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.

Australian Federal Election 2016: how Liberal Senator for Tasmania Eric Abetz is said to have become a millionaire in 2005

Another bona fide millionaire is discovered within Liberal Party ranks? 

This appears to be how Senator Eric Abetz made the grade when he was Special Minister for State in the Howard Coalition Government….

The Sydney Morning Herald, 26 March 2016:

In early 2000, Abetz paid $100,000 for almost four hectares of government land adjoining his house block in the Hobart suburb of Kingston. In March 2005, the area was rezoned from "residential" to "business and civic". Four months later, Abetz sold both the house block and the adjoining land to property developer Robert Rockefeller's company, AAD Nominees, for a combined total of $1.9 million.

Here's where Abetz got lucky. For the big vacant block (3.8 hectares), Rockefeller paid him only $400,000. For the house block (0.6 hectare), Rockefeller paid $1.5 million – more than five times the government valuation. This meant the bulk of Abetz's proceeds from the two sales was not subject to capital gains tax (a person's residence is exempt from the tax). The enormous discrepancy in the two sale prices cannot be attributed to the value of the house, a six-room weatherboard construction which has since been demolished.

In 2014, the capital value of Abetz's vacant former house block was assessed by the Tasmanian Valuer General at just $470,000. John Hawkins, the columnist on the Tasmanian Times website who first drew attention to the land deals, believes an explanation is long overdue. Abetz's attitude is calmly dismissive. The house block had more road frontage than the bigger block, which enhanced its commercial value, he tells me. The whole thing was entirely above board.

The Tasmanian Times, 10 September 2010:

Snapshot of Document 1

Mr Rockefeller through his company AAD Nominees Pty Ltd has applied to Kingborough Council to build a shopping centre, car park and other facilities on the adjoining block of land with Channel Highway street numbers 163, 167, 191 and a section of 203 (Document 1).

Kingborough Councillors have recently knocked back the Development Application (Document 2) which had been approved by the Planning Department of the Council. Two of these lots, 191 and 167 have an interesting recent history, of which I became aware as a result of checking the residential address provided by Senator Abetz on his nomination forms for the 1998 and 2004 Senate elections.

Lot 191 (191 Channel Highway) appears to have been owned by Senator & Mrs Abetz and was their family home. The land area was 0.6206 hectares and on it stood a weatherboard house with an imitation tile roof with six main rooms built circa 1910. The property was acquired prior to the introduction of Capital Gains Tax (CGT) so was free of CGT when the Abetz family decided to sell.

An adjoining block, Lot 167 comprising some 3.894 hectares or approximately 10 acres, was purchased by E and MA Abetz from the Tasmanian State Government on 1 June 2000. Lot 167 was purchased for $100,000. The purchase price was $20,000 less than the Government capital valuation price (Cap) and I can find no trace of it ever being put out to tender.

Senator & Mrs Abetz were lucky with the rezoning of their land as a result of the completely new Kingborough Planning Scheme introduced in 2000. The Kingborough Council prepared a Report for an Amendment to its Planning Scheme, and the matter was referred to the Resource Planning and Development Commission (RPDC). Lots 163, 167,  and part of 203 were rezoned from Residential to Business and Civic in March 2005. (Document 3)

The RPDC archives provide a good background to the matter but do not show who applied for the change of use. The Council Planning Officer, Andrew Goodsell, for some reason incorrectly describes the Abetz land as “167 Channel Highway in two titles (owner E Abetz) ….includes a small title of .3662 ha incorporating the house Lynden Rise” he continues and places emphasis on Lot 167 thus, “Of these lots it is this rear lot of 167 Channel Highway that potentially has the most potential, providing potential for facilities and services that interconnect with those of the Antarctic Division site”.

Interestingly Goodsell in this application reduces the land area of title 191 which gets no mention, only the house is named.

Lot 163, the adjoining house block on a larger land area 0.8232 hectares, had been purchased prior to the RPDC’s agreement to rezone from a Mrs V Wiseman on 10 December 2004 for $565,000 by AAD Nominees Pty Ltd. The Government valuation in 2004 (Cap) was $208,000 (the house was built in 1968). The Capital Value as of 1 March 2009 is $670,000 with a land value of $490,000.

Lot 203 was subdivided from the Antarctic Division block already owned by AAD Nominees Pty Ltd.

