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Australian Government debt ceiling raised

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Anyway

 

 

Joe Hockey blowing hundreds of millions to make himself look good

 

Reserve Bank governor Glenn Stevens has effectively confirmed that Joe Hockey is blowing several hundred million dollars in an attempt to make his performance as Treasurer look good. Never underestimate the vanity of politicians.

 

Forget a few thousand here and there on the cost of weddings and Cairns “meetings”, Hockey’s petty budget politics will cost tax payers about $300 million over the next 12 months and another couple of hundred million the next year.

 

In a speech at a Sydney investment conference this morning, Stevens backed up comments by the RBA deputy governor last week that the bank was happy to rebuild its capital reserves over time. The RBA certainly didn’t ask for Hockey’s $8.8 billion capital injection and didn’t think it was necessary.

 

That’s the extra $8.8 billion the government is having to borrow and pay interest on while blowing out “Labor’s” 2013-14 budget deficit by the same amount.

 

In the careful phrasing that characterises the Reserve Bank, Stevens today went further than his deputy. Reduce the three concluding paragraphs of his speech to bullet points, this is what you get:

 

The Australian dollar is going to fall.

 

The Aussie’s rise shrank the value of the RBA’s foreign reserves and, therefore, the bank’s capital by more than the bank thought prudent. (By implication, a falling Aussie will boost the RBA’s foreign reserves.)

 

The RBA wanted to rebuild its capital over several years by retaining its profits and not paying the government dividends.

 

Hockey’s $8.8 billion injection this year means dividends will be paid to the government over the next few years.

 

But don’t take my word for it. Here’s how Stevens explains Hockey’s borrowing binge:

cont in link

 

 

 

Read more: http://www.smh.com.au/business/the-economy...l#ixzz2jLDH9IM4

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You're all going to need to work harder if you want the last word. It's easier to just let it go.

Mostly Leo, since he can't stop slandering people even when they are not addressing him.

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You're all going to need to work harder if you want the last word. It's easier to just let it go.

Mostly Leo, since he can't stop slandering people even when they are not addressing him.

 

It's not slander if it's true.

 

Atomic Search does wonders for digging up your record, and everyone else's.

 

Anyway

 

 

Joe Hockey blowing hundreds of millions to make himself look good

 

Reserve Bank governor Glenn Stevens has effectively confirmed that Joe Hockey is blowing several hundred million dollars in an attempt to make his performance as Treasurer look good. Never underestimate the vanity of politicians.

 

Forget a few thousand here and there on the cost of weddings and Cairns “meetings”, Hockey’s petty budget politics will cost tax payers about $300 million over the next 12 months and another couple of hundred million the next year.

 

In a speech at a Sydney investment conference this morning, Stevens backed up comments by the RBA deputy governor last week that the bank was happy to rebuild its capital reserves over time. The RBA certainly didn’t ask for Hockeys $8.8 billion capital injection and didn’t think it was necessary.

 

That’s the extra $8.8 billion the government is having to borrow and pay interest on while blowing out “Labor’s” 2013-14 budget deficit by the same amount.

 

In the careful phrasing that characterises the Reserve Bank, Stevens today went further than his deputy. Reduce the three concluding paragraphs of his speech to bullet points, this is what you get:

 

The Australian dollar is going to fall.

 

The Aussie’s rise shrank the value of the RBA’s foreign reserves and, therefore, the bank’s capital by more than the bank thought prudent. (By implication, a falling Aussie will boost the RBA’s foreign reserves.)

 

The RBA wanted to rebuild its capital over several years by retaining its profits and not paying the government dividends.

 

Hockey’s $8.8 billion injection this year means dividends will be paid to the government over the next few years.

 

But don’t take my word for it. Here’s how Stevens explains Hockey’s borrowing binge:

cont in link

 

 

 

Read more: http://www.smh.com.au/business/the-economy...l#ixzz2jLDH9IM4

 

I will point out that if Hockey blows $10b on making himself look good, that's only 3% of what Labor did.

 

Having said that... the honeymoon will soon be over and the Libs will have to return to Howard form - being a little more subtle in their crowing about their victory. And that means making themselves look good through policy, rather than attacking Labor while they're (deservedly) down.

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Let's just stop and think for a minute about what is going on:

 

Pre-election, the coalition is all "we are going to end the waste", but Hockey is now borrowing 8 billion so he came blame it on Labor (it occured in a financial year where they ran the budget), so they can pay interest on it, then claim it as a "turn around". In effect, by borrowing 8 billion dollars, the economy will look 16 billion dollars better off under the coalition next year.

why 16? i dont get it.

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Guest xyzzy frobozz

Let's just stop and think for a minute about what is going on:

 

Pre-election, the coalition is all "we are going to end the waste", but Hockey is now borrowing 8 billion so he came blame it on Labor (it occured in a financial year where they ran the budget), so they can pay interest on it, then claim it as a "turn around". In effect, by borrowing 8 billion dollars, the economy will look 16 billion dollars better off under the coalition next year.

why 16? i dont get it.

