more correct than Robb, hence the post.

      • “The Rudd ad is about public debt”

        Baloney! Rudd knew exactly what he was saying and what he was hiding. He was lying and as Op8 said you are handing him a medal for that!

        FWIW Ti Mig and those who think bias is Ok because we make up our own minds this is supposed to be a site about facts as best as we can assess them.

        That said my opinion about both sides hiding the private debt issue still stands and, again putting on my tinfoil hat, I think this continuous obfuscation is clear evidence someone, or group, other than the parliament is running this country.

      • For heaven’s sake Barnaby is Wrong.

        I have simply noted that within the discourse offered by these two Rudd is more right than Robb.

        On another post today I destroy Rudd’s policy platform.

        Give me a break.

      • but the govt is on the hook for private debt as de facto guarantor of a banking system massively exposed to housing debt. This surely must affect govt as lender of last resort??

    • migtronixMEMBER

      I don’t think there is a need for “balance”, you can make your own mind. I, for one, agree with your sentiment and understand HnH’s also. It is political footballing because this guy will say THE EXACT opposite thing when the Libs win (such is our fade in the political environment we’ve had for 20+ years – since the second Keating term/One Nation).

      The warning re: ratings is fair, so is the complaint that it is all theatrics

      • Yeah I get the feeling if the tables were turned (Coalition were in govt) Robb would be singing the ratings agencies praises, as well as giving himself a hearty pat on the back.

        So in this respect, Robb’s ‘criticism’ is fairly transparent.

      • “It is political footballing ..”


        Which is why, given that MB is the only media source I know of that is on the ball re our Ireland-like risks vis-a-vis private debt, banking sector housing exposure, etc, I would venture to argue that it is irresponsible of MB to get drawn into the political footballing.

        As the only informed, credible and (thus) responsible media outlet re the economy, it behooves MB to not throw up half-baked partisan sledges like this, but instead, to scrupulously educate the public on the key issues that are interrelated with and convergent upon the tidbits of truth and untruth that both sides of politics throw back and forth.

        Otherwise, MB will slowly degenerate into just another well-spoken barracker for the dishonest ignoramuses populating one or the other “sides” of politics.

    • but Rudd’s seeking to allay the public’s anxieties about ever-rising public debt (with a $13 billion pa usury bill) by a taxpayer-funded TV ad campaign

      For what it’s worth, the ad clearly seems to be funded by the ALP.. isn’t that what all the ‘authorised by ALP’ guff at the end is about?

    • +1 Opinion8red.

      Public debt, private debt, what does it really matter? At the end of the day it’s the same suckers on the line to service the interest / pay back the principle, either via taxes or after tax income.

      • Yes I’d like to know why ‘it matters’ (genuine question) Admittedly in the ratings agency world ‘it matters’ because in their world private debt doesn’t sem to matter…yet. So to that extent it affects us.
        But in a real long term world I fail to see it matters diddly-squat whether debt is public or, supposedly, private.
        This is especially so in our case, as well documented by HnH et al the Govt is guaranteeing all the Bank debt anyway.

      • Yes I’d like to know why ‘it matters’ (genuine question) Admittedly in the ratings agency world ‘it matters’ because in their world private debt doesn’t sem to matter…yet. So to that extent it affects us.
        But in a real long term world I fail to see it matters diddly-squat whether debt is public or, supposedly, private.
        This is especially so in our case, as well documented by HnH et al the Govt is guaranteeing all the Bank debt anyway.

      • It wouldn’t matter if the private debt is held uniformly across all areas of private borrowings, although it may not be.
        But yes essentially the public will service the same debt whether it be their personal debt and they make the repayments, or if it is public debt they will pay additional taxes to service the same debt.

  3. “Relative to other countries our debt position is lower than many of the European states ”

    BS lets talk about Australia’s private debt and could it become govt debt in the future……… My money is on that it will one day……….

    • Or even better, look at a chart of Ireland’s private debt to GDP and public debt to GDP during the crisis and then have a discussion.

      • “When you combine Fed and State debt, Australia is in a worse position than Ireland was pre-crash.”


      • Ok, I’ll bite.

        Private debt is much higher than public debt, AND people are expecting the government to guarantee private debt. So, why are we not focusing on reducing the much greater private debt, rather than the much lesser public debt?

        If debt is important, that is.

  4. In a monetary system where money creation has been mostly outsourced to private banks, debt has to be somewhere to increase money supply.

    Currently the debt is with the private sector. An increase in public debt will lead to a reduction in private debt.

      • No – if public debt expands it will reduce private debt, or alternatively it will increase the money supply.

      • Peter

        You are only looking at the first and very minor part of the large and complex loop.

        Normally, in the long term, in the face of negative RAT rates and an economy structured as is the Aus economy, a Govt deficit ends up in the external account as CAD and hence foreign debt.

        If you want the Govt deficit to end up as serious debt reduction in the private sector you need to run positive RAT interest rates for a long period.

      • flawse – part of the private debt is already in the CAD – moving that from the private sector to the public sector doesn’t have to add to the CAD.

