Fitch Ratings Inc: The Trump Administration Poses Risks to Global Sovereigns

According to the Australian Dept. Foreign Affairs and Trade (DFAT) the United States ranks as Number 1 in the Top 20 countries with direct investment in Australia [ABS catalogue 5352.0, May 2016 & UNCTADstat database, October 2016].

In 2015 Australia direct investment in the U.S. was led by manufacturing, and the finance/insurance sectors and U.S. direct investment in Australia is led by the nonbank holding, mining, finance/ insurance companies, and manufacturing sectors. [Office of the United States Trade Representative: Executive Office of the President, 2017]

So international credit rating agency, Fitch Ratings Inc’s media release of 10 February 2017 may raise some concerns:

Fitch Ratings-London-10 February 2017: The Trump Administration represents a risk to international economic conditions and global sovereign credit fundamentals, Fitch Ratings says. US policy predictability has diminished, with established international communication channels and relationship norms being set aside and raising the prospect of sudden, unanticipated changes in US policies with potential global implications.

The primary risks to sovereign credits include the possibility of disruptive changes to trade relations, diminished international capital flows, limits on migration that affect remittances and confrontational exchanges between policymakers that contribute to heightened or prolonged currency and other financial market volatility. The materialisation of these risks would provide an unfavourable backdrop for economic growth, putting pressure on public finances that may have rating implications for some sovereigns. Increases in the cost or reductions in the availability of external financing, particularly if accompanied by currency depreciation, could also affect ratings.

In assessing the global sovereign credit implications of policies enacted by the new US Administration, Fitch will focus on changes in growth trajectories, public finance positions and balance of payments performances, with particular emphasis on medium-term export prospects and possible pressures on external liquidity and sustainable funding. US positions on some countries may change quickly, at least initially, but any potential rating adjustments will depend on consequent changes to sovereign credit fundamentals, which will almost certainly be slower to materialise.

Elements of President Trump's economic agenda would be positive for growth, including the long-overdue boost to US infrastructure investment, the focus on reducing the regulatory burden and the possibility of tax cuts and reforms, assuming cuts don't lead to proportionate increases in the government deficit and debt. One interpretation of current events is that, after an early flurry of disruptive change to establish a fundamental reorientation of policy direction and intent, the Administration will settle in, embracing a consistent business- and trade-friendly framework that leverages these aspects of its economic programme, with favourable international spill-overs.

In Fitch's view, the present balance of risks points toward a less benign global outcome. The Administration has abandoned the Trans-Pacific Partnership, confirmed a pending renegotiation of the North American Free Trade Agreement, rebuked US companies that invest abroad, while threatening financial penalties for companies that do so, and accused a number of countries of manipulating exchange rates to the US's disadvantage. The full impact of these initiatives will not be known for some time, and will depend on iterative exchanges among multiple parties and unforeseen additional developments. In short, a lot can change, but the aggressive tone of some Administration rhetoric does not portend an easy period of negotiation ahead, nor does it suggest there is much scope for compromise.

Sovereigns most at risk from adverse changes to their credit fundamentals are those with close economic and financial ties with the US that come under scrutiny due to either existing financial imbalances or perceptions of unfair frameworks or practices that govern their bilateral relations. Canada, China, Germany, Japan and Mexico have been identified explicitly by the Administration as having trade arrangements or exchange rate policies that warrant attention, but the list is unlikely to end there. Our revision of the Outlook on Mexico's 'BBB+' sovereign rating to Negative in December partly reflected increased economic uncertainty and asset price volatility following the US election.

The integrative aspects of global supply chains, particularly in manufactured goods, means actions taken by the US that limit trade flows with one country will have cascading effects on others. Regional value chains are especially well developed in East Asia, focused on China, and Central Europe, focused on Germany.

Tighter immigration controls and possible deportations could have meaningful effects on remittance flows, as the US has the world's largest immigrant population. World Bank data confirm that the US and Mexico share the world's top migration corridor and have the largest bilateral remittance flows. Relative to GDP, remittances are even larger for Honduras, El Salvador, Guatemala and Nicaragua, all of which receive most inflows from the US.

