Welcome to the Banana Republic Budget

Well, we have our answer. It’s lying our way to prosperity with our ears pinned back. This year’s Budget outlook assumptions have a veneer of credibility but scratch the surface and it becomes troublesome. Go deeper and it turns completely and catastrophically laughable.

Here are the headline numbers:


From the top down:

  • GDP outlook could be seen as cautious;
  • household consumption is fair enough given it assumes a further savings run down, so long as you accept households are happy to do it (a big if);
  • we already know that dwelling investment has peaked so it won’t be growing next year and will be tumbling the year after;
  • business investment is far too high. The ongoing mining capex collapse is right but non-mining is currently projecting -18% in the ABS capex survey for 2016/17 not plus 3.5%;
  • net exports looks conservative;
  • income growth is too high and the assumed rate of productivity growth is 1.6% versus it actually falling over the past year;
  • nominal growth is far too high for reasons I will come to;
  • all of the inflation numbers are too high for reasons I will come to;
  • the unemployment rate and employment growth are reasonable all things being equal;
  • the terms of trade is farcical and looks like this:

According to Treasury, Australia’s terms of trade are going to settle at a gentlemanly plateau far higher than they have even been in history outside of the China boom.

That may boggle the mind but when one marries it up with other assumptions it runs to comedy. China is going to continue to successfully rebalance away from the very investment that drives demand for the commodities that underpin Australia’s terms of trade. And it will slow consistently too:


A period of extraordinary growth has made China one of the largest economies in the world. Australia benefited significantly as demand for Australia’s commodities surged, leading to a record increase in mining investment in order to expand capacity. Australia is now benefiting from increasing commodity exports. China is entering a new stage of development, which the authorities have characterised as the ‘new normal’. The Chinese economy now faces the task of transitioning to a more balanced growth model. Unlike recent decades, growth will increasingly be driven by consumption and services, and be less reliant on investment.

Yet that outcome is going to result in the following for iron ore and coking coal which represent half of the terms of trade:

Continuing the approach taken at the 2015-16 Budget, the price of oil and key commodity export prices that underpin the forecasts are based on a recent average.

Iron ore prices have risen recently in US dollar terms. The iron ore price underpinning the forecasts is $US55 per tonne Free on Board (FOB), compared with $US39 per tonne FOB at the 2015-16 MYEFO. Metallurgical coal is also a key input into steel production. The metallurgical coal price is $US91 per tonne FOB compared with $US73 per tonne at the 2015-16 MYEFO. The price of thermal coal remains unchanged in US dollar terms since the 2015-16 MYEFO.

Although prices for some key commodities have increased in US dollar terms since the 2015-16 MYEFO, the overall impact on nominal GDP has been partly offset by an appreciation in the Australian dollar. Australia’s key commodities are traded in US dollars and a higher exchange rate has reduced the price exporters receive in Australian dollar terms. The exchange rate is now assumed to be 77 cents against the US dollar compared with 72 cents at the 2015-16 MYEFO.

A key risk to the nominal GDP forecast is the volatility and uncertainty around movements in commodity prices. The inherent uncertainty around both supply and demand factors means the outlook for the price of iron ore is subject to considerable risk.

The impact of iron ore prices being US$10 per tonne lower/higher, based on the sensitivity analysis presented in Statement 7 is set out in Table 3. A US$10 per tonne reduction/increase in the iron ore price results in just over a $6 billion reduction/increase in nominal GDP in 2016-17. These illustrative impacts differ from those presented in the 2015-16 Budget due to a more comprehensive analysis presented in this year’s Statement 7. In particular, the sensitivity analysis now assumes that export commodity prices fall/rise over the course of a year rather than an immediate movement. The effect of this is to reduce the impact in the first year of the analysis. The effect in the second year is in line with the earlier sensitivity analysis. For purposes of comparison an immediate fall/rise in the iron ore price would have a direct effect in the first year of around an $11 billion reduction/increase in nominal GDP in that year.


And here we come to it. The Budget assumes an iron ore price of $60 spot ($55 FOB) across the forward estimates. It hasn’t used Singapore futures as a guide, which would give it a price of $43. It hasn’t used Chinese futures which would give it a price of $48. It hasn’t used sell side research which would give it a price around $40.

It has used a recent average price during the most spectacular mini-bubble in spot pricing in living memory.

One can only view this as a deliberate lie. When you plug in the the falls that are actually ahead, a price of $35FOB for 2016/17, $30FOB for 2017/18 and $25FOB for 2018/19 then you need to subtract more than -1.5% in nominal GDP from the year ahead and much more further out. For tax receipts its -$8bn next year and much more further out. These figures will be mitigated by the use of the 77 cent dollar forecast which offers some insurance as it will fall much further than that over the forecasting period but it is an offset not trend changer.

Moreover, it appears Treasury has relied upon the outright fantasies of the Department of Industry’s Office of the Chief Economist which sees ceaseless volume growth with stable prices:


That said, the resource sector continues to underpin growth in total exports with iron ore and LNG production continuing to ramp up after the investment phase of the mining boom. Mining exports are expected to increase by 7 per cent in 2016-17 and 7½ per cent in 2017-18. In 2015, Australia exported over 760 million tonnes of iron ore, with 625 million tonnes exported to China. This compares with 240 million tonnes of iron ore exported in 2005, with almost 120 million tonnes exported to China. In 2015, China’s imports of Australian iron ore increased by around 11 per cent with Australia increasing its share of the Chinese iron ore market. Over the forecast period iron ore exports are expected to increase by around 16 per cent, while LNG exports are expected to continue to grow strongly, with the Department of Industry, Innovation and Science forecasting exports to triple between 2014-15 and 2020-21 (Chart 7). 1