In summary therefore the blocks owned by Senator & Mrs Abetz Lots 191 (although not specified) and 167 were attached to 163 and 203 then owned by AAD Nominees Pty Ltd for the purposes of a rezoning in an application referred to the RPDC for approval.

Following approval by the RPDC on 24 Feb 2005, Senator & Mrs Abetz immediately sold 191 and 167, with completion on 18 July 2005, to AAD Nominees Pty Ltd for $1.9m with Abetz apportioning $1.5m to the family home, 191 Channel Highway, and $400,000 to Lot 167, the 10 acres purchased from the State Government for $100,000. It should be noted that the Abetz name does not feature on the Title to Lot 191 in this transfer; why?

Since the purchase, AAD Nominees Pty Ltd has obtained two reductions in the rated value on Lot 191 - the Abetz family home, now a land value of $430,000 and a capital value of $840,000. In a rarity for Kingston this loss of value over the past five years, must put a question mark over the assigned value of the Abetz residence in 2005.

Is it a case of Lot 191 having been overvalued by Abetz? This would reduce his capital gains tax liability on the adjoining 10 acre land Lot 167. Perhaps Abetz can elucidate further.

The Senate requires all Senators to maintain a “Statement of Registrable Interests”. This is kept at the Senate in Parliament House, Canberra.

Regarding real estate, the Register requires that the suburb or area is provided and makes a distinction between residential and investment property, and whether the property is used as a residence, as a holiday home, as a farm, or is held for investment or other business purposes. For all purchases or disposals of real estate, the date of settlement is to be considered the date of alteration of interests and notification should be made within 28 days of that date.

Senator Abetz’s information in his Statement of Registrable Interests for each of his terms of office reveals, in part, his real estate interests. The 1994 Register, his first in Parliament, gives his only property as ”Kingston Tasmania Residence”; in an alteration to Senators’ Interests (Document 4) he cancels his loans but he makes this addition to his interests, “Consultant to Abetz & Co in association with Shields Heritage”.

He declares the purchase of two investment properties at Gagebrook in 1995 and 77 Beach Road Kingston - a block of four units or flats overlooking the golf course - in 1998, with a sale in 1999.

There is no mention on the Register of Assets of the separate purchase from the State Government of Tasmania of Lot 167, yet he informed the Register: “My wife and I have contracted to purchase land adjacent to our residence through a nominee” possibly the Abetz Family Trust on 14 Feb 2000. He later confirmed the purchase but in joint names (Document 5) on 5 June 2000, with no mention of investment that would turn out to be financially beneficial. Eighteen months later, in Dec 2002, still no mention, but he informs the Register that he has paid out the loan.

Someone must have been looking into Erich’s affairs, for his former legal office Abetz Curtis at 83 Davey Street was the subject of Documents 6 and 7. It may be that Gagebrook, Beach Road and Davey Street should be subject to audit if a check is to be run over 167 and 191 Channel Highway.

The acquisition of 10 acres of land, Lot 167 Channel Highway, from the Tasmanian State Government, followed by rezoning from Residential to Business and Civic, must turn this transaction to a “property held for investment” and as such it becomes very much a “Registrable Interest.” This property as 167 Channel Highway has never been declared as either a purchase or sale to the Senate of Australia.

Abetz still gives, “Kingston Residence” as his only property even after 167 and 191 are sold with completion, 18 July 2005, yet he has to inform the Register within 28 days of sale. I ask why the delay? The sale was declared as Residential on 3/Jan/2006 (Document 8)

The sale of Lot 167 within five years, at a declared profit of $300,000 - but arguably an actual profit of approximately $1.3m - makes this a very good investment indeed. If this is so the capital gain is in excess of $1m and the Capital Gains Tax unpaid would be in excess of $200,000.

This begs the question, why did the Tasmanian Government not arrange itself for the rezoning in conjunction with the developer, so as to benefit the people of Tasmania rather than a well-connected Senator?

See http://tasmaniantimes.com/index.php/article/abetz-and-channel-highway-land-deals#sthash.zt9f3o5X.dpuf for document downloads.

It is noted that as of 19 March 2008 the very expensively purchased house and land package known "Lynden Rise", 191 Channel Highway, Kingston remained undeveloped and only became the subject of a development application in 2014. While the larger but less expensively acquired Lot 167 appears to remain undeveloped to date.