Countries hosting US direct investment, at least part of which has financed export industries focused back on the US, are at risk of being singled out for punitive trade measures. The list of these countries is potentially long, since US-based entities account for nearly one-quarter of the stock of global foreign direct investment. Countries with the highest stock of US investment in manufacturing are Canada, the UK, Netherlands, Mexico, Germany, China and Brazil.

Current Australian Real Gross Domestic Product figure is no reason to panic

Australia has enjoyed 25 consecutive year of Gross Domestic Product (GDP) growth.

This is what the last ten years of that growth looked like:

So  when that arch enemy of sound economic principles, Federal Treasurer and Liberal MP for Cook, Scott Morrison, starts yelling that the sky is falling and Santa Claus is dead – remember the only weapon in his armoury across all three portfolios he has held (Immigration, Social Services & Treasury) is The Big Scare.

Like all his big scares this one is designed as warfare against the weak and vulnerable, so expect the MYEFO (mid-year budget update) released tomorrow to be structured to deliver doom and gloom.

According to Yahoo! News: The last time Australia was in recession, Sale of the Century was on the nation’s televisions and people endured Bryan Adams’ (Everything I Do) I Do it for You as the number one song for 11 long weeks.

So if a 77 year-old Tony Barber isn’t fronting a new television game show this month and a 57 year-old Bryan Adams hasn't returned to centre stage from the musical back blocks he currently tours, then I suggest you don't have worry about an economic recession just yet.

Otherwise, enjoy your festive season in the sure knowledge that federal parliament is in recess until 7 February 2017 and therefore pollies can do no further harm for the remainder of 2016.

Is "Yes, Minister" syndrome rampant in the Turnbull Government?

In the face of this……

The Guardian, 3 October 2016:

The Coalition, contrary to all perceptions, has been spending at an alarming rate. 

In 2012-13, the last full year of the previous Labor government, the ratio of government spending to GDP was 24.1%. 

In 2014-15, this had risen to 25.6% and, in 2015-16, it rose to 25.7% of GDP. 

The 1.6% of GDP blowout in spending between 2012-13 and 2015-16 is about $26bn and accounts for more than the blowout in the deficit from the time of the 2014 budget.

The deficit blowout fed into the level of government debt as it had to ramp up its borrowing to cover the ever growing shortfall.

Net government debt rose to $296.4bn at June 2016, up from $153bn in June 2013 just before the Coalition took power. 

As a share of GDP, net government debt has risen from 10% to 18%, just off the all-time high in the wake of the second world war. 

When the 2016 Myefo is released before year end, net government debt will be at a 60-year high and rising.

Gross government debt, according to the final budget outcome documents, rose to $420.4bn, or 25.5% of GDP, in June 2016. This is at the highest since 1971-72 when the Vietnam war effort was being funded.

And this......

The Australian Senate Community Affairs Legislation Committee was informed on 19 October 2016 that all public health cost-cutting measures previously supported by the Turnbull Government are still being progressed as policy.

The Turnbull Government is doing this…..

The Sydney Morning Herald, 19 October 2016:

The Department of Foreign Affairs and Trade spent an estimated $215,000 or more sending nearly two dozen senior bureaucrats from Canberra to Paris to attend an inhouse talkfest about ways to save money.

Fairfax Media can reveal the two day junket in September included business class return travel for all 23 DFAT officers.

They included John Philp, Australia's former ambassador to Afghanistan and current first assistant secretary of the consular and crisis management division and John Fisher, first assistant secretary of DFAT's corporate management division.

But the entourage, which was hosted for the two day conference by Australia's ambassador to France, Stephen Brady, included a departmental psychologist, a conduct and ethics manager, and a health and safety officer, according to a list of attendees obtained by Fairfax Media.

According to the Qantas website, the cheapest business class "saver" ticket to Paris costs $3800 one-way, indicating the group of 23 cost at least $175,000 in airfares alone for the 48-hour jaunt.

The group stayed at the four-star Mercure Paris Centre Eiffel Tower Hotel where standard rooms for mid-week business travellers start at $530 a night, according to booking websites…..