These are the fantasies of a corrupt (consciously or otherwise) Banana Republic institution that is unable for whatever reason to imagine anything other than endlessly rising dirt exports and prices to underpin local demand. The truth is that a few years out iron ore volumes are going to fall not rise and begin detracting from GDP even as prices keep falling as well, as first the juniors go bust and then the higher cost major’s production is shut-in:


None of this is to say that the nominal GDP targets can’t still be reached. What makes no sense is how they will be achieved. Once you plug in realistic terms of trade forecasts the only way that nominal growth can accelerate and labour markets be maintained is via more borrowing, both public and private, that in turn means the deficit forecasts are more comedy, from Westpac:

The Commonwealth Government’s net debt position remains manageable, well below other AAA-rated sovereigns. From a starting point of 14.8% of GDP in 2014/15, net debt is expected to rise to 17.3% in 2015/16 (versus 16.8% at MYEFO); 18.9% in 2016/17; and a peak of 19.2% in 2017/18 (compared to 17.9%in MYEFO). Thereafter, it is expected to edge lower, ending the forecast period at 17.8% in 2019/20 – only marginally higher than its 2015/16 level. The stock of Commonwealth Government Securities on issue at June 2016 is expected to be $427bn; it is expected to rise to $584bn by June 2020, little changed in scale relative to GDP, circa 29%.


Finally, this all means that the current account deficit will continue to widen not contract as forecast. It is pure Banana Republic economics, lying about dirt exports to disguise a mushrooming external debt problem so that the government of that day need not enact reform and can protect entrenched rent-seekers.

Anyway, there you have it. This was the easiest to destroy set of Budget assumptions that I have seen in a decade of covering them. The reason why is simple: the iron ore assumptions that flow into nominal growth and sustained tax receipts are a fairy tale. Every bit as bad as the WA budget at its worst.

This Budget has guaranteed the loss of the Government’s credibility in the next term, guaranteed an ongoing confidence shock to households to go with it and guaranteed the loss of the AAA rating within 12 months.

Frankly, on this evidence, we deserve nothing less.


  1. How about exports of lithium, titanium, wood, food (oh dear urban sprawl results in our best fertile land being built upon).

    And AUS is too corrupt to put a big export tax on coal, LNG, iron ore, bauxite, titanium ore, uranium.

    • Hey, two things to remember here:

      1). Coal is good for humanity
      2). Never tax the invisible hand that bankrolls your election.

    • tonyddMEMBER

      The funny thing with the LNP crowing about food export growth, is that when exports grow we locals have to pay more for those products and likely get the lesser quality. These cockheads think its something to be proud of, but we will have hunger locally when exports peak, a kind of ‘potato famine’.

      • But but but! Free Trade Agreemets are good for Authtralia no? Competithion is good for conthumer!
        Let biddneth be biddneth, man!

      • “When you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you. . . you may know that your society is doomed.”

        “Atlas Shrugged” – Ayn Rand

      • Come on, really? Ayn Rand?

        Many years ago, on a television network far, far away, I expressed support for libertarianism because back then it meant that I didn’t want Big Government in my bedroom or my medicine chest, and especially not in the second drawer of the night-stand on the left side of my bed. And I still believe that. But somewhere along the way libertarianism morphed into this creepy obsession with Free Market capitalism based on an Ayn Rand novel called ‘‘Atlas Shrugged’’, a book that’s never been read all the way through by anyone with a girlfriend.
        (Bill Maher, ‘Bill Maher Trashes Libertarians’)

      • Ranoids….. groan….

        “There’s something deeply unsettling about living in a country where millions of people froth at the mouth at the idea of giving health care to the tens of millions of Americans who don’t have it, or who take pleasure at the thought of privatizing and slashing bedrock social programs like Social Security or Medicare. It might not be as hard to stomach if other Western countries also had a large, vocal chunk of the population who thought like this, but the US is seemingly the only place where right-wing elites can openly share their distaste for the working poor. Where do they find their philosophical justification for this kind of attitude?

        It turns out, you can trace much of this thinking back to Ayn Rand, a popular cult-philosopher who plays Charlie to the American right-wing’s Manson Family. Read on and you’ll see why.

        One reason why most countries don’t find the time to embrace her thinking is that Ayn Rand is a textbook sociopath. Literally a sociopath: Ayn Rand, in her notebooks, worshiped a notorious serial murderer-dismemberer, and used this killer as an early model for the type of “ideal man” that Rand promoted in her more famous books — ideas which were later picked up on and put into play by major right-wing figures of the past half decade, including the key architects of America’s most recent economic catastrophe — former Fed Chair Alan Greenspan and SEC Commissioner Chris Cox — along with other notable right-wing Republicans such as Supreme Court Justice Clarence Thomas, Rush Limbaugh, and South Carolina Gov. Mark Sanford.”


        For those without the historical back ground to flesh out decades of social PR used to head’fk the unwashed, with ideological pontification and delivered with evangelical like zelotry…. ***IT’S TRUE***… a walk down memory lane…. Watch Bill Clinton, Larry Summers, and Phil Gramm Have a Love Fest Over Repeal of Glass Steagall

        “This clip is a reminder of the ideology that got us into our current mess: rising inequality and debt levels, a global meltdown that led to the greatest looting of the public purse in history, followed by stagnation and deflation that is too widely blamed on the march of technology and not on poor policies and overt corruption. And this thinking is very much alive.”


        Skippy…. So the libertarians [aka neo-liberalism] want to trot out the old chestnut that it was the big bad Gov’ment spoiled the “Free Market” party…. sound like an admission of failure in my book….

      • MediocritasMEMBER


        Have you read Atlas Shrugged skip? I tried once, not because I particularly wanted to, but because I figured I should try to understand the mindset of it given her apparently large number of followers. It’s the same reason I’ve read the Qur’an and the Bible. If a billion people think something, no matter how wrong I might think it is, I should at least try to “know my enemy”.