 

$8 billion borrowed to donate to RBA this year, which will make the economy look $8 billion better next when that borrowed money is withdrawn from the RBA and put back onto the budget bottom line. A $16 billion turnaround....

 

That's if the government chooses to do a deposit and redraw - which I strongly doubt.

 

EDIT - Clarity.... original post was shit, unclear and confusing. QFT:

 

"$8 billion withdrawn from the RBA next year, which will make the economy look $8 billion better than this year which has taken an $8 billion hit by borrowing the money in the first place. So that's a $16 billion difference.

 

That's if it happens that way, which I very much doubt."

Edited by xyzzy frobozz

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The main thing is that the debt ceiling would've been reached at some point or other in the future anyway due to inflation and such. So, increasing of the debt ceiling in itself is not a major sign that we are going down the way of destruction, as much as PM Abbot has been suggesting over the last several years. It just means that we have some leeway just as the PM said in the SMH article. What he plans to do with the increased debt ceiling is another thing.

 

To be honest, its more smoke and mirrors as far as I am concerned. He is already setting the stage for things that are to come. He has already said that we shouldnt expect a budget surplus till after 2016.

 

Ideally, I would love to see some bipartisanship in Parliament. Things done for the good of the country, instead of being good for the party. I mean look whats happening up here in Queensland. Sigh. Ill end here before I start ranting.

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Ideally, I would love to see some bipartisanship in Parliament. Things done for the good of the country, instead of being good for the party.

Seriously. Good luck with that. You've got waaaay more chance of winning the Lotto

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Let's just stop and think for a minute about what is going on:

 

Pre-election, the coalition is all "we are going to end the waste", but Hockey is now borrowing 8 billion so he came blame it on Labor (it occured in a financial year where they ran the budget), so they can pay interest on it, then claim it as a "turn around". In effect, by borrowing 8 billion dollars, the economy will look 16 billion dollars better off under the coalition next year.

why 16? i dont get it.

 

$8 billion borrowed to donate to RBA this year, which will make the economy look $8 billion better next when that borrowed money is withdrawn from the RBA and put back onto the budget bottom line. A $16 billion turnaround....

 

That's if the government chooses to do a deposit and redraw - which I strongly doubt.

 

 

er...evidently, i am quite "special". because i am still totally lost!

 

i have never seen a government financial statement. so theres that...

 

and i guess i am not clear on the exact relationship between the govt and the RBA. so theres that too...

 

but i dont see how a liability of $8b would have much effect on net profit in either case

 

or how adding $8b to -8b would do anything other than cancel out on a balance sheet

 

:S

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Guest xyzzy frobozz

Let's just stop and think for a minute about what is going on:

 

Pre-election, the coalition is all "we are going to end the waste", but Hockey is now borrowing 8 billion so he came blame it on Labor (it occured in a financial year where they ran the budget), so they can pay interest on it, then claim it as a "turn around". In effect, by borrowing 8 billion dollars, the economy will look 16 billion dollars better off under the coalition next year.

why 16? i dont get it.

 

$8 billion borrowed to donate to RBA this year, which will make the economy look $8 billion better next when that borrowed money is withdrawn from the RBA and put back onto the budget bottom line. A $16 billion turnaround....

 

That's if the government chooses to do a deposit and redraw - which I strongly doubt.

 

 

er...evidently, i am quite "special". because i am still totally lost!

 

i have never seen a government financial statement. so theres that...

 

and i guess i am not clear on the exact relationship between the govt and the RBA. so theres that too...

 

but i dont see how a liability of $8b would have much effect on net profit in either case

 

or how adding $8b to -8b would do anything other than cancel out on a balance sheet

 

:S

 

Well, basically because they borrowed $8 billion (actually closer to 9bn at $8.8bn), which means that "Labor's deficit" increases from around $30bn to $40bn.

 

Next year, if they decide to withdraw the money back from the RBA, they will have improved the budget bottom line by $8bn, which will already be improved by not borrowing $8bn. Assuming the budget position stayed the same as this year, that would mean that they could say that the budget deficit had been reduced to $24bn from "Labor's" $40bn deficit.

 

It must be said that I don't think that they will withdraw the full amount from the RBA. What they're doing is borrowing money from "Labor's budget" so that they can take dividends in the following years. If the currency loses value against other currencies, as most expect that it will against the Greenback as the U.S. Federal Reserve begins to "taper" Quantative Easing (slows the rate at which it prints money), then they make money which can be returned to the Federal Government as dividends. But as Michael Pascoe has pointed out on a number of occasions in the Herald, this is robbing Peter to pay Paul, as interest needs to be paid on the borrowings.

 

It's a pretty cynical play.

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So the debt ceiling has not been raised... Yet.

 

 

"Federal Treasurer Joe Hockey has raised the prospect of a US-style government shutdown, warning there will have to be "massive" spending cuts if the Opposition does not back down on increasing the debt ceiling.

 

The Government wants to raise the debt cap to half a trillion dollars, but Labor and the Greens have joined forces in the Senate to amend the plan and impose a lower limit of $400 billion."

