Dead Duck locks in property crash to save self

David Uren captures the real import of the great Abbott makeover today:

The government appears to be at a loss to know what to do. It failed to make the case for savings with populist crossbenchers and a Labor Party determined to be as intransigent as the Coalition had been in opposition under Abbott’s leadership. It allowed Labor to define its budget savings in terms of their “fairness”. It also has failed to make the case for savings with the community more generally, leading some to suggest it is time to revive the Hawke government’s recipe for a “summit” to generate at least a minimum community consensus on the need for action.

The problem is partly that although the budget situation is serious, it is not urgent. The ratings agencies all re-endorsed Australia’s AAA credit rating following the December writedown in the deficit, expressing confidence that blockages to savings measures would prove temporary.

…[Chris] Richardson says that while Australia does not have big debts, it is looking at large and persistent deficits. The task of budget repair, he says, is one of insurance against the next crisis. Going into a downturn with deficits the size they are now would leave the economy dangerously exposed. “If we can do something about that, we can help to future-proof Australia against the next downturn. We can build a budget that can be used to protect Australia’s economy when the next storm hits.”

This is double-speak for the simple fact that the Budget is the key stone in the Australian credit arch. When the AAA sovereign rating is stripped the banks will be downgraded as well and credit will become more expensive across the economy. Remember that we’ve not got much headroom before we breach the S&P ceiling of 30% general government net debt to GDP:

gnetbwe

And we’re swiftly running out of rate cuts to make up the difference.

There’s a certain inevitability to it all, of course, as the commodities super-cycle bust destroys the Budget anyway but the fallout could and should be mitigated by a huge push to reform the Budget, not only in terms of savings, but in terms of productivity growth. That is, improving the quality of spending as much as the fiscal balance.

That’s where Tony should be going now, and Malcolm if he replaced him, but we appear instead to be swinging wildly into reverse for a binge of outright giveaways to save the Dead Duck.

That’ll boost growth a little in the short term and lock-in the crash in the medium term. Australian crashnics should be well pleased.

In the meantime, enjoy the makeover:

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

    • It’s all good. If the ‘nominal house prices can never fall’ policies continue, then the decline may simply be reflected in the AUD exchange rate. Good luck with that, since Oz now makes almost nothing and imports almost everything…

      … I guess you can always fund the CAD by selling everything to China. Australia’s youth be damned.

  1. Family pork to blow the budget just compromises the political narrative of the government further.

    It will backfire politically. After all the talk of debt and deficit blowing the budget with family payment pork will just lead to even less confidence and trust in the government. How can you trust a government which has no consistent message?

    There is no way back for Abbott. He is the ultimate liability and the #1 asset for the ALP. He will be replaced, it is just a matter of how much damage he will do in the mean time.

    • Even if they ditch Tonedeaf, who has the cojones and the willpower to stand up to the rent-seekers and do what needs to be done? The front bench is totally uninspiring and the Opposition is lead by a spineless backstabber.

      This stuff is locked in no matter who is in charge.

      • Jason – I think it’s not just the ‘rent-seekers’ It’s everybody. Most of us are ‘rent-seekers’ one form and another. We live off selling our nation’s assets.

      • True, everyone is a rent seeker in some way, but the ones I am referring to are the ones making a motza in Government tax subsidies.

      • Not all of us. When my employer failed, and it became apparent that the only employers were government, defence, or banks, I ‘ran away’ (that’s what some on the forum have called it) to the US, where I work for a profitable company that people give money to of their own free will for our services.

        Running away involved racking up some of the costs on credit cards (temporarily). But I can honestly say that I am not a bloody rent seeker. I make things that never existed before, and people willingly pay for it.

        That people here are now saying ‘we’re all rent seekers’ bodes VERY poorly for Australia’s near term future.

      • My Lord,

        Well said. I think the majority will be willing to make a sacrifice, but they want to see that it’s justified and that it will be across the board, not getting a pineapple while others are eating whipped cream.

  2. I was happily sipping a beer to the white-noise of Abbott on 7:30 Report last night when two and a half words popped from his mouth and cut the air like a samurai sword……

    “Inter-generational theft.”

    What’s that Sir Tony? Please elaborate….I’m suddenly listening.

    • Oh, now he gets it?