        I couldn’t finish it. It’s the only book in my life that I’ve ever just said “fuck it” and put down, never to pick up again and finish. Easily the worst writing I have ever read and that’s saying a lot given some of the crap I’ve battled through. It was so bad that I went on a Hemingway binge afterwards to try and restore my love of literature.

        I’m 100% sure that the vast, vast majority of people who copy and paste quotes from Atlas Shrugged online have never read it. I was going to write a review of what I’d read of Atlas Sucked, but in googling for that very term, I found this review which nails it: https://sites.google.com/site/atlassucked/part-1

        Still, I wanted to understand the mindset of the Randroids. How could such an OBVIOUS female psychopath (she’s a textbook case) possibly be so popular? So I began to research her life and found no surprises. Classic psychopathic background. It led me into a more interesting analysis of why it is that so many people are drawn to their doom by following psychopaths and sociopaths, as if they were nothing more than moths drawn to a flame.

      • tonyddMEMBER

        I tried to read the Qur’an. Very disappointed as it held nothing memorable, just lots of nasty punishments for non-conformity. What did you think?

      • drsmithyMEMBER

        Ooooooh, Bill Maher. Such an intellectual heavy weight!

        From someone quoting Atlas Shrugged !

        That’s the kind of irony that’ll bring in UN weapons inspectors.

      • drsmithyMEMBER

        I’m 100% sure that the vast, vast majority of people who copy and paste quotes from Atlas Shrugged online have never read it.

        Nothing surprising there. The same tends to be true of those quoting Adam Smith, Keynes, Marx…

      • Or Einstein [they never use the full quote nor in its original context “but not to simple”] and Heisenberg [he really would like people to stop abusing the uncertainty principle out of context]…..

      • Oh well done Tony – dangerous ideas like that might just about solve Glens low inflation ‘problem’.

      • ‘‘Atlas Shrugged’’, a book that’s never been read all the way through by anyone with a girlfriend.

        Ha! This is literally the truth in my case.

    • Strange Economics

      How about Australia’s biggest export of Melbourne Dockland tiny apartments (emptyghost towers) to foreign buyers. At least victoria govt has added a 3% export tax (stamp duty) and yes land tax to them..

  2. I for one am very pleased by the not very broad income tax cut and the company tax cut that will lead our grocery code of conduct into sunlit uplands of prosperity.

    Seriously though, realistic forward estimates would spook the cattle, which would burst the bubble. No one wants to be the one to do that.

  3. Freezing the Medicare rebate foe another two years.

    It’s like they’re trying to bring in the co payment by stealth.

    • Lol. Looks like the LNP will always try to hurt the poor.

      The tax breaks to a minority who get paid more than $80k should be a wake up call to anyone that gets paid less than that – to vote against the LNP.

      • LNP enjoys inflicting pain to the poor directly while Labor has some fetish where they enjoy doing it indirectly

      • Don’t those under $80k receive a lot of hand outs and other benefits? Making their effective tax rate 4/5ths of FA.

        Besides, the poor vote Labor.

      • tonyddMEMBER

        Escobar ! The regions have more than their fair share of poor, but have high rates of National Party representation. So I wouldn’t draw that conclusion outright !

      • “Besides, the poor vote Labor.”


        Experts agree that there is no “gold standard” in measuring poverty.

        Fact Check was unable to find one dataset that definitively measures poverty in relation to electorates.

        However, three separate datasets all indicate that the Nationals’ electorates are on average poorer or more disadvantaged than those represented by Labor and the Liberal Party.

      • If they didn’t want to be poor they could go and get a better job.

      • It doesn’t “hurt” the poor for those who earn more to be given a small tax cut. If taxes were increased, or benefits reduced for the poor, then that would hurt them (whoever they are).

      • Immanuel Kant


        Been here longer than you champ – since day one actually.

        Read the post, obviously hence my response, and pretty sure I understand the issue better than you, welcome to MB.

        The OP is making ludicrous claims regarding “depressed fatties” clogging up her earning potential, balancing out her earnings against HECS, renting etc. Its utterly ludicrous and is quite frankly crap – anyone with even a fraction of understanding of the issues knows it. its a great big fat whinge by a 1% er.

        I have no doubt that there are some clients “impacting” on her full earning potential – no doubt. But I would also bet he has exaggerated the situation and had a good old rant.

        This person would be pulling down roughly $85k for 25 / hours per week – I am sure even our OP will confirm this – if she is not able to cover her contributions to rent and clinic costs and parking and child care – then there is something seriously wrong with her clinic costs.

        And this is the wage level of the lowest of the lowest paid Doctors in NON-OWNED surgeries. The wage figures take into account the costs of paying clinic costs.

        So yeah – I had already considered the costs.

        I just think the OP is not being entirely honest and has distorted the facts – and quite frankly to be sitting here in Australia with GP’s as some of the highest paid in the world reading someone whinge about how they don’t get enough is beyond risible – it really is.

        There is a bloody good reason most small businesses don’t last 12 months – and the average Australian wage is $50k FULL TIME and they have to pay for parking, childcare and everything else.

    • My wife is pissed – she’s a GP who lost money working part time last quarter. Medicare billings can only sustain practices who book 6 to the hour which results in “6 minute medicine”, the time it takes to get into the slightly higher billing zone before kicking the patient out with a script of antibiotics for their cold (Which is easier than explaining to the patient that the antibiotics don’t do anything and in fact probably make you more sick by killing all your gut bacteria for no good reason).