Google Earth snapshot, 26 March 2016

The Abbott Government's first Intergenerational Report examined through jaundiced eyes

Peter Martin, Economics Editor of The Age newspaper observed on 3 March 2015:

The Intergenerational Report is required by law every 5 years. It assesses the long-term sustainability of the government's policies 40 years into the future. This one will take us through to 2055. It's 2 month's late, although that's not the fault of the treasury. Finance minister Mathias Cormann was keen to tell the Senate that it's a report of the government, not the treasury. It's inherently political. Sensitivities over its immigration projections (and possibly what it will say about climate change) have delayed it as government ministers have tossed drafts back and forth.

So what does the Abbott Government tell us in its first and Australia’s fourth Intergenerational Report?

Well, it tells us in those 145 pages that Australia has an economy that has had an unprecedented 23 year stretch of unbroken economic growth that is continuing today as I write.

It seems the nation also has a well-functioning health system.

Both of these admissions will come as a surprise to many because since the Coalition won government in September 2013 we have been repeatedly told that the country was facing a ‘debt and deficit disaster’ and, the health system was on the financial sick list so we needed to put our hands in our pockets to pay GPs a bit extra because government couldn’t afford to continue paying the Medicare rebate bill.

For some strange reason the federal government appears to believe that all males and females born since November 2013 have an average life expectancy at birth of 91.5 and 93.6 years today when what the Australian Bureau of Statistics actually said on 7 November 2013 was; "A boy born today could expect to live 79.9 years, while a girl could expect to live 84.3 years. For those approaching retirement age, say 65 years, males could expect to live a further 19 years and females a further 22 years". It defies belief that Joe Hockey and Mathias Cormann believe that in just on sixteen months life expectancy at birth has risen 11.6 years for males and 9.3 years for females.

The federal government also informs us that the elderly are living an inconveniently long time and, in its opinion more of them should remain at work or go back to work after retirement age because they are costing the government too much to keep alive - even at the minimum levels of income support and physical care it is willing to fund.

It tells us that workers’ average weekly wage will increase over the next forty years, but not at the rate wages have over the last forty years and government expects all workers to put shoulders to the wheel in order to be more productive – and swallow the reforms allegedly required to make them all that bit more competitive and flexible.

To that end its review of Australia’s workplace relations framework is apparently an important building block in facilitating the development of new markets, and allow businesses and the public sector to harness innovation.

The young had a national unemployment rate of 14.2% in January 2015 and will probably face a high unemployment rate into the future as it appears the only solution the Abbott Government has to date is to make applicants under 25 years of age wait six months before unemployment benefits and make them also ‘work for the dole’.  Presumably because, along with people with disabilities, young unemployed people are expected to generate gains in GDP and income growth over the next 40 years.

By 2055 the Abbott Government thinks that government will only need to spend an extra $400 of its own money per student to keep primary, high school and tertiary education in tip top shape.

It expects that federal government won’t be spending more money in forty years’ time on defence materiel than it does today.

Infrastructure is good to have and the nation needs MOAR & MOAR, but the Abbott Government is not quite sure how we are going to get all those roads, tunnels, by-passes, bridges, railway lines and ports it is lusting after - except perhaps by 'efficiently' selling off some which exist already to its rich mates and the foreign power best new friends of Tony Abbott.

The Abbott Government has included a handy little graph at Page 35 which shows that by 30 June 2014 its own spending spree had increased the underlying cash balance and output gap deficit to around 3% and 1.75% of GDP respectively.

Apparently the nation needs strong economic growth and a sustainable budget before it can tackle climate change. Part of any effort to mitigate those pesky adverse impacts caused by global warming is to take a proverbial broom to the countryside – because we need “Clean land” and “Clean air”– and one of the best ways to achieve that is to continue hacking away at ‘green tape’ thereby weakening the community’s ability to protect the environment.

Confident that it will get its data retention legislation through parliament the Abbott Government intends to deliver government services digitally, thereby making the forthcoming  mass surveillance of the populace as detailed as possible. Australia is about to become a hackers Nirvana sometime before 2055 and, people living in remote and rural regions will probably still face a level of difficulty in reliably accessing the Internet and therefore have intermittent problems accessing these same government services.

As for net migration, it is expected to be an est. 215,000 people per annum from 2018 onwards and, Australia’s population is predicted to be 39.7 million in 40 years’ time. Which must leave local governments across the country wondering where they are collectively going to put around 427,027 extra residents each year.