      When the horse has bolted over the hill,

      The Captains & The Kings depart (with their loot)

      Leaving the husk of the economy to the plebs,

      spiralling into the void

      The Climate on the verge of disaster,

      Now he gets it……………………..

      Bit bloody late.

    • And to further confuse matters, there was Alan Jones on Q&A advocating for the removal of super concessions for the wealthy and the inclusion of the family home in means-testing of the aged pension……

      Paul Kelly, Muppet-At-Large at the Oz, told me there was only one way to repair the budget….the Hockey Way. Goodness, I just don’t know what to make of it all.

      • If he Jones could set aside his obvious bias against Labor, he would be making a lot of sense.

        Cut super concessions
        Means test pension
        And blocking CSG

        If I were Mike Baird, I’d be a bit worried. Ominously, the Parrot basically said he’ll be railing against any party that didn’t protect farmland.

        #Lockthegate
        #Canteatcoal
        #Farmlandnotgasland
        #Frackoff
        #Privatepropertyrights
        #OnJustTerms

      • Mining BoganMEMBER

        I was extremely disappointed with Bowen. He could have given some leadership on this last night. He squibbed.

        A pox on all their houses.

    • Mining BoganMEMBER

      Problem is he’s got it arse-about.

      He truly believes the young are costing the wealthy the lifestyle they deserve.

      Arsehat.

  3. But think of all the good that will come of this. Time-poor families will become time-rich. People will learn to cook and bake and strangle rabbits again. They’ll grow vegetables and spend time in one small room together in the evening. It’ll be like going back in time to a simpler, kinder era.

    • Uranium GeoMEMBER

      My veggie patch is humming and if I’m desperate free range guinea pigs will be on the menu, along with the chooks when they finish laying :).

      • Then you’re ready! Make sure you and all the kids can ride bikes for all your daily errands.

        If you find a use for the choko glut you will be king prepper.

      • choko’s are great in pickles, chutney etc.

        A bottling led economic recovery

        Grow the Greens

      • Don’t knock guinea pig until you’ve tried it! Forget desperate, those tasty little fellas will fetch good money from gourmets. Especially if raised on organic veggies!

  4. Leaving aside the self-harm Abbott has done, which is plenty, I would just add that politics is far too poll driven for any hope of serious reform occurring now. The media and the public have made it that way. We need 4 or 5 year terms, and we need to reform the senate voting system so the balance of power isn’t held by microparties. Sure you can get rid of Abbott and nobody will miss him, but do you expect that alone will clear the way for any serious reform? The media-driven opinion polling will restart as soon as the next leader takes over, probably the next day, and everyone will be baying for blood the moment his or her numbers start to look doubtful. We’ve become addicted to the ride now. Australia is becoming very politically unstable. It’s a nonsense to pretend that the demise of Australia began with Abbott, and it won’t end with his departure. We are simply stuffed in every way.

    • It’s a hell of a lot easier if you don’t go round acting like an ultra right wing religious extremist cum monarchist nut case

      • His quirks don’t make much difference. Reform won’t be easier under Turnbull or Shorten. They’ll be beholden to the media driven opinion polling, and the whims of the senate, too. Abbott isn’t the cause of this malaise and his departure, although very welcome, won’t fix the system. We may hate his guts, we want him to burn in hell, but we ought to hate the media and the polls and the senate in equal measure. Australia is a country that has turned on itself. We’re simply stuffed.

      • Its getting desperate tring to find some off the shelf sociopolitical template to beguile the consumers with… endless tweaking… ask Mig-i.

      • They never learn, looks like Newman is trying to hold onto power in Queensland. Don’t they know the first thing about their job, if Peter Wellington sticks with Labour they would get a vote of no confidence first day in the chamber, unless they intend to interfere with the Electoral Commission.

        They might be going to try a Long Parliament , back to the 17th century.

      • As opposed to a union puppet, backstabbing, spineless, hypocritical idiot noddy toy leading the other lot?

    • Gillard had a minority government was able to pass some of the biggest and best reforms this country has seen in a long time.

      This narrative that its both parties is bullshit. This narrative that it is small parties holding people to ransom is bullshit.

      It is quite simply crap policy by rabid fascists. No ifs, no buts – that’s what it is.

