Thursday, 19 March 2015

Tony Abbott is barking mad and the Liberal Party refuses to put him out of his misery

This is what the Australian Parliament Library stated in December 2013 about public debt in the year the Abbott Government was elected:

# General government, as defined by the Australian Bureau of Statistics (ABS) comprises all government units (of local, state and national governments) and non-profit institutions controlled and mainly financed by the government.

The general government gross and net foreign debt currently stands at 14.1 and 12.3 per cent of Gross Domestic Product (GDP) respectively.

There has been no change in the gross debt, but there has been an increase of 0.1 per cent in net debt as a percentage of GDP since March 2013.

The total Australian public sector (including general government, and financial and non-financial corporations controlled by governments) gross and net foreign debt currently stands at 19.5 and 13.5 per cent of GDP respectively. Gross and net foreign debt has decreased 0.7 and 0.8 percentage points respectively since March 2013.

# The private sector is responsible for 80.5 and 75.0 per cent of Australia’s gross and net foreign debt respectively. This is an increase of 1.7 and 3.1 percentage points of gross and net foreign debt respectively since the March 2013 quarter.

On the basis of these figures Tony Abbott and his Cabinet have been crying ‘debt and deficit disaster’ at every opportunity.

Now all has changed.

This was Prime Minister Abbott quoted in the Financial Review on 18 March 2015:

Tony Abbott promised voters a "dull" May budget and is content for now with current forecasts of a net debt equivalent to 60 per cent of the economy and no surplus for 40 years.

Mr Abbott said while such a debt ratio, four times the current level, was "too high" and "we want to get it in a much better situation than that", he added "a ratio of debt to GDP at about 50 or 60 per cent is a pretty good result looking around the world".

These are graphs of Australia’s net public debt between 1981-82 and 2013-14, with projections up to 2017-18 based on the Abbott Government's first budget, and net interest payments covering the same periods:

The Guardian 9 June 2014

The difference between the historical record, the last full financial year, what Abbott promised in May 2014 and what he now expects voters to tolerate is mindboggling.

In the space of one budget cycle Abbott has altered his expectations and now predicts that net public debt will grow by an estimated 46.5 per cent over the next 39 years.

What renders his new fiscal position so bizarre is that there appears to be no economic need for the level of debt he now wants the nation to carry as the only way this level of growth in public debt could occur is if, by his own admission, the Federal Government did nothing but sit on its hands for the next thirty-nine years and introduce no new finance policies.

Indeed I strongly suspect that Australia has not carried even a ratio of 60 per cent (or higher) gross public debt to GDP since the period covering 1942-1950, when the nation was in the middle of an almost six year-long world war and then was starting to pay down war debts.

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