      Meanwhile females who naturally attract women, complex old people and depressed fatties, can only book 3-4 to the hour. The billings are far worse for these so they charge a gap. If you charge any gap, the Medicare billings are usually less, so a $10 gap does nothing. So it’s normally $30. Patients discover the practice is a gap and cancel, leading to twiddling thumbs and $0 for that 15 minute period. Not to mention the other 3 no shows in a 4 hour session, that’s 1 hour unpaid.

      The Medicare billing is only billed for patient contact time but is meant to cover paperwork, reviewing test results and sending follow up booking reminders. It’s also meant to cover the cost of the practice and the nurse and admin staff, and practice manager. Normally GP’s work for themselves and pay a practice 30-40% of billings to get a room, staff & nurse. Being self employed, the billings should also cover superannuation and paying off a massive HECS debt and lack of any employment in your early 20’s.

      So – my wife worked part time Q1 and after insurance, RACGP membership and compulsory courses, didn’t make enough to cover parking and Childcare. She lost money.

      I suggested the RACGP should mandate all members charge $50 or they won’t approve their training points to the medical board.

      The medical industry is not a market based economy. The government, elected and given power and legitimacy by fucking morons have stated that primary health care is not important. If they don’t raise billings, I don’t see anything wrong with every GP charging a $50-100 gap for wasting their time getting sick certificates.

      • sorry to hear about your loss.

        lets not forget that the medical industry is a fing monopoly where GPs have wedged themselves in as must go to gatekeepers, whom are then pandered to by the pharma complex.

        yet there are some good ones out there, yet,as you say,they are the ones losing money : )

      • To paraphrase Joe Hockey:
        If your wife wants to make more money, she should studied harder and become a specialist.

      • @Joao,
        That was cold, but not far off the truth.
        A good GP is worth a lot to the community.
        But, it seems that they are becoming like teachers in that people who would be great realise that they are making their life harder in the long run by going down that path.

      • Sickies and sick certificates are part and parcel of our sick society. Rats on a treadmill; running faster and faster. And for what? As a child of the 1940’s I’m all for turning back the clock 50 years or so. No Internet? We’d survive without MB I guess. No TV? Fantastic! Little in the way of recreational drug abuse back then, apart form ethanol and ciggies. Public schooling system worked well enough to produce quality wage slaves.

        Health care? Well, better now in many ways, but continuing massive denial and the overwhelming sense of entitlement that pervades society right now means that self-inflicted chronic disease (obesity and Type 2 diabetes) runs rife.

      • GP is a actually a speciality that requires several years of post intern training as a GP registrar – granted it is the quickest one, but not inherently ‘easy’ because of that.

        I can see an inherent efficiency to having primary generalised health care that refers people to specialist areas. Most ailments can be fixed with X,Y,Z treatment, on your way – we’ll send you to the heart guy if it’s looking like a chronic heart thing, but we don’t want to bother the heart guy for your integestion because that’s not a heart problem you stupid patient.

        Unfortunately it’s a bit of prisoners dilemma — people are unwilling to pay a surcharge for a native english speaking resident female who takes more time to do a consult, so the pricing ends up a race to the bottom.

        Personally, I’d be operating it more like a high end business than “Oh but the patients needs…”. Black list clients who are no-show or don’t pay. Spread details of these people amongst other practices (like banks do with customer credit ratings). Charge a booking fee for no-shows. Sell those fees to debt collectors to get 50% of it back.

      • gosh and i still though being a doctor was a licence to print money. my apologies to your wife. i would like to see your blackbans, the whole attitude to antibiotics and colds, to sick certificates and to ‘oh kiddy looked a bit tired will need a doctor to fix her’, not to mention ambulance call outs and the over the top world of allergies….

      • Immanuel Kant

        “didn’t make enough to cover parking and Childcare”

        I’m calling bullshit on this. You get six patients through the door / hour and you are already looking at $180 / hour .

        Average wage for non-owning GP at 50 / week is between $180-$360k

        You are full of it. Absolutely full of it.

      • @Catherine
        Sounds like you want to see more 3rd world overseas-trained assassins doctors.
        The [edit: locally-trained] grunts working in GP (Medicare) and public hospitals are increasingly being treated like dirt and questioning their futures [edit: ‘burning out’]. The money-printing rorters are those with access to the private insurance/DVA Gold Card rivers of gold (not GPs or public hospital salary types).

      • How many profit and loss statements of GP’s have you looked through?

        I’d be confident in saying I’ve seen more than you.

        Plumbers earn more than GP’s

      • Jumping jack flash

        Debt is the key and the cause of most of everyone’s problems. It inflates everything in the short to medium term by injecting money directly, and the subsequent service obligation raises the bar on “required minimum wage”.

        How much debt do you pay? Don’t tell me, just consider it, your total personal weekly debt service. And offset that against your lifestyle aspirations.

        If you’re reaching ever higher to the lifestyle you want while taking on copious amounts of personal debt to get there, then you’re doomed my friend. A certified debt slave. No amount of wage increase is going to let you have it all if you fund it with debt.

        Save, then spend LESS of your savings than you save. Cut out the banks completely. It is the ONLY way to fix this mess we call an economy which relies on debt injections with ever-greater size and frequency to provide the illusion of growth.

      • darklydrawlMEMBER

        Immanuel Kant: “Average wage for non-owning GP at 50 / week is between $180-$360k”.

        That maybe so (I haven’t checked so I am not sure if that is correct or not, but lets assume it is) but you are only looking at one side of the picture here (ie, Income). Most of these professions have some fairly serious outgoings as well. In addition to the obvious ones like paying for the space and staff to run the clinic – the insurance and professional fees are usually pretty darn sharp as well. Plus the kit required is not cheap to purchase and upkeep as well (depending on the clinic of course). Anyway, I know from my personal experience that looking only at my income (sans outgoings) and I too, am looking like I am ‘living it large’. Sadly this is not the case, but it looks darn sexy on paper.