      We had a PLETHORA of fantastic nation building projects happening, we had a fantastic regulation on infrastructure, we had great science, we had a real future outside of mining, a car industry, renewable industry, a world leader in environmental reform – all of that has been trashed by Abbott – and some how the NUFF NUFFS on here want to re-write history and pretend its always been crap.

      Seriously – Abbott was LYING before the election just as he is LYING NOW.

      • “Gillard had a minority government was able to pass some of the biggest and best reforms this country has seen in a long time.”

        What would they be?

        “We had a PLETHORA of fantastic nation building projects happening”

        A PLETHORA? Please tell …

        “It is quite simply crap policy by rabid fascists. No ifs, no buts – that’s what it is.”

        You seem to be very black-and-white in your thinking and intolerant of discussion.

        If Julia was as brilliant as you suggest, why was she taken down by her own party?

      • @Hobbes — – Well said +100

        In fact small parties since shirt face & his team were elected have saved us by opposing the bastards when necessary !

    • Wow – you have actually responded with more ?

      Um – a plethora, was she the MOST PRODUCTIVE PRIME MINISTER EVER, DID SHE HAVE A MINORITY GOVERNMENT, ARE WE RULED BY MINOR PARTIES or is ABBOTT and CO a bunch of FACSTIS with crap policy –

      http://www.theguardian.com/news/datablog/2013/jun/28/australia-productive-prime-minister

      BOOM.

      Thanks for turning up.

      And what did they achieve in nation building ?

      Fair Work Australia, paid parental leave, disability care, reforming secondary education and expanding tertiary education, improving the pay of low-paid workers (largely women), removing over 80 forms of discrimination against same-sex couples, the apology to the stolen generations, instituting a carbon price, establishing the Royal Commission into Child Sexual Abuse, reforming Murray River water management, transforming federal-state hospital funding arrangements and improving relations with China and India.

      What has Abbott done ?

      Implemented a regime of secrecy backed by a police state mentality dragging civilians matters into military matters (the very bedrock of fascism), targeted and attacked the most vulnerable, off shored or shut down major industry, savaged social services while embarking on military campaigns and military expenditure.

      Answering your questions is like shooting fish in a barrel – because there is no denying reality or facts.

      Seriously ? How can you not even be aware of such basic fundamentals ?

      • I agree with you somewhat. My complaint with Labor was that they didn’t do enough. e.g. Watered down mining tax, clamp down on 457, and clamp down on overseas company dodging taxes.

        Compared to the LNP however, it’s like night and day.

    • We need 4 or 5 year terms, and we need to reform the senate voting system so the balance of power isn’t held by microparties.

      I would far rather the balance of power be held by independents and microparties, than suffer 4-5 years of dictatorship (sorry, “mandate”).

      An ideal situation would be if both houses were stuffed to the gills with independents and microparties.

      • The major parties don’t represent me at all so if the senate gets “reformed” I risk losing all representation. Careful with that.I’d rather abolish the lower house where they only care about a few swing voters in a few swing seats.

        Really the microparties only have any power at all because the major parties are so strongly whipped they can’t compromise on anything. If Labor or Coalition Senators could negotiate all you would need to do is convince enough members of your party and other parties for it to pass.
        Really stupid legislation is failed by your own senators and hopefully good policy gets passed by a combination of senators. And the microparties are just 1 or 2 votes with the same power as anyone else. And if wacky they will just get marginalised.

        Kind of like actual representative democracy.

      • The major parties don’t represent me at all so if the senate gets “reformed” I risk losing all representation.

        Assuming you’re respondong to me, how ?

        If Labor or Coalition Senators could negotiate all you would need to do is convince enough members of your party and other parties for it to pass.
        Really stupid legislation is failed by your own senators and hopefully good policy gets passed by a combination of senators.

        What you are describing is functionally identical to a Senate filled with independends and microparties, but without having to rely on a substantial percentage of representatives go against their party’s wishes.

  5. Supply side economics lubricated by accounting control fraud, juicing top tier remuneration, meets its inevitable conclusion.

    Skippy…. even the planet says enough….

  6. I remember in early 2013 when MB presented such an analysis for the AU economy. It was logical, was based on fact yet housing went 20% from there. Obviously the call was a little early.

    Even if the banks lose their AAA rating, what would the cost of funds to Joe average on the street increase by? 10bp? 50bp?