      • Peter it does not have to if the private sector saves the deficit. For that to happen you really need to run positive RAT interest rates….which is what we are definitely not going to do.
        So if it is not saved in the private sector it ends up in the CAD.

    • Cognitive Dissonance

      Your argument seems to suggest one debt is as good as the next ….and you know better than this Mr Fraser.

      If debt is expanded for consumption it is a fools game, what you have consumed now needs to be repaided with interest later……no net gain only an immediate ‘stimulus’ of new cash.

      If debt is expanded for production, this is a good thing, with the extra production you pay back the debt and the interest….everybody wins, the banker, the businessmen and the end consumer who paid for it out of a growing wage base…….weeeee this stuff is easy.

      EDIT: It is why you need corrections know and again, to clear out the bad debts from people that consumed too much with money they never had or businessmen that made poor decisions…..this is why they are called corrections……..(overlooking public debt, but same same)

      • No – that’s simply not what I said. My point is that debt has to be held somewhere, either in the public sector or the privare sector. At the moment it’s out of balance with too much in the private sector and too little in the public sector and it needs to rebalance.

        That is exactly what is happening now, it has nothing whatsoever to do with borrowing for consumption.

      • Cognitive Dissonance


        And I gave you credit for understanding that governments big spending ideas will be mislabelled and ought to belong in the ‘consumption’ column, in that, as far as production goes the bang for your buck will be close to zero….a waste of money, a burden on our children….something that will need to be corrected at a later date………but “who cares” right ? the sun will shine on my face

      • CD I never said that the government should borrow for consumption, I only spoke of rebalancing the debt. Your argument is a strawman.

    • “An increase in public debt will lead to a reduction in private debt”

      How do you figure that? An increase in public debt means an increase in total debt. Even assuming assuming Ricardian Equivalence this is the case.

      Simple example. Assume there is no private debt in the first place.

      • In that case if a federal government ran a deficit it would become savings held by the people.
        Have a look at Japans massive public debt, and then look at the equally massive savings held by the people of Japan.

      • Not at all.

        What if the economy fell into recession and the budget deficit increased through automatic stabilizers. The economy is in recession so incomes are falling. Savings are a function of income, therefore a increase in the deficit would be coupled with a fall in ex post saving.

      • Ah well if you add a variable yes you will change the result.
        Nevertheless the deficit will either add to savings in the absence of a recession, or lessen the effect of any recession.

      • Peter
        Japan has run a serious Current Account Surplus. We run a Curennt Account Deficit.

        It’s an essential difference that escapes 99.9% of modern economists. You are not alone!

      • no I mean a variable like falling GDP which is usually called a recession.

        In a normal economy a government surplus means taking savings off the people, and a government deficit means adding to the savings of people.

        If you wish to change that to reflect either strong GDP growth or a recession then it will have a + or – effect on that result, as I’m sure you are aware.

      • flawse you are adding production to the variables. Yes it’s a major factor. The health of an economy depends on it’s ability to produce goods or services, in particular for export.

        That is not in dispute.

      • ‘normal economy’?
        As a result of modern economic theory not sure one exists. However again for your scenario you require a zero propensity to import as a result of monetary injection.
        That sure is not Australia.

      • Peter Unfortunately that is what you are disputing. You are saying that, in Aus, a Govt deficit just adds to savings. It doesn’t.
        You’re presuming that the Govt deficit all goes to production. In Aus that certainly is not the case.
        In China or Japan you get a quite different scenario.

        This is neither a straight line nor an absolute argument. It depends on the structure of the economy.

      • I don’t think it does mean that. In a normal economy a budget surplus usually means above trend growth & a prudent fiscal policy.

        Your theory only works if:
        -GDP is fixed
        -the economy is closed (or real exchange rate is fixed)
        -existing debtors only ever spend, and existing creditors only ever lend (and there is no constraint on either).

        None of these apply, so there isn’t a causal relationship between public and private debt.

      • flawse what I am saying is that if a government gives savings to it’s people via tax breaks or other means then those measures will increase savings or reduce debt in the private sector at the expense of the public sector.
        Factoring in a trade deficit or a recession may change the net result, but not the effect.

      • You argue long and hard for our government to not bring in a surplus, and you argue for lower rates with the specific purpose of reducing private debt or increasing savings for those with no debt, and yet you suggest that there is no net difference between a surplus or a deficit for the people.

        My statement that “An increase in public debt will lead to a reduction in private debt” was simplistic, I agree, but the intent was to point out that debt can be transferred between the two sectors over time subject to the constraints of the economic conditions of the day.

      • JohnsonMMEMBER

        Peter in today’s modern system of shenanigans I think what you said in one of your earlier posts is the truth:

        No – if public debt expands it will reduce private debt, or *alternatively it will increase the money supply*.

        Idk of any study on this but I’d definitely be interested. But from my perspective – if the government pulls out stimulus we all go and borrow more to feed like pigs at the trough. When public debt expands, the private sector expects boom-like conditions and borrows to take advantage of rising asset prices.