That figure does not include the as yet unknown cost of getting more than two dozen Europe-based diplomatic staff to Paris.

The conference, hosted at the Australian embassy just near the Eiffel Tower, was held to discuss a project known internally as "Redesign" and aimed at "streamlining work and improving efficiencies at posts in Europe", according to DFAT.

According to a source familiar with the September 7 to 9 conference, some Australian-based participants wondered why the conference could not have been held via a cheaper and perhaps more agile fashion like video conferencing…..

Australian and foreign-owned companies who are laughing all the way to the bank

QANTAS AIRWAYS LIMITED with an income of $14.90 billion stated it had no taxable income in in 2013-14 so paid no tax. Hmmmm…..

ENERGYAUSTRALIA HOLDINGS LTD earning 8.84 billion and EXXONMOBIL AUSTRALIA PTY LTD bringing in $9.94 billion in that same financial year also had no tax to pay.

News Corp’s APN NEWS & MEDIA (owner of most of the regional newspapers in Northern NSW ) with a taxable income of $21.29 million in 2013-14 also paid no tax.

They are among the hundreds of Australian and foreign-owned companies with incomes of over $100 million a year which the Australian Tax Office (ATO) lists as paying no tax.

ATO Corporate Tax Transparency - 2013-14 Report of Entity Tax Information

Corporate tax transparency – further contextual background

Counting the coins as we wait for the 45th Parliament to commence

Before Malcolm Turnbull (as prime minister of a government in the third and final year of its first term in office) called a double dissolution election, the last Dept. of Finance Australian Government General Government Sector Monthly Financial Statement due was for May 2016 and, this revealed an underlying cash balance for the 2015-16 financial year to 31 May 2016 which was in deficit to the tune of $34,860 million.

With Income, Expenses & Debt Year to Date May 2016 coming in at:

total government revenue - $360,209 million of which $340,866 million was taxation revenue

total expenses - $388,061 million leaving a shortfall of $27,852 million

public debt interest - $14,101 million

net government debt - $284,657 million.

The June figures are yet to be published and it will be a case of track the Dept. of Finance website for the next three years as the Liberal-Nationals Coalition fails yet again to reign in its own discretionary spending.

Meanwhile Prime Minister-elect Turnbull - in an election so close that by 18 July 2016 only 13 of 150 House of Representatives seats have been officially declared - held an evening of champagne and canapés with a who’s who of Liberal and National MPs and senators at The Lodge in Canberra on 17 July.

The food included Pialligo ­Estate’ smoked salmon on rye toasties with horseradish cream, Moroccan lamb rissoles with harissa yoghurt, vegetable samosa with mint relish, roast beef en croute with stilton cream and tomato chutney, Vietnamese prawns with chilli jam and chicken satays.

I sincerely hope that Mr. Turnbull personally paid for use of The Lodge that night and for all catering and security at this event, as he didn’t become the official tenant again until after the Governor-General swore him in on 19 July 2016.

Mr. Turnbull's reportedly in excess of $1 million donation to the Liberal election campaign may possibly have brought him government but it could never buy the allocation of taxpayer funds for his private victory party.

Statistics that Team Turnbull hope voters won't notice

The Guardian, 4 June 2016:

Australian Bureau of Statistics data released over the past few days shed a stark light on private sector business investment and company profit trends over the past few years. It shows that rather than being anti-business, investment and profits boomed under Labor, and rather than being pro-business, they have collapsed under the Coalition.

Here are the facts.

In the two and a half years since the 2013 election, company profits have fallen 11% to their lowest level since 2010. This has occurred with the global economy registering decent growth and interest rates at record lows. In the six years of Labor government to 2013, company profits rose 28% despite the global financial crisis which plunged the world economy into a deep recession.

On business investment, the credentials of both sides of politics are even more extreme. Since the September 2013 election, private sector capital expenditure has fallen a thumping 26% and the outlook for the next year is for a further fall of between 5% and 10%. The fall in business investment is set to be more severe than during the early 1990s recession.