        Personally I am inclined to accept easypete on his word given the detail provided and he also explained why and how the discrepancies happened. Interesting angle I thought.

      • I’m with Immanuel Kant on this. How much part time did she do? There’s going to be a point below which costs wont be covered by the part time hours worked. My wife’s in a similar situation (psychology). Below 30% full time and its not a financial proposition, more a keep-your-hand-in until the kids are finally at primary school 5 days a week.

      • IK – did you read the original post? Female GP’s attract depressed fatties and you can’t book 10 minute slots — half of them end up taking 30 mins and the billings for 30 mins is about half of 3×10 slots, then a bunch don’t show up. Minus 30-40% practice fees, liability insurance (because of dick heads like that fat guy who sued a doctor for getting type II diabetes because he wasn’t told about the stomach surgery option), college fees, training material and courses to maintain currency.

        Sick certificates – absolutely retarded. Some people come in saying “I was sick last Friday – can I have a certificate”. The doctor has got as much idea that the person was sick as the boss. It’s a waste of everybody’s time, plus now the employee is late for work.

        So yes, the only incentive is to book 10 minute slots and pump and dump patients as fast as possible working full time. This is the primary health care the peasants have voted for and they deserve all the shit overseas doctors they get.

      • About 20-25 hrs per week. So at least half time.

        It scales up, but doesn’t scale down. The first half of the week is to pay for all the professional expenses. After that they make their money – I’m not arguing with the maths, that is true.

        What I’m saying is based on our circumstances (which are common to a lot of people, man works, 2 young kids, woman part time), and apparently ENCOURAGED by the government, the incentive right now is to stay at home and save on transport + daycare.

        If you want some cheap import GP you can hardly understand working full time pumping you through in 6.1 minutes, keep cheering on the Medicare system. If you want a female GP who takes the time explaining things properly doing your pap smear, then there needs to be reform, because right now the incentive is for this female GP to stay at home or volunteer in the soup kitchen.

      • IK, go away.

        This is a serious blog.


        A). Read post before commenting, and
        B). Do understand that merely quoting income without considering expenditure means precisely nothing, and
        C). Try to keep it civil, otherwise when you trip up by making beginner’s mistakes A). and B). above you’re going to look silly.

      • easypete.

        I have never seen you round here before, you are here for trouble, enjoy but I wont bite into your stupid shit sandwich. Good bye !

      • Ronin8317MEMBER

        Your wife can do what some medical clinics do : schedule patients to come in after hour so you can charge more!!
        The problem with a lot of poster is that, like me, they have never been to a bulk-billed GP who spent more than 5 minutes on consultation.

      • Young Ok…

        I disagree with your assertion that GP’s are a fault here, they did not construct the market, that was the health and insurance sectors. Not to mention the financialization of everything sundry from University to treating Health as a profit center.

        Disheveled Marsupial…. maybe we should just cut to the chase and replace GP’s with MBA’s….

      • meanwhile, I know well of a colleague who works for bayer who gets paid to have the GPs use his technology.

        not a particularly bright guy who couldn’t make it thru to doctor school himself, yet knows how to manipulate people incredibly well.

        the problem with GPs and many specialists is that for the 5% who are brilliant, there are 60% who really know how to fuck people up with addictions, crazy drugs that won’t be around in 20 years, and a good 30% who make good decisions most of the time and bad decisions from time to time.

        Just remember that for every 10 brain surgeons, there is one that graduated last in the class, and that is probably the guy who designs the syllabus now

        medicine as a business is self serving – GPs should be paid for the percent of time each year that their patients are well, not every time they are sick (that’s for the free hand believers out there). Now go give me solutions MB intelligentsia.

        Skippy… you may well be right (I humbly almost agree). I would liken the GPs to the baby boomer housing rent winners, the whole system goes to shit yet as long as you have a piece of the loot you go along with it until things don’t work for you. Probably at fault by default there? As a PHD in systems modelling, one assumption that I believe we need more discussion on is how do systems form in the first place Skip? You are assigning responsibility to insurance companies and finance corp, yet are they the only node? Systems form themselves or do we assign blame to one or two fall guys? That’s a core question that needs resolution on just about every structural issue for solutions.

      • Where’s spambot today? Must be at the doctor getting a sick note. Jeez, the macropod got slam dunked by the bot a few days ago for trifling comments compared to the invective heaped on pete. Not that I concur with his tale of woe about his GP wife …… a bit of licence at play methinks with the math, but cripes guys, be civil.

      • Young Ok….

        Well as you know models are only as good as the data going in and rigorous methodology throughout the entire process. By this time I would have thought you grasped the historical significance of neoliberalism and understood its origins. With this noted one would think anthropological and sociological disciplines would inform how such mythology weaves its was through out society until it becomes dominate. With that in mind when referring to applied mathematics I would recommend Mandelbrot’s [and Keynes] works, especially wrt financialization.

        “Funnily enough Milton Friedman actually realised this to some extent. In a response to Kaldor he admitted that causation could run both ways. In 1969 he wrote:

        The feedback effect of business on money, which undoubtedly also exists, may contribute to the positive conformity and may also introduce a measure of inverted conformity.

        Personally, I cannot understand how Friedman continued to make the case for monetarism after publishing this statement. His whole theory, together with the policy stances recommended thereby, rested on the supposed fact that the growth of the money supply and the national income were strongly correlated and that the reason for this correlation was because increases in the money supply led to increases in the nominal national income (i.e. increases in money could either generate economic activity if there was excess capacity or inflation if the economy was at full capacity). The moment that Friedman admitted that the causality might run the other way and that national income (and inflation) might drive the expansion of the money supply his whole doctrine falls apart. The correlations he found could then be explained in precisely the opposite manner – which is exactly what the Radcliffe Commission found and which, today, is exactly what the endogenous money theorists argue.

