Apart from the overly generous PPL scheme, I agree with everything Abbott said. Based on this speech, I think Abbott is solid on the economy. Actually, I think this speech should be considered the benchmark going forward. Not just for Australia, but for the entire world. It hits on every major issue facing the global economy at the moment: ‘government doesn’t create wealth’, ‘better government is not about more government’.
Joe Hockey has announced $31.6 billion in savings over the forward estimates. It’s peanuts. Total Commonwealth expenditure over the forward estimates is forecast to exceed $1.7 trillion. In other words, Hockey’s cuts amount to a reduction of 0.019 per cent in Commonwealth expenditure.
So what does this mean?
- Rudd’s claims of ‘cut, cut, cut’ are embarrassing;
- Rudd’s claims that the reduction will hurt the economy are embarrassing; and
- Hockey has a long way to go before he can hope to balance the budget.
Even if Hockey does go ahead with $70 billion worth of cuts over the forward estimates, as Rudd claims he will, it would still only amount to a cut in Commonwealth expenditure of only 0.04 per cent.
Sober reading on China’s incredible level of indebtedness and shrinking labour market:
The IMF’s Article IV report on China states – as clearly as the IMF dares – that excess credit has been pushed to the outer limits of sanity, and that there is a growing risk of an “adverse feedback loop” as the financial system and the economy take each other down in a mutually reinforcing spiral….Loans have jumped from $9 trillion to $23 trillion since 2008, a faster pace of debt build-up than in any major episode of the past century.
Not sure if this includes around $2 trillion in Chinese provincial and city government debt. Interesting to note also that relative to the USA, China’s per capita growth rate has not been as strong as Japan’s and Korea’s was during the 1950s and 1960s. Growth is now slowing.
So what’s Rudd’s response? More debt, tax, welfare and regulation…..
The Germans are asking for their gold back from the US and France:
So what the heck is Germany doing? It is a nation with a deep-seated fears about the stability of its currency, no doubt in part the legacy of the Weimar hyperinflation of the early 1920s. The fixation on its gold comes at a time when the world of finance seems in chaos. Germans are being asked to help rescue Greece and other European nations with troubled finances. The European Central Bank has bought bonds from some of those nations, which Germans widely view as tempting enormous inflation. Against that backdrop, it is perhaps not shocking that there is political resonance to the theory that the New York Fed and Banque de France may be putting one over on the Bundesbank and that some of Germany’s gold might actually be missing.
I actually think it has more to do with the lack of trust in the socialists running the show in the US and France at the moment, as well as some geopolitical realities.
The RBA’s dealings with gold have been monumentally bad over the years. When the price for gold hit rock bottom in the 1990s, the RBA and Treasury decided to off load most of our gold holdings.
The RBA revealed in July 1997 that over a six-month period, it had sold 167 tonnes, reducing Australia’s reserves to just 80 tonnes. At this time, the value of its gold assets fell from $3.6bn to about $1.1bn.
The RBA’s sales pushed the world gold price down to an 11-year low, returning just $2.4bn for the gold that was sold via a single broker engaged without a tender.
The same amount of gold would be worth about $7.4bn today.
The paper justified the decision to dramatically reduce the bank’s holdings by arguing that gold had been a poor investment, and that Australia need not worry about access to financial markets during another economic crisis.
Since this decision, the world financial system has suffered severe stress, first with the dotcom bust in 2000, then the 9/11 attack the following year and, more recently, the near collapse of the global financial system in 2008.
Apparently nearly all of the RBA’s gold is in London, for the purposes of urgently raising foreign exchange. Well, given the strength of the Australian banking sector and the less than stellar performance of the UK and their ongoing exposure to the EU, I’m not so certain that keeping nearly all of our gold holdings in the UK is such a smart idea.
Some might argue that Australia’s gold deposits are all in the ground; however, they won’t last forever. Certainly not while our gold deposits are being shipped to China at break neck speed to hedge against US economic collapse – a real possibility under Obama’s cavalier attitude to fiscal matters.