Under the previous Labor government, business investment rose a robust 67% to reach a record high proportion of GDP. It seems the policy settings which included the carbon price and mining tax did nothing to discourage the private sector from going out and investing.

Labor being anti-business with its emphasis on better health and education, and the Coalition being pro-business with its planned tax cuts.

Don’t believe the journalist? Still convinced only conservatives understand business? Then check his facts at 5676.0 - Business Indicators, Australia, Mar 2016 – data from 1994 to 2016.

Australian Federal Election 2016; debt, credit and GDP

So how is Australia’s economy faring under the Abbott-Turnbull Government in the lead-up to the 3 May 2016 federal budget and the following general election?

Australian Dept of Finance, 24 March 2016:

The underlying cash balance for the 2015-16 financial year to 29 February 2016 was a deficit of $38,719 million.¹

The fiscal balance for the 2015-16 financial year to 29 February 2016 was a deficit of $35,292 million…..

Total revenue was $1,223 million lower than the MYEFO profile, primarily due to lower than expected taxation revenue and dividend income.

Total expenses were $2,831 million lower than the MYEFO profile, primarily due to lower than expected supply of goods and services, wages and salaries and grants expenses…..

Net worth is negative $352,423 million;

Net debt is $287,920 million; and

Net financial liabilities are $516,561 million.

Financial Review, 28 March 2016:

Australia is one of seven countries that Forbes magazine says is the "most likely to suffer a debt crisis" within the next three years. 

China, whose economy has faltered in the past two years, comes No. 1 on the list of seven, but Australia is No. 2. Sweden, Hong Kong, South Korea, Canada and Norway complete the list of infamy.

Using data for both private and public debt compiled by Switzerland-based Bank of International Settlements, the magazine looks at the rate of growth of credit compared with gross domestic product, paying particular attention to when credit growth begins to fall……

"The bottom line is that private sector expenditure in an economy can be measured as the sum of GDP plus the change in credit, and crises occur when (a) the ratio of private debt to GDP is large; (b) growing quickly compared to GDP," the magazine says.

When credit growth slips as servicing debt exhausts funds available to finance it, "new borrowers baulk at entry costs to house purchases, and numerous euphoric and Ponzi-based debt-financed schemes fail" leading to a change in available credit.

Australia, like the other six countries on the list, fill the two key prerequisites, a high level of private debt to GDP, and a rapid growth of that ratio in the last few years, the report says.

Economic crises often coincide with private debt exceeding 1.5 times GDP and the level of private debt grows by about 20 per cent over a five-year period.

The Guardian, 15 January 2016:

The results are in: Australian households have more debt compared to the size of the country’s economy than any other in the world.

Research by the Federal Reserve has shown the consolidated household debt to GDP ratio increased the most for Australia between 1960 and 2010 out of a select group of OECD nations. Australia’s household sector has accumulated massive unconsolidated debt compared with other countries. As of the third quarter of 2015, it now has the world’s most indebted household sector relative to GDP, according to LF Economics’ analysis of national statistics……

Australia has around $2 trillion in unconsolidated household debt relative to $1.6 trillion in GDP. Australia’s ratio is 123.08%.....

Australian property investors and homeowners are burdened with massive mortgages, especially new and marginal entrants. Unlike winning a gold medal at the Olympics, having the world’s most indebted household sector is not an achievement the nation should be proud of. This is where Australia’s real debt and deficit problem lies, not in the public sector.

Footnotes

1. Compare with the 2013-14 financial year to 30 September 2013 which covers the last eight months of the former federal Labor government:

The underlying cash balance for the 2013-14 financial year to 30 September 2013 was a deficit of $22,929 million.

The fiscal balance for the 2013-14 financial year to 30 September 2013 was a deficit of $19,659 million…..

Total revenue was $4,580 million lower than the Budget profile primarily due to lower than expected taxation revenue. This reflects lower than expected individuals and other withholding taxation, company tax, superannuation fund tax and resource rent taxes.

Total expenses were $4,636 million lower than the Budget profile primarily due to lower than expected grants and subsidies, suppliers and personal benefits expenditure.  This is in part consistent with reduced expenditure during the election caretaker period and reflecting timing differences, particularly for grants and subsidies…...