        I found myself wrestling with Friedman’s ghost on this point. Was he being cynical or simply incoherent? Was he an ideologue pure and simple who fudged his argument to sell his politics or was he a rather witless thinker who had a tenuous grasp of basic causal logic? I wasn’t the first to ask this – many, Kaldor included, have questioned whether Friedman and the monetarists were really serious about what they were saying and doing. This was annoying me for quite a few days because I didn’t know what I was to write in this piece. After talking to some friends and emailing some economists I have decided that I must be wholly honest and admit that I am still not quite sure if Friedman was being cynical or just a bit dim. Perhaps, being part of the same tissue, we cannot really separate the two. Perhaps those who hide their ideology beneath the auspices of science really do reason in a different way people who do not. I will leave that to the reader to decide on their own. Whatever cannot be said, it is certainly clear that in making the above statement and continuing to peddle his doctrines, Friedman and those he counselled were undertaking a extraordinary leap of faith.”


        Disheveled Marsupial…. for some fun try…. https://implicit.harvard.edu/implicit/education.html

      • Meh I’m hard skinned – I don’t take personal offence to anything said. I’m a long term reader (since when Leith had his separate blog).

        If anybody can come up with an awesome scheme I’m all ears! Right now the taxpayer is getting a good deal, which I guess is good to prevent US style health care blowout, but the consequences are the billings only promote 6 minute primary health medicine.

        Don’t worry I’m onto the wife about this all the time – the problem is the ones who care too much about their patients end up spending more time with them which erodes any chance of making money when part-time.

        And yes expenses in some professions are HUGE. I heard of an obs+gyn having a $100k insurance because they get sued the most…

      • great stuff skip.

        at risk of taking over the thread and off topic. I will be swift with my response.

        Yes, great chicago boys and all and then the stupendous and simple ways of permeating every research funding grant and syllabus in schools to instill ideology and strategy – and the answer for many people is ‘blame neoliberalism’.

        yet out of those nodes you can go quite deep – a good case study is the rockefeller network and influence/persuasion as well as key appointments.

        yet going highly mathematical you can look at power max theories in maths etc – guys like nate hagens hypothesising that humans are no different from say a plant that organise in a way to extract max resources and then shrivel up and die. neolib is also only 50-60 years in life and comparable in terms of life, and we need to look at shifts in system design now where persuasion was subtle to being enforced through the end of a gun or an administration of drug or social fear machine.

        great stuff skip. I’ll leave the thread back to the doc – and on that point – lets not forget that many doctors are cursed by suicide, depression at a higher rate than most other professions. This thread requires much more discussion than the posts afforded today.

      • Just a short reply…

        Sure some dominate societies in literature [heavy influences – see romantic et al] have acted in the way you say, but, not always [sweet spots – post WW America], yet to be inclusive of all our species social formations in a comparative study, does not support the proposition of ‘always’….

        Disheveled Marsupial…. Medicine in my book should not be a profit center, nor education, making everything a market and monetizing it does not make a round peg fit in a square hole….

      • The free shit army just can’t let go of those ‘free GPs’

        Move with your wife to a suburb/country that respects her services – the vitriol you just copped shows the general level of nuttery you are up against.

      • skippy, thanks for taking the time to clarify.

        agree with much of what you say about the stupidity of profit max as a sacred principle to solve every policy – unless that is, that profit is actually measured in a feasible way – not simply as fiat in a gamed market with rules that are ill defined and set in stone by policy makers, many who no longer exist in human form, and then further deliberated on by other rule makers who have no real understanding of why policies were set that way in the first place.

        As a token of thanks for expanding on my own understanding from time to committed, I would like to leave you with one layer of the semantic pie to think about – and that is how we can apply the monkey experiment to legacy policy as well as to new policy. Enjoy:

        “An experimenter puts 5 monkeys in a large cage. High up at the top of the cage, well beyond the reach of the monkeys, is a bunch of bananas. Underneath the bananas is a ladder.

        The monkeys immediately spot the bananas and one begins to climb the ladder. As he does, however, the experimenter sprays him with a stream of cold water. Then, he proceeds to spray each of the other monkeys.

        The monkey on the ladder scrambles off. And all 5 sit for a time on the floor, wet, cold, and bewildered. Soon, though, the temptation of the bananas is too great, and another monkey begins to climb the ladder. Again, the experimenter sprays the ambitious monkey with cold water and all the other monkeys as well. When a third monkey tries to climb the ladder, the other monkeys, wanting to avoid the cold spray, pull him off the ladder and beat him.

        Now one monkey is removed and a new monkey is introduced to the cage. Spotting the bananas, he naively begins to climb the ladder. The other monkeys pull him off and beat him.

        Here’s where it gets interesting. The experimenter removes a second one of the original monkeys from the cage and replaces him with a new monkey. Again, the new monkey begins to climb the ladder and, again, the other monkeys pull him off and beat him – including the monkey who had never been sprayed.

        Monkeys (or perhaps more aptly is this Humans?) at work

        By the end of the experiment, none of the original monkeys were left and yet, despite none of them ever experiencing the cold, wet, spray, they had all learned never to try and go for the bananas.

        And the implications for us now? How can one take on five monkeys that don’t even exist?

      • MediocritasMEMBER

        @Young OK

        I don’t see Neoliberalism as new at all. Monetarism, certainly, less than 100 years old, but the Monetarist camp is just one of many under the Neoliberal umbrella.

        Neoliberalism is nothing more than Neofeudalism, it’s a return to the very scheme under which human societies operated for thousands of years, rule by the Aristocracy, or, as I prefer, the Insect Model.