The bottom line appears to be that if Australia wants a bright and prosperous future, then every one of the Abbott Government’s punitive policies and budget cuts, rejected by voters and the Senate to date, need to be implemented.

Now who didn’t see that coming?

So what is Australian Treasurer Joe Hockey telling the country in the December 2014 Mid-Year Economic Outlook (MYEFO)?

What has the implementation of the Abbott Government's ideologically-driven economic policy left Australian families and businesses facing for the rest of its term in office?

For an in-depth look at the nation's prospects go to the MID‑YEAR ECONOMIC AND FISCAL OUTLOOK 2014‑15.

For the time being here is the briefest of outlines:

The December 2013 MYEFO stated that tax receipts had reduced by more than $37 billion for the period 2013-14 to 2016-17 – now total taxation receipts have been revised down by $6.2 billion in 2014‑15 and $31.6 billion to 2017-18, bringing the total write down in tax receipts since the Government was elected to over $70 billion .

In December 2013 company tax receipts were revised down by $180 million in 2013-14 and $7.1 billion across the four years to 2016-17 – now a mere twelve months later company tax receipts are being revised down by $2.3 billion in 2014‑15 and $14.4 billion over the forward estimates.

Weaker wage and employment growth is expected to continue through to at least 2017-18 - with 2016-17 to 2017-18 wage growth now predicted to be much lower than was anticipated in the December 2013 MYEFO.

The unemployment rate will rise even further than the 6.25% predicted in December 2013 – it is now predicted to reach 6.5%* in 2015 and stay that high until at least June 2016.

In December 2013 the consumer price index for the 2014-15 financial year was supposed to come in at 2 – it is predicted to rise to 2.5.

Despite repeated warnings about a predicted sharp fall in commodity prices which the December 2013 MYEFO failed to fully recognise – by December 2014 there appears to be an element of faux surprise at finding how sharp that fall actually was and a decision made to cast iron ore prices as the arch-villain of the piece.

The December 2013 MYEFO stated that the underlying cash deficit would be $33.billion for 2014-15 – now an underlying cash deficit of $40.4 billion is expected in 2014‑15.

In 2013-14 net government debt was $191.5 billion. Public debt (on which interest has to be paid) will be $425 billion in 2014-15

Total interest expenses on all public debt have risen from an predicted $16.3 billion for 2014-15 in the December 2013 MYEFO to $16.3 billion for the same financial year in the December 2014 MYEFO and, are projected to rise to $19.9 billion by 2017-18.

Unsurprisingly, despite May 2014 budget cuts, further announced cutbacks in federal government agency numbers and public service employee numbers; Abbott Government gross operating expenses are predicted to rise from $119 billion in 2014-15 to $120.9 in 2016-17 and $125.2 billion in 2017-18.

Miraculously and perhaps over-optimistically, in the latest MYEFO the nation's real gross domestic product (GDP) growth has been revised up from 2.5% for the 2014-15 financial year and 3% for the 2015-16 to 2016-2017 financial years to 3% and 3.5% respectively. Nominal GDP has also been revised up.

In the face of all this Joe Hockey is telling the world that he will now have the budget back in a very small surplus by 2019-20. Presumably if the Abbott Government gets a second term and he remains as federal treasurer.

Hockeynomics at its best.

* An unemployment rate of 6.5% represents in excess of 803,952 Australians without a job and the regular pay packet which comes with it.

The Real Age of Entitlement: State governments spent $17.6 billion supporting mineral & fossil fuel industries between 2008-2014 and Australian Government intends spending more than $40 billion over three years supporting fossil fuel industry

Excerpts from The Australia Institute’s, Mining the age of entitlement: State government assistance to the minerals and fossil fuel sector, Technical Brief No. 31 June 2014:

Supporters of the minerals and fossil fuel industries, like Queensland Premier Campbell Newman and the New South Wales Minerals Council, regularly emphasise the money that these industries pay to state governments. Much less is said about the money that state governments pay to assist these industries.

State government assistance to the minerals and fossil fuel industries is considerable.

Based on an analysis of state government budget papers, we estimate that a total of almost $18 billion has been contributed by the taxpayer over the last six budgets.