The net worth of the General Government sector is a negative net asset position of $220,670 million at 30 September 2013.

The net debt of the General Government sector is $174,557 million at 30 September 2013.

A Trans Pacific Partnership negotiated for Australia by the Coalition Government? Well, what did you expect!

It seems that the Australian Liberal-Nationals Federal Government laboured to bring forth a puny bundle of little joy.....

World Bank, Global Economic Prospects, January 2016:

On October 4, 2015, 12 Pacific Rim countries concluded negotiations on the Trans-Pacific Partnership (TPP), the largest, most diverse and potentially most comprehensive regional trade agreement yet. The 12 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam.

The Sydney Morning Herald, 11 January 2016:

Australia stands to gain almost nothing from the mega trade deal sealed with 11 other nations including United States, Japan, and Singapore, the first comprehensive economic analysis finds.

Prepared by staff from the World Bank, the study says the so-called Trans-Pacific Partnership would boost Australia's economy by just 0.7 per cent by the year 2030.

The annual boost to growth would be less than one half of one 10th of 1 per cent….

Since sealing the deal in October the Australian government has been reluctant to commission an economic analysis of its effects, turning down an offer from the Productivity Commission.

Prime Minister Malcolm Turnbull described the deal as a "gigantic foundation stone", saying it would deliver "more jobs, absolutely".

It opens up trade between members but makes trade more difficult with non-members through a process known as "cumulative rules of origin" where members lose privileges if they source inputs from countries outside the TPP.

The Productivity Commission has been strongly critical of the provisions saying that they turn so-called free trade agreements into "preferential" agreements.

The Partnership also requires members to sign up to tough intellectual property provisions and to submit to investor-state dispute settlement procedures administered by outside tribunals.

World Trade Online says the negotiating parties are planning to sign the agreement in New Zealand on February 4. It says Chile has confirmed the date and some trade ministers have already made arrangements to travel to Auckland, but it says New Zealand has yet to issue formal invitations.

As we approach the Abbott Government's second set of Budget Papers due in May 2015 - a timely reminder of how far we are going backwards

Sky News on 3 April 2015 telling Australia what social media commentators have known since December 2013:

In the year ended 30 June 2013 the then Labor Federal Government reported total revenue of $338.7 billion, total expenses of $381.4 billion (est. 25.1% of GDP) and a fiscal balance deficit of $28 billion. Net government debt and net interest payments on that debt stood at stood at 10 and 0.5 per cent of Gross Domestic Product (GDP) respectively.

The Abbott Coalition Government was sworn in on 18 September 2013.

In the month Tony Abbott took hold of the reins of government the Department of Finance listed Australia’s net debt at $174.5 billion and an underlying cash balance (deficit) of $22.9 billion projected to fall to $18 billion by 30 June 2014.

The Abbott Government reported total revenue of $374.6 billion, total expenses of $415.2 billion (est. 26.2% of GDP) and a fiscal balance deficit for the year ended 30 June 2014 of $42.2 billion. At that time net government debt stood at 12.5 per cent of GDP and net interest payments at 0.6 per cent.

In February 2015 and just on halfway through the Abbott Government’s term in office, the Department of Finance listed net debt at $254.9 billion and an underlying cash balance (deficit) of $40.4 billion projected to fall to $40.3 billion by 30 June 2015. At which time net government debt is expected to be 13.9 per cent of GDP and net interest payments at 0.7 per cent of GDP.

So why did budget deficit and public debt increase so dramatically in those first nine months and why is it barely decreasing to date?

Well, there have been signposts along the way and the most obvious place to start is with the borrowing spree that Treasurer Joe Hockey went on almost from Day One of the Abbott Government.

By 4 December 2013 (after less than 3 months in office) Abbott Government borrowings were averaging in excess of $203 million a day. At 30 June 2014 borrowings stood in excess of $351 billion and the 2014-15 budget papers predicted that borrowings will be 23.3% of GDP by 30 June 2015.

Then there was the $8.8 billion grant to the Reserve Bank in October 2013 and the loss of est. $2.9 billion over the 2015-16 and 2016-17 financial years due to the repeal of the Mineral Resources Rent Tax.

