ARE WE IN DEBT $650 BILLION?
Four-time Walkley Award winning political commentator and Churchill Fellow, has returned to the fray over concern that the integrity of news dissemination is continually being threatened by a partisan media.
Well sort of, but we are owed $580 billion.
What Joe Hockey is trying to tell us ain’t necessarily so. As I have said before here, when talking Labor’s debt you’re talking a length of string. And for the lowest common denominators to listen, debt has to be spoken of in simple terms like, “Labor has left every man, woman and child with a debt of $11,000 each”. But does that figure include what the bank borrowed to lend you the first mortgage on your home?
It would be more honest to say the Government receives $15,000 for every man woman and child in taxation receipts each year.
Yet every country lends money and borrows money. That’s what makes the world go round financially. It only becomes deceptive when you look at one figure (in this case Labor’s deficit) in isolation.
But let’s be honest, if Swan, Rudd and Gillard were allowed to continue on their merry way, and China had faltered, we could easily have been in the same basket case as Greece.
I mean Gillard couldn’t catch a cab without tipping some foreigner $20 million.
Our net foreign debt is around $650 billion, as Joe infers, but only 10 per cent of that amount is owed by the public sector, both Federal and State. Ninety per cent is owed by private sector corporations, private investors, banks etc.
Each quarter the cost of our imports has always exceeded the receipts from our exports, leaving us with a trade deficit. Our “current account” deficit had exploded (relatively) under Labor.
Labor blames a high dollar but I recall when our dollar was as high as $1.50 and as low as 50c against the US dollar, nothing much changed then, we still thrived.
Of course we have to pay interest and dividends on the difference in current trade accounts, so when you add everything up you're left with a ''current account'' deficit which is running at a variable, comparably paltry, $10 billion.
That deficit has to be covered either by borrowing from foreigners or by foreigners investing in the ownership of Australian businesses, including farms. That is why the Government is mad keen on foreign investment, but it’s far too complicated for the Government to explain to the plebs... and Barnaby Joyce.
The disparity can be covered either by debt or by ''equity''. At the moment it's mainly covered by debt. Hockey rightly wants “equity”.
We have run current account deficits in almost every year since Federation and, since we also have had to borrow to cover the interest on earlier debt, our total foreign debt all up stands at around $1.3 trillion or 80 percent of GDP.
It's not that bad ‘tho. That's the gross amount we owe. But while Australia was borrowing from foreigners, Australians, including our banks and super funds, were lending money back to foreigners hand over fist while they were busy using it to buy up Aussie bonds. Foreigners currently owe us around $580 billion.
Forget our AAA rating. That’s nothing but a load of old frog droppings, as the ratings agencies are dictated to by corporation lobbyists. S&P and Fitch had all the sub-prime-rate players on a AAA rating the very day before they all went belly-up.
So, do we have a foreign debt of $650 billion. Well, sort of, but the meaningful figure is only 10 percent of that and includes Queensland with $50 billion in the hole and NSW $60 billion, with a States’ total of $185 billion. (Suffice it to say we had blanket Labor State Governments until recently.) Ninety per cent of the $650 billion is owed privately.
But foreign debt is not to be confused with Federal, or for that matter State, budget deficits. A budget is in deficit when a government has received less than what it has spent... enter the Feds, Wayne, Kevin and Julia.
Ah, and remember that $9 billion Wayne Swan ripped off the RBA in his last desperate attempt to get his surplus? Well, Joe has returned that money and the RBA is now making a fortune for the Government on the Forex.
To repair the deficit will take six budgets and two full terms of measures and it must be done as quickly as possible in order to insulate us from, or at least cushion us against, a China growth rate collapse.
The US, which owes $17 trillion, is China’s biggest customer and China owes a reported $32 trillion. Either could falter against the backdrop of an insolvent Europe yet that African-American in the woodpile, Obama, is busy picking a provocative fight with China while imposing sanctions on an already broke Russia, and against Europe’s wishes! Thank God this galah has only a couple of years left!
Why are Conservative governments always left with cleaning up messes left by Socialist governments. Why are Conservative governments always on the back foot as a result?
Well, if the Conservatives were truthful about how they intended fixing the Socialists’ messes they would never be elected... so the Socialists are on a hiding to nothing.
Anyway, if you hear a politician quoting gross debt figures rather than net debt figures, or foreign instead of domestic or national instead of Federal or foreign instead of budgetary, which Mr Hockey has been doing a lot of lately, it's because politicians are exaggerating to convince people who don't understand and don’t really care.
And they’re the people at barbeques who try to sound learned by repeating an oft-repeated, pollie sound-bite.