This assistance takes many forms. Sometimes it is a direct cash payment. For example, the New South Wales government gave multinational coal companies $10 million in 2009 as an ‘assistance package’. Other times it comes in the form of discounted access to services provided by the state and its businesses – Queensland has provided the coal industry with ‘concessions’ on access to rail services worth over $1 billion between 2012-13 and 2013-14.

Often assistance comes in the form of infrastructure or projects that wholly or partly benefit the minerals and fossil fuel industries. Sometimes this expenditure brings a financial return, as in the case of Western Australia’s hundreds of millions of dollars spent on developing port infrastructure. Sometimes it doesn’t – the New South Wales government is unlikely to see any return on its $76 million expenditure on the Cobbora Coal project…..

At the federal level, The Australia Institute publishes an annual study on subsidies of the mining industry, which totalled $4.5 billion in 2013, up from $4.0 billion in 2012.

Other organisations publish estimates of subsidies provided to fossil fuel use and production, which also focus largely on assistance at a federal level….

...the loss to the New South Wales government relating to the treatment of the Coal Research Levy.

This levy for $0.05 per tonne of coal mined is fully deductable from royalties that coal miners pay to the New South Wales government for the rights to mine the state’s coal. This deduction is effectively a subsidy of millions of dollars per year from the New South Wales government to the Australian Coal Association Research Program….

Environment Victoria, Ending the fossil fuel industry’s age of entitlement: 

An analysis of Australian Government tax measures that encourage fossil fuel use and more pollution, 2013:

The assessment concludes that the Australian Government is set to spend over 

$40 billion (see Table on page 4) in the form of tax rebates and concessions,
foregone revenue and expedited write downs of assets per year from 2013/14 to 
2016/17. 

This assessment only includes tax measures, and does not include direct grants or 

State Government measures, which could add billions more to the annual totals.

UPDATE

Australian Productivity Commission, Trade & Assistance Review 2012-13:

I'd laugh if the Abbott-Hockey ploy didn't presume Australian voters were idiots

To date the Abbott Government has run up at least an additional $29.3 billion dollars in national debt over the last 135 days.

This means as of today the nation owes in excess of $189,422.8 billion in gross public debt.

Having mapped out this level of rising debt some months ago, the Abbott Government abolished the legislated debt ceiling late last year.

On 22 January the Federal Treasurer Joe Hockey made this nonsense announcement:

"I direct that the maximum total face value of stock and securities that may be on issue is $500 billion"

The directive apparently expires rather appropriately on April Fool’s Day 2024, as at the rate it is currently borrowing this $500 billion debt cap (now unsupported in law and therefore meaningless) will be exceeded by Abbott, Hockey and Co in under three years.

After all, Abbott still hasn’t said how the nation will fund his proposed personal $250 million VIP aircraft and other little prime ministerial luxuries or compensate for the reduced revenue his industry level taxation cuts will produce before the next federal election in 2016.

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

deal?...

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

Where is Australian Federal Treasurer Joe Hockey sourcing his financial advice?

By the end of October 2013 the Abbott Government was borrowing an est. $265 million per day and it continues to borrow at a frenetic pace. 

At the same time it is moving away from the budget measures outlined in its September 2013 costing table and has blown out the 2013 budget deficit by an estimated $10 billion.

ABC News 9 November 2013:

The Budget Monitor from Deloitte Access Economics..... has raised concerns about whether the Government will take unpopular decisions to improve the budget outcome and return to surplus within the promised 2016/17 timeframe.

The assessment has forecast a budget deficit of $39.7 billion for this financial year, almost $10 billion higher than the Pre-Election Fiscal Outlook (PEFO) predicted.

The PEFO estimated a deficit of $30 billion, but since then the new Coalition Government has scrapped some tax windfalls and handed $9 billion to the Reserve Bank.

Deloitte's Chris Richardson says those decisions have significantly contributed to the size of the deficit.

"That is a cost to the budget, it's all fallen this year. It's a lot of dollars," he said.

"You might eventually see those dollars head back to the Government but it is a really rotten budget deficit this year."

The myth that the Howard Government left absolutely no government debt when it departed

 

How the Federal Liberal Party would like you to see Australian Government Debt

 

http://www.liberal.org.au/latest-news/2013/03/27/labor-must-recognise-facts-about-australias-record-debt

 

How the rest of the world sees Australian Government Debt

 

Historical Australian Government Debt

 

 

 Australian Governments 1990 to 2013

 

 The Howard Government

 

 

No matter which way the bread is sliced the fact remains that the Howard Government went to the 2007 federal election with government debt on the books.