Add to this the cost of The War On Terror conducted Abbott-style, which is conservatively estimated to cost $400 million in this year alone for troops deployed in the Syria region, plus the $5.3 million a month cost of an ongoing and inevitably fruitless search for a long gone commercial aircraft.

Throw in the approximately $4.7 million spent on the prime ministerial fleet of bomb-proof cars (which will be stationed around the country for Abbott's convenience) and the est. $250 million reportedly being spent on a new VIP aircraft sometime this year primarily for the prime minister's use .

Factor in the cost of servicing political egos found in the Dept. of Finance lists of parliamentary entitlements paid and the additional expense of VIP flights for political elites.

Add the est. $2.4 billion in tariff revenue foregone due to international trade agreements signed since 2013, along with the est. $86 million spent on two royal commissions into 'pink batts' and trade unions.

Pour in the mix that $400 million plus reportedly spent on hosting the G20 Summit in 2014.

Then toss in a reported $1 billion in public service redundancy payouts expected to flow from the Abbott Government's 'restructuring' of government departments and downsizing of the public service between September 2013 to 2016-17.

Insert the increasing costs of immigration detention and the in excess of $2 billion in contracts awarded in early 2104 for the management of two overseas detention centres. This equates to these contracts costing over $420 million annually. The National Commission of Audit's February-March 2014 report states the projected detention costs for all centres over the forward estimates currently exceeds $10 billion.

Top it all off with the unfair 2014-15 federal budget, which for all the ideologically driven pain it intended to inflict was expected to only save $27 billion over a four-year period and which has now been effectively gutted by the Abbott Government is a desperate grab for some degree of popularity.

Combine all of the above with Prime Minister Abbott's recent conversion to a 'debt is good' philosophy and it is easy to see why government finances are mired in red ink. With the non-Treasury document being circulated by the Treasurer, the March 2015 Intergenerational Report Australia in 2055, predicting net government debt could be as high as 60 per cent of GDP in forty years' time.

Now Tony Abbott has abandoned his 'debt and deficit disaster' rhetoric he has decided that the real budgetary crisis is actually federal government spending. Spending is probably the slowest growing line item in all the aforementioned figures, nevertheless Abbott was quoted in The Australian on 2 April 2015 as stating;even with the changes that we’ve already made, we’re still heading for government spending at around 31 per cent of GDP".

If all this sounds a mite confusing, remember one of the features of budget predictions and economic outlooks produced by the Abbott Government to date is that rarely do all of the documents contain the same basic assumptions or numbers. Since September 2013 creative writing not reliable economic policy appears to be the order of the day.

Australian Treasurer Joe Hockey needs to come up with a better argument concerning the federal Goods and Services Tax

David Pope in the Canberra Times, 30 March 2015

Brisbane Times 30 March 2015:

Treasurer Joe Hockey says Australian consumers have changed their behaviour so much in recent years, through online shopping and choosing more GST-exempt goods, that they are putting pressure on the GST as a revenue-raiser.

Apparently Joe Hockey is upset that this consumption tax raised $47.4 billion in 2012-13, $50.7 billion in 2013-14 and, is expected to raise $53.7 billion this financial year, $57 billion in 2015-16, $60.4 billion in 2016-17 and another $63.8 in $2017-18.

That’s not good enough for our millionaire Liberal treasurer.

It appears he is rather perturbed that people are still buying GST-exempt basic fresh food, simple dairy products and unprocessed cooking ingredients in their local shops or purchasing online second-hand, handmade or other goods worth less than $1,000.

This is the rather weak excuse he is offering for encouraging the states to believe there should be more in the federal Goods & Services Tax kitty.

The GST is a regressive tax when applied to low income households and no amount of vague talk in the mainstream media about possible ‘compensation’ for pensioners will change that.

TRUST: no respite for Australian Prime Minister Tony Abbott

Peter Martin, Economics Editor at The Age, blogging it like it is on 10 February 2015:

As Abbott brought forward the timing of the leadership vote on Sunday his supporter and finance minister Mathias Cormann told the ABC the economy was "heading in the right direction".