        Case in point: when the GFC first hit private debt was contracting rapidly and this was the cause for such a sharp recession. Once the public gravy train came rolling to the rescue the private debt went back to its good ole’ mountain climbing days, no?

        I get that the public debt mechanic by itself means surplus delivered to the people, but in reality it also offers a false market signal that everything is ok, and gets the private sector to continue borrowing more and more on speculative assets.. we can’t deny the second-stage impact of increases to public debt and only mention the immediate direct impacts (unless we’re politicians XD)?

    • Robb will never get any brownie points here for telling the truth. Look at the article headline ffs. Let’s wait to see something of the like for Bowen or Rudd.

      Op8, thanks for pointing out what is quite obvious. MB bias for the Left will not be going away anytime soon I’ll wager.

      • I must say, it is rather bemusing that MB has not (that I’ve seen) published a single critique — not a whiff — of our Treasurer’s solitary idea shared at the NPC, for “Managing The Economic Transition”. Even though I pointed it out (first comment here, from memory) on the day of the speech, and have raised it again since.

        I mean seriously – did MB really fail to notice that Bowen’s grand plan to manage the transition, is by turning Australia into a “financial services centre”?

        Is that somehow not worthy of analysis … while Robb’s statement of truth about AAA ratings is, and merits headlining him as a “AAA Goose”?

  5. Some journo needs to ask Campbell Newman about Robb’s comment.

    Getting Queensland’s AAA rating back was one of the main justifications for taking an axe to the public sector.

  6. Re Robbs statement he is correct as to ‘red ink as far as the eye can see’ It is well acknowledged here in MB that there is no real prospect of a surplus. Treasury forecasts were unrealistic and they have admitted to that.

    Then we go and add a whole lot more expenditure in the form of the Disability scheme and Gonski expenditure etc etc etc. For all the talk by Swan et al there never were any real proposals to rein in Govt spending. We were just relying on ever increasing exports to make up the difference eventually…somehow….

    The new Treasurer says any new expenditure must be financed by cuts elsewhere…good luck with that idea when you are trying to convince a Labor caucus or trying to do away with negative gearing and the like.

  7. Hey wingnuts, do you seriously believe your side will implement any of this austerity nonsense as we go off the mining cliff? Not a chance. If his arse is on the line, Abbott will spend like a drunken sailor.

    Austerity made sense in 2010 and 2011 when mining was going gangbusters, but not now. Right now austerity is bad politics and bad economics.

    • The only chance of Abbott going ahead with spending cuts is if he won with a thumping majority, but that clearly isn’t going to happen now. My money is on Rudd comprehensively out-campaigning Abbott.

  8. We have come to expect dishonesty of our politicians,but it is becoming increasingly difficult to find sites like this that are apolitical. Andrew Robb had every right to say what he did, that’s politics, and unfortunately,was the truth. This site shouldn’t be encouraging deceit and dishonesty in its economic commentary.

    • Cognitive Dissonance

      “apolitical” not having a go but I think it is quite the opposite, I despair that the highest number of comments / involvement is all about politics and not the more real topics. Conversations about policy this and that……policy and government made the problems, more policies that suit peoples individual liking will not help. When the world is at its most prosperous / peaceful people forget who the PM is, who the head honcho at RBA is….I want to live in a world where people are too busy to care about these clowns, not in a world where people are waiting on every word, it is only this way because this is where the money is flowing from for too many people….this is a dangerous world.

      Rant over

    • Is it true that ratings agencies get things badly wrong? Yes.
      Is it true that Australia has a private debt problem? Yes.
      Is it true that Australia has a public debt problem relative to other developed economies? No.
      Are significant spending cuts by the federal government desirable at this point in the economic cycle? No.
      Should the government have been cutting harder during the mining boom? Yes.

      I don’t think there’s anything particularly political about the above statements. If Robb was telling the truth, it was a half truth at best.

      What I object to is assertions from the loon pond that all government spending is bad, and the Australian government is on the brink of a financial crisis. Its just not true … and please don’t quote Barnaby, he’s a complete fruit loop.

  9. Bemused by the hand-wringing and indignation on display that MB is betraying a political identity. Well, duh ! Do the people baying for the elimination of all public debt, the neutering of the public sector, deregulation of markets, and the banishment of usury really think those are apolitical positions? That should be reflected back to them by MB in all of its editorial choices? The fuck. Point me to your alternative media source where that happens.

  10. SauropodMEMBER

    I find it extraordinary that anyone worried about Australia’s private debt could support the coalition parties. The Howard/Costello government pumped private debt at every opportunity.

    Have a look at the period between 1996 to 2007 in this graph

    The period since the GFC has been a model of prudence in comparison.

    Howard and Costello had a chance to do something about our private debt. They weren’t as fiscally constrained as the current government. But instead they pumped house prices and passed unsustainable tax cuts.
    The Howard government was a hugely wasted opportunity. And I don’t see any sign an Abbott government would do anything different.

    For me, Robb’s comments have as much credibility as Costello’s debt truck.

    (Rant over. Sorry. Feel better now.)