Sunday, 17 November 2013

Federal Treasurer Joe Hockey in danger of becoming a walking talking sovereign risk

The current national government debt ceiling is $300 billion and, on 13 November 2013 the House of Representatives passed the Commonwealth Inscribed Stock Amendment Bill 2013 increasing the Treasurer’s standing borrowing authority in the Commonwealth Inscribed Stock Act from $300 billion to $500 billion. Subsequently the Senate sent the bill back down with the amount amended to $400 billion.

It doesn’t take a genius to realize that Australia’s national debt is not going to grow beyond $400 billion before mid-2016, if the Abbott Government is as good a financial manager as it promised it would be.

At present government borrowings stand at an estimated $292 billion, with $22 billion of that being borrowed by the Abbott Government since 18 September 2013.

Since the Senate acted, Treasurer Joe Hockey has been publicly threatening a Tea Party-style hissy fit which would allow government services to stop and to bring about “massive cuts” if Labor does not support the Coalition's bill to raise the debt ceiling.

Mr. Hockey apparently finds nothing amiss in making threats which have the potential to damage Australia’s reputation.
If he keeps on in this manner foreign/domestic investors, business and consumers may react negatively.

If this happens Mr. Hockey will have become a walking sovereign risk and cost the economy many billions of dollars.

As the Business Spectator opined on 15 November:

The national interest, however, would be better served by Hockey getting out of campaign mode and into governing mode. Asking for more debt next year would be a minor political embarrassment (and let’s not forget that it most likely won’t be needed), but in the meantime we would look less that the scared kid of Asia hiding under the stairs. 
That Mr. Hockey’s ego-driven threats are hypocritical and a political ploy can be clearly seen when one looks back to May 2012, when the former Labor Government announced its intention to raise the debt ceiling from $250 billion to $300 billion the Coalition was not happy and attempted to block this increase:

If you do raise the debt ceiling, you have a rather large train rolling off the edge of a rather large cliff. [(Leader of the Nationals in the Senate and Member of the Opposition’s Shadow Ministry Barnaby Joyce, Financial Review, 14 May 2012]

Now they are saying they are living within their means but are also saying, 'Just in case, please give us an increase in the credit card limit to $300 billion.' It does not sound like a lot if you say it quickly but it is a hell of a lot of money that Australians have to repay. Enough is enough....
The government must appropriately reflect the significance of increasing the limit on the face value of stock and securities that can be on issue under the Treasurer's standard borrowing authority. The Treasurer must then make the case to the Australian people that Labor deserves the right to increase the credit card limit. The Treasurer must explain why he cannot use the Loan (Temporary Revenue Deficits) Act 1953. I asked him a question in this place. He could not answer it. So, to that effect, and I move the following second reading amendment:
That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House requests the Government to vary the resolution in relation to the Appropriation bills agreed by the House on 8 May 2012 to permit amendments to be moved and debated to Appropriation Bill (No. 2) 2012-13.”
This is the very least that the public deserves......
We will quiz the AOFM and the Department of the Treasury at estimates. We want to get to the bottom of exactly why this sneaky government is trying to avoid proper scrutiny on the debt limit. [Liberal MP and Shadow Treasurer Joe Hockey, Hansard, 21 May 2012]

Acting Prime Minister, does  the government view the increase in the nation's credit card limit from $250 billion to $300 billion as a very serious issue or no big
This is a budget with the debt issue, this increase in debt from $250 billion to $300 billion debt ceiling.... [Liberal MP and Shadow Minister for Finance, Deregulation and Debt Reduction Andrew Robb, Hansard, 21 May 2013] 

Joe Hockey's current belligerence is also a far cry from his attitude just five days after the federal election when he told voters: You can go forward and spend your hearts out because we're going to have a good Christmas

* Photograph found at Google Images

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