He wanted "to build on the achievements we made in 2014".

Take a moment to consider the achievements and the direction in which things are heading.

That year began with a quarterly rate of economic growth of 1 per cent. After the budget it slid to 0.5 per cent, and then to 0.3 per cent. It's falling, rather than rising.
The direction is down….

The Reserve Bank made its view about economic growth clear on Tuesday. Here's what it said when it cut rates an hour or two before its governor briefed Cormann and others in cabinet:

"In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak."

It's weak and it's bleak. It isn't heading "in the right direction".

Looking ahead the Reserve Bank expects growth to remain "a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected."

Unemployment has climbed from a quarterly rate of 5.3 per cent at the end of 2012 to 5.8 per cent at the end of 2013 to 6.2 per cent at the end of 2014. We get the first figures for 2015 on Thursday.

The direction is undeniably clear, but it's not the right one. Unemployment is worse than it was at the peak of the global financial crisis. The Reserve Bank expects it to get worse still...

Hockey and Cormann will tell you that while unemployment is growing, employment is too. But it's not, really. The number of hours worked per month grew barely at all throughout 2014. More people may have been employed at the end of the year than the start but on average they've been working less, some shifting to part-time work and others to fewer hours of full-time work. Disturbingly, the Reserve Bank says the number of hours worked per month has scarcely changed since December 2011 despite three years of population growth.

None of these facts would surprise anyone in business or anyone looking for a job. What would surprise them would be to hear from the team at the top that things are "heading in the right direction". It would make them think they were being lied to….

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, 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 50 cents 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 around 30 per cent, including account 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.

And exaggerated claims have eaten away at trust. Hockey said Australia was on track to run out of money to pay for its health, welfare and education systems. The figures put forward by his then health minister suggested otherwise. In ten years the cost of Medicare had climbed 124 per cent, the cost of the Pharmaceutical Benefits Scheme 90 per cent and the cost of public hospitals 83 per cent. But Australia's gross domestic product - the money we would use to pay for these things - climbed 94 per cent.

The government tells us it's concerned about future generations, but won't release the treasury's intergenerational report. It tells us it wants a discussion about tax, but won't release the tax discussion paper finalised late last year.

Without trust we lack confidence. We are neither spending nor investing what we should. Business and consumer confidence has been sliding since September….

The government itself has become an impediment to economic growth…..

Abbott Government releases its 2014 Energy Green Paper - prepare to be underwhelmed

The Abbott Government released its Energy Green Paper on 23 September 2014.

The document sketchily mentions renewable energy or forms of renewable energy a total of 134 times within its 92 pages, while mentioning conventional gas/unconventional gas a total of 434 times, coal 100 times and exports 131 times.

Readers who care about Australia's sustainable energy future move onto the body this paper at their own risk.......

Australian Government Energy Green Paper September 2014

Abbott Government Mid-Year Economic & Fiscal Outlook 2013-14: no responsibility taken, excuses scattered like confetti, strong hints that it's the poor who will be paying the government bill

Joe Hockey spinning on live television at the National Press Club on 17 December 2013

Australian Treasurer Joe Hockey needs to grow a spine, find a political and social conscience and begin acting like an adult before he loses the nation's excellent credit rating, drives away investment, destroys industry and causes a recession with his juvenile point-scoring and loose talk.

Taking responsibility for his first 90 days in office (not the fictional 100 days) would be a good start.

On 3 September 2013 Australian Treasurer Joe Hockey stated that the Federal Labor Government was borrowing an average $83 million per day.

By 17 December 2013 the Federal Liberal-Nationals Coalition Government was borrowing on average an est. $216 million plus per day.

In the MID-YEAR ECONOMIC AND FISCAL OUTLOOK 2013-14 (MYEFO) released on 17 December 2013 Hockey admits that an increase in Abbott Government borrowings has increased Australia’s national debt:

* The increase in the expected level of net debt since the 2013 PEFO primarily reflects a higher issuance of CGS owing to an increase in the financing requirement, which is partly negated by higher yields (interest rates) than were assumed at the 2013 PEFO.