    While there is still room for interest rates and cheap credit for those already in the market then we are more than likely to end up like London where everyone in Australia invests in Sydney.

  7. It’s so childish. Liberals, Labour and the Greens could restore fiscal balance in the Budget on a unity ticket and a sense of compromise. Yet pigs might fly.

    To mix metaphors to the extreme, Adversarial Abbott opened Pandora’s box and now the genie won’t be put back into the bottle.

    • That’s a hardcore slap down from Martin. Abbots win yesterday is playing out like a massive joke on the Australian populace. There’s a growing realisation that the country missed an opportunity to rid itself of a fool.

    • That was a breath of fresh air.
      Note to the Canberra press gallery; this is how you do journalism:

      “Joe Hockey’s first budget was far worse than it seemed on the night in part because he didn’t tell us the truth about it on the night. The usual calculations showing the households that won or lost were missing. The Treasury had prepared them as usual, but the Treasurer withheld them.

      And he made up stuff. He said Treasury had told him that fuel excise was “a progressive tax”. It hadn’t. He said the poorest Australians “either don’t have cars or actually don’t drive very far in many cases,” something many of them know to be untrue. Petrol takes up a much bigger share of a low-income budgets than high-income budgets.

      He said his own wealthy electorate of North Sydney had “one of the highest bulk-billing rates in Australia”. It had one of the very lowest in all of Sydney. He said “higher income households pay half their income in tax”. They pay nothing like half. Even those on $200,000 pay just 36 per cent. Back from his holidays this January, he revived the claim and went further saying typical Australians pay nearly half their income in tax.

      “When Australians spend the first six months of the year working for the government with tax rates nearly 50c in the dollar it is a disincentive. You’re working July, August, September, October, November, December just for the government and then you start working for yourself and your own household income after that for another six months, he said.

      But Australia’s tax-to-GDP ratio is about 30 per cent, including all taxes, state and federal. It simply can’t be the case that typical Australians pay nearly half their income in tax. They don’t”.

      This is how I understand journalism should be done. Testing claims against data, not just reporting them as though they are one side of the debate.
      As Martin says, Hockey has been making stuff up since he took over as Treasurer. And he has got away with it because the media don’t do their job.

      A perfect example; Abbott last night on 7.30:

      “And one of the points that I made in my speech to the Press Club last week is that if you look at what New Zealand did with fiscal consolidation, they had a very tight clamp on new spending. They didn’t engage in big cuts. They had a tight clamp on new spending and New Zealand has got government, as a percentage of GDP, from 35 per cent to 30 per cent – a very big change in just a few years”.

      What does Abbott mean? Spending as a share of GDP? Gross debt as a share of GDP? Net debt?
      I have know idea because Leigh Sales didn’t press him.

      If he mean’t gross debt (and I think he did), he is talking nonsense. Gross debt as a % of GDP has not fallen 5%. Secondly they are still running budget deficits, so all the improvement has been due to growth in the denominator, not consolidation.

      None of his points were challenged, Leigh Sales just moved straight on to the standard press gallery narrative:

      “Prime Minister, if you do your best and you’re a unable to turn things around in a reasonable timeframe, will you give your colleagues a promise tonight that you will step aside to give them a fighting chance with somebody else as leader”?

      Then Abbott says this:

      TONY ABBOTT: Jobs growth three times in 2013 than in 2014.

      Obvious response is that “jobs growth” in isolation is irrelevant and that unemployment is at a 12 year high, so how does Leigh Sales respond:

      LEIGH SALES: How can you say you’ve put it behind you when such a significant bloc of your own party room has lost confidence in your own leadership?

      She isn’t even engaging in the points he is making, so how is she going to call him out when he is making stuff up? They’re just hopeless.

    • It’s currently crashing quite nicely in other currencies.

      Australia may well preserve nominal house prices, while trashing the AUD and still remaining completely uncompetitive.

      Banana republic, here we come!

      • @Lord Dudley your post is the post of the month! I say to my friends as long we remain in Australia and ensconce ourselves how with spending AUD in AUS then we can ride it out. The moment we look to foreign shores we are finished.

        Funny how this scenario is diametrically intransigent to the free trade policy ideologue that manifests itself in Labor and Liberal contemporary manifestos……