        Monarchic only when one camp dominates, more Liberal when there’s competition, these are the Magna Carta loving types of Liberals, ie: those that fight for Liberty….for the rich and powerful. People who would stand up for the freedom of the “peasants” are branded by Neoliberals as “socialists”.

        “Neoliberalism” is actually not “Neo”, it’s 800 years old. They just rebranded an old concept and updated it with some more modern techniques (such as Monetarism): https://youtu.be/6KbDNSkSovQ?t=4m51s

      • drsmithyMEMBER

        IK, go away.

        This is a serious blog.

        He’s the latest incarnation of the poster also know as Thanasis Veggos, Adam Smith, etc.

    • MediocritasMEMBER

      But they certainly won’t be doing anything to freeze price rises!

      Big pharma aren’t making anywhere near enough money in Australia. We really need to import the US model via the TPP. Won’t somebody think of the children?

    • drsmithyMEMBER

      As I’ve said before, the Right hold a special hatred in their hearts for publicly funded healthcare.

      Presumably because they think only people who deserve it get sick. Gods judgement.

  4. I’m Just Assuming the ratings agencies have already given Turnbot a heads up on the locked in ratings downgrade, thats why they are trying so hard to throw the election.

  5. “Those with a Transition to Retirement Pension will no longer be able to withdraw big lump sums from their super, and those aged between 60 and 65 will no longer be able to draw tax-free earnings.”

    Anyone able to explain what that means? Thanks.

  6. H&H, any comment on the likely impact of AAA loss on Aussie state and federal gov bond prices? A small part of my super over the last few years has been those bonds via ETFs (RGB and RSM), anticipating Australia heading to ZIRP. They’ve done ok. Just wondering what a downgrade will do to them.

    • The RBA will respond most likely so the impact is probably market neutral at first. But it thus depletes more monetary ammunition so takes us closer to the point of our own monetary failure where we lose control of bond yields and it goes instead to foreign buyers of the debt.

      It’s impossible to know when or even if that tipping point comes given the amount of free money galivanting around the globe but in looking at the risk adjusted return on the face value I’d be concerned when the AAA goes.

  7. I wonder how would likely economic projections affect the budget:

    1. real GDP growth: in 16/17: -1% ; in 17/18: -4.5%; in 18/19: -3%
    2. Business investment: in 16/17: -11%, in 17/18: -15%; in 18/19 -10%
    3. Participation rate: in 16/17 64%; in 17/18 62% in 18/19: 60%
    4. Unemployment (fake ABS numbers): in 16/17 6.5%, in 17/18 9%, in 18/19 9%

  8. Stephen Morris


    So they’re not going to deregulate university fees.

    They’re just going to deregulate university fees for the “elite” courses!

    This policy is – and always has been – about ensuring that only the kiddies of the rich (and a tiny number of scholarship students) can get into the prestigious courses which allow a decent income and guarantee their own membership of the Elite in the future generation.

    Welcome to the “refeudalisation” of society.

  9. HnH, good analysis and correct summation: It’s lying our way to prosperity with our ears pinned back.

  10. good analysis on the delusional forecasting.

    however what does it really mean? that we are preparing budgets that will run deficit which is hardly a bad thing.

    as steve keen’s Minsky model shows, running big deficits (gov lending) is the only way from not going Japanese once household lending and business lending walks off a cliff; and need to keep VoM ticking over. Spend baby spend. Why is this so bad again?

    The best strategy back from there is to go energy/food independent so that you don’t need to settle for too much in forex and nationalise gold mines ; )

    • “Why is this so bad again?”
      Because it’s what people spend their newfound disposable income on! Taking on more ‘leverage’ just locks up whatever new liquidity a household has received.
      If people were encouraged to spend their money into the community it might help. But the way our economy is structured? Nope. It’s going straight into 2 areas – the stock market and the leveraged property market, where it will remain locked up until those markets correct. When they do, that investment capital, the newly acquired spending-debt, will evaporate……leaving the whole country in the poor house…literally!

      • I agree with your points on the futility in firing the ponzi janet, absolutely.

        However, what I am saying is that with the overestimated forward revenue assumptions in the budget, we are keeping a buffer on our gov’s spend allocations rather than going the full austerity stick, which would give us a triple whammy of low gov, household and business debt creation and red line the VoM gauge.

  11. Hmmm So let me get this straight:
    -the Aussie Gov’t is going to borrow less from abroad
    -the Aussie people are going to borrow less abroad
    -Large Aussie Business are going to borrow less from abroad
    YET the net outcome of this synchronized frugality is higher GDP and lower CAD.
    Mathematically this is Only possible under one condition, that being the massive sale of Private and Public assets to foreigners.

    I suspect it’s one of those: Be careful what you wish for occasions!

  12. The member for Panama’s Golden Sachs is out this morning accusing the opposition of ‘class warfare’.

    Those working class numbskulls are trying to take our MONEY!

    What a wanker. He knows his numbers up. Coalition fruitloop Govt is almost at an end.

    • Labor should literally out that quote on billboards with “OUT OF TOUCH” underneath.

      • Mining BoganMEMBER

        This is the Prime Minister saying there’s us rich people and there’s the rest of you. The government is going to look after one group and it’s not yours.

        Yes, a sound thrashing.

      • drsmithyMEMBER

        I would have thought “perfectly in touch with Liberal voters” would work just as well…

    • Turnbull is a parasite of the highest order. The man stands for nothing other than his own self interest.

      He had a lot of people fooled for a time, I know I was one of them. He is going to lose this election, closely followed by the leadership of the Liberal party.
      History will look back on his time as PM as an unfortunate blip on the Australian political radar.

      No doubt there is a cosy ambassadorship someplace waiting for him to slip into.