* The main factor contributing to the increase in net debt is the higher expected issuance of CGS relative to the 2013 PEFO of around $60 billion in face value terms as a result of the increased financing requirement. This is partially offset by revaluation of the projected CGS on issue of around $9 billion owing to an increase in expected yields and hence a decrease in the market value of CGS.

According to Hockey net government debt now stands at $191.5 billion in 2013-14.

Gross debt is of course higher and currently is in excess of $304.5 billion – with $216 billion of this amount being added to the total by the present Abbott Government between 18 September and 17 December 2013.

Impacting MYEFO is the inescapable fact that the Abbott Government has increased federal government spending over that outlined in its pre-election Fiscal Budget Impact of Federal Coalition Policies document, which in its turn also indicated levels of revenue which the Coalition was willing to forgo to meet its ideological requirements.

Some of the more significant components of the revenue write down apparent in MYEFO are ideologically rather than fiscally based.

The biggest one-off spending item in 2013-14 was the unplanned $8.8 billion it gifted to the Reserve Bank, a sum which coincidentally comprises over half of the budget deficit blow-out Hockey is complaining about.

Again according to Hockey, since the Economic Statement released in August 2013 the budget deficit has blown out from the predicted $30.1 billion 2013-14 deficit under Labor to a  $47 billion deficit this year under the Abbott Government.  That's a $16.9 billion difference in the bottom line primarily flowing on from Coalition policy and/or economic decisions.

However, the average voter wouldn't know it from Hockey's blaming Labor rhetoric.

BACKGROUND

The Pre-Election Economic Fiscal Outlook (PEFO) produced in August by The Treasury, for the information of all political parties and candidates prior to the 7 September 2013 election day.

MEDIA REACTION

The Sydney Morning Herald 17 December 2013:

How on Earth did we convince ourselves this bunch would be miles better at fixing the budget than the last lot?

Joe Hockey claims his midyear budget update is an honest assessment of the state of fiscal affairs he inherited from Labor. It isn't.

Rather, it is an attempt to lower expectations about the speed and ease with which the Coalition will be able to get the budget back on track.

He won't be able to achieve it for many years - he's not saying when - and not without significant and painful, but as yet unidentified, cuts in government spending. In short, he is unlikely to be able to do it much faster than Labor would have. What's likely to differ is who will bear most pain.

Labor would have erred in the direction of higher taxes, particularly on the better-off. Hockey has ruled out higher taxes and is hinting at cuts in government spending on ''welfare, education and health''.

Contrast this grim slog with all the Coalition said in opposition about the deficit being purely the result of Labor mismanagement.

This time last year Tony Abbott and Hockey were promising to deliver a budget surplus in each year of their first term. By the election campaign the return to surplus had been delayed until the first year after the next election.
Now even that is in doubt....

The Australian 18 December 2013:

JOE Hockey now has to stand up.

After gaslighting the Australian public for weeks about Labor's mess, the Treasurer has produced a horror outlook for the economy complete with the potential for a decade of deficits and a Devil's debt number of $666 billion.

Slowing growth, rising unemployment, a further decline in tax revenue and a sharper drop in mining investment are all wider economic challenges facing an Abbott government wedged between curtailing government spending and maintaining consumer and business confidence in the face of growing uncertainty. Without drastic action, the Treasurer has warned of ongoing budget deficits, rising debt and no chance of an income tax cut for 10 years....

But, having laid the blame himself with Labor, even allowing for the Coalition's own responsibility for part of the post-election deficit blowout, Hockey has to accept that he has indeed "drawn a line in the sand".

He must start providing solutions, no matter how tough....

Abbott Government debt

On 4 December 2013 Australian Treasurer Joe Hockey announced that; The Government has today agreed to the Australian Greens’ proposal to repeal the statutory debt limit and enhance transparency around government debt reporting. 

On 4 December Abbott Government borrowings were averaging in excess of $203 million a day.

Now the fiscal brakes have been removed from Hockey's little red treasury wagon, I wonder how much further into debt he will drive the Commonwealth.