 

So why is the Australian National University aiding and abetting a mining company intent on destroying NSW Northern Rivers communities?

 

 

According to the Australian National University (ANU) in the ACT this is its financial situation:

 

ANU is unusual in Australia in that it has a large investment portfolio for the size of the University budget. Annual University revenue is $0.9B, while funds in investments total $1.1B. This investment portfolio serves a number of purposes:

• Provides revenue to support the ANU liability to current and former staff covered by the Commonwealth Superannuation Scheme (CSS) – approx. $450M
• Invests the funds within the Endowment for Excellence which funds some staff salaries, scholarships etc.
• Invests the cash reserves of the University, whether held centrally or by Colleges

National and international issues mean that investment returns have declined in recent years and the expectations are that markets may have now entered a period where investment returns may be below 5 per cent for an extended period. This decline in investment income will have a significant impact on the University budget. The 2012 budget indicates investment returns will be $30M less than in 2011. Within this, the total funds required to support CSS pensions will be $10M more than the return on the CSS investment sum. This is a shortfall which must be met from other University funding sources.

So how is this university tackling its falling investment income?

Well, it is apparently not doing what it implied to faculty, students, media and the general public in 2011 - totally divesting itself of coal seam gas industry shares.

Woroni, the ANU student newspaper:

Vice-Chancellor Ian Young has announced that ANU will sell its shares in Coal Seam Gas extractor Metgasco in light of opposition from students to university involvement with the industry.

 

The Canberra Times:

The ANU's vice-chancellor Professor Ian Young announced the sell-off of about $1million worth of Metgasco shares in a statement to the ANU Students Association this week. But he's played down the role of student protests in forcing the move, telling The Canberra Times it was ''a pragmatic decision'' based on the worth of the shares.
''We've had those shares since 2001,'' Professor Young said.
''They represent less than 0.1 per cent of our total investment portfolio.''

Because according to Metgasco's own documents as of 21 September 2012 ANU was the 17th largest shareholder in this coal seam gas exploration and production company with 2.5 million shares remaining of the 4.2  million shares it held in 2011.

The university's excuse in August last year for this state of affairs - “there are no/few buyers” for these shares. 

This excuse seems laboured. Even though share volume traded is often sluggish, by the end of September 2012 a good stockbroker should have been able to offload ANU's remaining shares.

It would appear that it is determined to retain its investment in Metgasco in spite of the fact that this mining company's first-stage plan for the Northern Rivers is to establish an estimated 1,000 gas production wells.

Turning the rural landscape into a version of this:

Section of a gas field in Tara, Queensland

 

ANU faculty, students and alumni need to confront the fact that they are enabling a mining company to proceed with its commercial objectives despite the fact that the affected Northern Rivers communities have clearly not granted it a social licence to do so.

This is the current membership of the University Council and I would suggest to Northern Rivers communities that these individuals need to justify the continuing inclusion of Metgasco Limited in the university's investment portfolio:

Professor the Honourable Gareth Evans AC QC - Chancellor

Professor Ian Robert Young AO - Vice-Chancellor

Ms Ilana Atlas - Pro-Chancellor  

Dr Doug McTaggart

Dr Vince FitzGerald

Ms Robin Hughes AO

Ms Martine Letts

Mr David Miles AM

Mr Graeme Samuel AC

Professor Andrew MacIntyre

Professor John Close

Professor Tim Senden

Mr Matthew King

Ms Aleksandra Sladojevic

Ms Julie Melrose

 

Their contact details are here.

* An email was sent to the Australian National University Chancellor seeking further confirmation of the Metgasco share parcel. No reply has been received.

In which Standard & Poors, ABN Amro and Local Government Financial Services Pty Ltd are found liable for Australian local government financial losses

 

Excerpts from Justice Jayne Jagot's reasons for judgment in the matter of Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 (5 November 2012):

 

12.5.3.7 IMPACT OF THE GLOBAL FINANCIAL CRISIS

1. For the reasons already given I do not accept that the GFC was the real, essential or effective cause of the loss or damage incurred by the councils…..