There is something highly disturbing about a man you thinks the needs of government trump the needs of freedom, personal responsibility and the citizen generally.
….after resigning from the Treasury last year, Dr Henry today backed the recent debate on the tax.
“Even if we don’t for whatever reason feel comfortable with relying more and more on consumption tax bases for more and more revenue, we’re going to have to, because it is one of the things that we can practically tax,” Dr Henry said at a forum in Canberra.
While most people imagine that “tax reform” means they will be paying less tax, Dr Henry said this was “curious.”
“It is more likely that over time… revenue will have to be expanded in order to meet the future needs of government, in part because of the ageing population,” he said.
What a strange world he lives in. How much tax is enough?
European style socialism:
Foreign ownership of Australia’s government securities reached a record 79% during the first quarter as global investors snapped up the nation’s high yielding, triple-A rated bonds, according to analysis by JPMorgan.
That’s up from about 30% of Aussie government bonds held by foreign investors about a decade ago.
It hasn’t stopped Gillard giving Europe a good lecture. I find the following lecture about the current economic crisis more compelling:
For the sake of bubble-gumming the euro together, we are willing to slaughter democracy in the very place where it was born. What is the point of a Greek elector voting for an economic programme, if that programme is decided in Brussels or – in reality – in Germany? What is the meaning of Greek freedom, the freedom Byron fought for, if Greece is returned to a kind of Ottoman dependency, but with the Sublime Porte now based in Berlin?
The gritty details:
Greece has repeated itself, only more emphatically, declining to give any party a majority. In Europe’s palaces and chancelleries, the hope is that the two old parties, PASOK (corporatist Left) and New Democracy (corporatist Right), might form the core of a pro-bailout coalition: between them, they have a bare majority. But PASOK is indicating that it doesn’t want to join any coalition without SYRIZA (populist Left), which in turn says it won’t join any government that accepts the EU’s cuts package. If no coalition is formed, what next? A third election? A fourth?
At least one political leader understands the lessons of history. I’m cure the Coalition shares the same sentiments, as do the voting public. I’d like to see another strong statement from Abbott that Australia should not be bailing out European banks to preserve the left’s beloved political experiment: the Euro.
Swan can’t have it both ways. On the one hand he says the reason we are in heavy deficit this FY, $44 billion, is because of the GFC, et al. However, Swan is now touting the strength of the Australian economy with a GDP growth rate of 1.3 per cent in the first three months of 2012. In any case, I think we will find the ABS revising down its GDP growth rate figure in the coming months. And while Swan et al remain hostile to wealth creators and the great get ahead ambitions of Australians, and continue to spend our money without control, the budget will continue to be in deficit.
Premier Mariano Rajoy and his inner circle have allegedly accepted that Spain will have to call on Europe’s EFSF bail-out fund to rescue the banking system, even though this means subjecting his country to foreign suzerainty.
CNBC discussion on upcoming Greek elections:
Greek society was built on cheating and scheming, saying “everyone does it” but that voters elsewhere in the euro zone were now calling Greece to account.
“The basic question is that a German has to increase working from 65 to 67 and that is to pay for Greeks retiring at 50. The 17th of June is the perfect opportunity to say either ‘we’ll behave’ or ‘we’ll carry on cheating,’” he said.
1.6 million families are due to receive compensation for the carbon tax today. Good news? Not really.
According to Greg Combet, of those 1.6 million families 1/3 will not receive enough compensation to cover the increase in costs due to the carbon tax. In 2011 there were 6.4 million families in Australia. So that’s only around 17 per cent of families that will have their costs covered, assuming Treasury models are correct. Given the last minute cash splash handout announced by the government in the Budget, it seems Swan thinks Treasury may be wrong. It is safe to assume therefore that 17 per cent is an upper band figure of families that will not be worse off because of the new tax.
Hardly seems fair. So much for only the big polluters paying.