    • I believe he was referring to Jon Faine specifically.

      Nevertheless it still betrays the underlying attitude. And how exactly does it help the others who aren’t wealthy.

      Truly pathetic.

    • I just let the olds know that Mal wants them to send me a suitcase of cash.
      Should go down a treat.

    • Next thing down the inter generational wealth transfer pipeline will be the 100 year mortgage made so popular in Japan in the late 1980s.

      If you aren’t happy with the government saddling your next generations with extra taxation to pay off your deficits – top ’em off with a mortgage payment on a million dollar joint 30kms from the city.


      That said, perhaps we should support the Malcolm crowd looking to get their kids on the ‘ladder’. Nothing will bring families together like intergenerational negative equity

      Lucky Australia is different:

  13. Banana Republic. Has anyone asked Paul Keating how he feels about this ?
    Where is his J curve when you need it.

    • Keating put away his J curve when it drooped into a U. He was good theatre, but he and bird brain are actually in a great part responsible for the neoliberal world we live in today – ably assisted by the doddering Howard who couldn’t make money as an accountant so go figure how he became a treasurer, let alone PM. We should take away their gold cards so they sink into oblivion.

      • Right on. The day Australia first “won” the America’s Cup was the day I finally gave up on mainstream Strayan pollies. Even those with Rhodes scholarships.

      • Immanuel Kant

        Ummmmmmmm – that’s like blaming Ancient Greeks for inventing coins.

      • Not really IK. Hawke was elected via a popular vote by the middle classes who believed the early work he achieved in equality in the ACTU would be carried forward into his political career. Instead he hijacked the wages growth of the middle class by hooking it into the Accord which pretty much saw wages growth and equality stagnate because it maintained the status quo. He was ably assisted in this subterfuge by Keating, who was a master at greasing the neoliberal spin. These pricks did no better then Fraser. They dished out vote catching spending at the appropriate time irrespective of the social democracy people policies expected from them and refined the budget deficit/surplus bullshit mantra well after the dollar was floated when we could have so easily stepped away from the straight jacket of the gold standard days and pegged exchanges. By moving the ALP to the right of centre they followed exactly in the neoliberal mould and pulled apart the social gains put in place by the Whitlam era. People became confused because they occupied the same policy space as the LNP which is how they managed to stay in power. Peacock fluffed his lines in the dying stages of the election which would should have seen H and K booted out, but they clung on and the march into neoliberalism became a stampede. So to use your analogy, they were the Greeks and should be blamed for putting us into the bloody mess.

  14. Mining BoganMEMBER

    Hey, I have a question.

    St Mal says cutting super concessions makes things fairer, yet cutting NG concessions is a NEW TAX!!!!! This wouldn’t be political would it?

  15. Good analysis. Though it’s worth pointing out that, all other things equal, measured productivity should rise as a natural consequence of the mining boom ending. Mining accounts for at least 25% of the drag on productivity over the past decade: high prices made it profitable to throw craploads of inputs at extracting very marginal deposits (i.e. lots of input for little output).

    Just pointing it out now so no-one gets excited when it happens later, as it will be meaningless.

  16. Anyone watching this afternoon Scomo’s underwhelming address to the press gallery would understand this is an election budget designed to sooth the disgruntled electorate. The time horizon for the wonky trickle down effect of taxation cuts is just can kicking for another administration to adjust according to their preference and like the expanded depreciation policy, it won’t add one iota to economic activity because small business is already on the ropes. The $80K threshold increase won’t be a significant benefit to offset the negative effects of non action on child care, medicare etc it will only benefit the higher income earners which won’t feed back into economic activity because their increase in disposable income is saved, not spent. The superannuation changes, while appearing to correct the use of superannuation as an estate planning tool by the wealthy, will just result in high super balances being shuffled into other estate tools. The negative consequence will be those on the margins who have to make changes as of today on superannuation arrangements that were guaranteed by the government who is now backflipping because they don’t have the cojones to address the twin elephants in the room of NG and CGT. both of which will continue to distort the speculative bubble as the RBA ratchets IR levels south in blind panic. So a half arsed superannuation reform gets plugged in which just diminishes the confidence of folks planning for retirement. Most people I know are cashing out their super accounts asap because they are losing faith.
    The analysis by HnH would never even rated as a look in by the Treasury boffins who were under orders to present a smoke and mirrors budget to act as a stop gap. The real budget will be produced post election when things are suddenly found to be “worse than we thought”.
    Anyone, anyone, with barely functioning cerebral matter, would destroy these fools at the ballot box.


    There’s been only an oblique mention of ‘innovative’ and ‘new’ retirement income stream products that will become eligible for the earnings tax exemption that will only now apply to account based pensions < /= $1.6mil.
    If this 'new' and 'innovative' products walks, looks and quacks like a geared Inv Property inside a SMSF, I'm pulling up stumps!

    • Listened to some pow-wow not long ago.

      They look to be annuities that pay tax-exempt income.


        Thanks RP!
        Will have a look around. Not a big fan of annuities as today rates are so low and 0% ‘residual capital value’ means one has to kiss off the principal- and if the provider flames out; you’re in the hurt locker -no guarantee.

        Note: the word ‘innovative’ got me all tingly with what may be ‘innovated’ long as there’s not relinquishing of principal. Always thought we could use a type of municipal bond to help fund the badly needed infrastructure.

      • Yeah, that was the afternoon from the FPA, got some more views scheduled.

        Bearing in mind all this has yet to achieve royal ascent.

        But if there is going to be annuities that are income tax-exempt, in line with other changes, you can imagine product providers will rush to the doors.

        As far as yield goes… I can only imagine the exemption status will have to imply the legislation behind insurance bonds or so. Their yield are a bit higher, with potential competition to come.