16. CONCLUSIONS

1. For the reasons given in the preceding sections I am satisfied that:

(a) the councils' claims for rescission of the agreements by which they purchased the Rembrandt 2006-3 CPDO notes from LGFS and restitution (both under statute and otherwise) should not be accepted;

(b) leaving aside some aspects of their claims immaterial to their overall entitlement to damages, the councils are each entitled to succeed in their various claims for damages against LGFS, S&P and ABN Amro;

(c) the claims of LGFS, S&P and ABN Amro against the councils for contributory negligence and being largely responsible for their own loss, with the consequence that the damages payable to each council must be reduced, should not be accepted;

(d) the councils have each proved that they suffered loss and damage as required to sustain their claims against LGFS, S&P and ABN Amro, the damage being the amount each paid for the Rembrandt 2006-3 CPDO notes less the amount they received on the cash-out of those notes. No deduction for coupon payments received by the councils should be made;

(e) this is also the proper measure of damages payable to Cooma and Corowa in respect of their breach of contract claims against LGFS;

(f) other than in respect of their claims for equitable compensation from LGFS for breach of fiduciary duty, the councils' damages claims against LGFS, S&P and ABN Amro attract the various proportionate liability provisions and liability for the councils' damages should be apportioned as between LGFS, S&P and ABN Amro as to 33⅓% each;

(g) the councils' claims for equitable compensation from LGFS for breach of fiduciary duty should also be sustained. While this compensation is not apportionable the measure of compensation is the same as the councils' damages claims;

(h) there is an outstanding issue as to the interest which the councils should receive, ABN Amro having argued that pre-judgment and perhaps post-judgment interest should not exceed the interest which would have been payable had the Rembrandt 2006-3 notes not cashed out and the other parties not having addressed that argument;

(i) LGFS is entitled to succeed in its various claims against ABN Amro and S&P including:

(i) proportionate liability of S&P and ABN Amro in terms of the councils' claims against LGFS (see above);

(ii) liability of S&P and ABN Amro to LGFS for damages in respect of the Rembrandt 2006-3 CPDO notes that LGFS purchased and did not sell to councils but sold instead to its parent company, LGSS, after S&P downgraded the rating of those notes from AAA to BBB+; and

(iii) liability of S&P and ABN Amro to make equitable contribution to LGFS in respect of LGFS's settlement of the StateCover claims against LGFS, S&P and ABN Amro relating to StateCover's purchase of the Rembrandt 2006-2 CPDO notes.

(j) the claims of S&P and ABN Amro against LGFS for contributory negligence and being largely responsible for its own loss in respect of the Rembrandt 2006-3 CPDO notes that LGFS purchased and did not sell to councils, with the consequence that the damages payable to LGFS on that account must be reduced, should not be accepted;

(k) LGFS has proved that it suffered loss and damage as required to sustain its claims against S&P and ABN Amro in respect of the Rembrandt 2006-3 CPDO notes it did not sell to councils, the damage being the amount LGFS paid for the Rembrandt 2006-3 CPDO notes less the amount LGFS received on the sale to its parent company. Again, no deduction for coupon payments received by LGFS should be made;

(l) LGFS's damages claims against S&P and ABN Amro attract the various proportionate liability provisions and liability for LGFS's damages should be apportioned as between S&P and ABN Amro as to 50% each;

(m) the issue of interest referred to above applies equally to LGFS;

(n) LGFS's claims against S&P and ABN Amro for damages or equitable contribution against S&P and ABN Amro in respect of LGFS's settlement of the StateCover proceedings should be accepted, with LGFS, S&P and ABN Amro each to contribute 33⅓% to the overall settlement sum including LGFS's costs of the proceedings;

(o) the cross-claims of S&P and ABN Amro against each other should be rejected;

(p) LGFS's claims against AHAC for indemnity under the contract of insurance should be accepted and AHAC's cross-claim against LGFS for reimbursement of defence costs already paid should be rejected; and

(q) costs, along with the outstanding issue of interest, may be argued.

 

3723.   Directions will be made for the parties to confer about a timetable for the making of any further submissions on interest and costs, as well as the making of final orders in accordance with these reasons for judgment.
 

On 24 May 2012 the Australian Securities and Investment Commission revoked Local Government Financial Services Pty Ltd's Australian Financial Services license.

 

It has been reported that Standard & Poors intends to appeal the 5 November Federal Court judgment.