 

 

 

http://www.abc.net.au/news/2013-11-14/hock...hutdown/5090722

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It's pretty cute how the Coalition think they can associate our sitation with the US one, in hopes they can make Labor look bad. They should try running the country instead.

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if you can't live within budget, you have to spend less

 

upping your card limit is stupid... and given the government has no expensive capital investment plans, they should harden the fuck up

 

tony is quickly realising it's easy to be a smart arse in opposition, but now the hard decisions are down to his crew, and they are revealed as the idiots they are

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So, so many points of order in Question Time today over just whether Abbott had ever voted down ceiling hikes while LOTO

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Guest xyzzy frobozz

So, so many points of order in Question Time today over just whether Abbott had ever voted down ceiling hikes while LOTO

Did he?

 

To be honest, my understanding was that debt ceiling votes had been pretty much bi-partisan in the past, although I'd be not at all surprised to be informed that I was incorrect on that.

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I had to go do stuff so missed the tail end. The SO was denied. I think it was something like there was a Senate vote against, maybe, but not a vote against in the Other Place.

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Let's just stop and think for a minute about what is going on:

 

Pre-election, the coalition is all "we are going to end the waste", but Hockey is now borrowing 8 billion so he came blame it on Labor (it occured in a financial year where they ran the budget), so they can pay interest on it, then claim it as a "turn around". In effect, by borrowing 8 billion dollars, the economy will look 16 billion dollars better off under the coalition next year.

why 16? i dont get it.

 

$8 billion borrowed to donate to RBA this year, which will make the economy look $8 billion better next when that borrowed money is withdrawn from the RBA and put back onto the budget bottom line. A $16 billion turnaround....

 

That's if the government chooses to do a deposit and redraw - which I strongly doubt.

 

 

er...evidently, i am quite "special". because i am still totally lost!

 

i have never seen a government financial statement. so theres that...

 

and i guess i am not clear on the exact relationship between the govt and the RBA. so theres that too...

 

but i dont see how a liability of $8b would have much effect on net profit in either case

 

or how adding $8b to -8b would do anything other than cancel out on a balance sheet

 

:S

 

Well, basically because they borrowed $8 billion (actually closer to 9bn at $8.8bn), which means that "Labor's deficit" increases from around $30bn to $40bn.

 

Next year, if they decide to withdraw the money back from the RBA, they will have improved the budget bottom line by $8bn, which will already be improved by not borrowing $8bn. Assuming the budget position stayed the same as this year, that would mean that they could say that the budget deficit had been reduced to $24bn from "Labor's" $40bn deficit.

 

It must be said that I don't think that they will withdraw the full amount from the RBA. What they're doing is borrowing money from "Labor's budget" so that they can take dividends in the following years. If the currency loses value against other currencies, as most expect that it will against the Greenback as the U.S. Federal Reserve begins to "taper" Quantative Easing (slows the rate at which it prints money), then they make money which can be returned to the Federal Government as dividends. But as Michael Pascoe has pointed out on a number of occasions in the Herald, this is robbing Peter to pay Paul, as interest needs to be paid on the borrowings.

 

It's a pretty cynical play.

 

okay, "The meaning of "deficit" differs from that of "debt", which is an accumulation of yearly deficits. Deficits occur when a government's expenditures exceed the revenue that it generates."

 

expenditures vs revenues...

 

so are debts counted as expenditures? if so, why arent banked current assets counted as revenues?

 

or is investing the money the expenditure? in which case, how is borrowed money not revenue?

 

so confused.

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Debt would go straight to the balance sheet as a liability and the funds received would be added to the cash balances.

 

The expenditure of that loaned money on non capital items would go to expenditure - increasing the deficit (assuming there was no other income to fund that expenditure, but if that were the case why borrow?). Capital expenditure would be on the balance sheet - added to assets i.e. not affect the deficit directly. However I imagine they amortise/depreciate the assets which would be charged as a non-cash expenditure which indirectly increases expenditure (and any potential deficit).

 

edited: for further clarity.

Edited by martyr

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Debt would go straight to the balance sheet as a liability and the funds received would be added to the cash balances.

 

The expenditure of that loaned money on non capital items would go to expenditure - increasing the deficit (assuming there was no other income to fund that expenditure, but if that were the case why borrow?). Capital expenditure would be on the balance sheet - added to assets i.e. not affect the deficit directly. However I imagine they amortise/depreciate the assets which would be charged as a non-cash expenditure which indirectly increases expenditure (and any potential deficit).

"...the funds received would be added to the cash balances" on the balance sheet as a current asset, right?

 

"The expenditure of that loaned money on non capital items would go to expenditure - increasing the deficit..." and putting money into the bank is not a 'non capital' expense, right?

 

incidentally, where does non banked government revenue go? into a giant petty cash box? how different is revenue from money invested in the RBA in the government's name? (am i making any sense!!!!!!?)

 

in any case, 8 billion put into the RBA would be highly liquid, wouldnt it? i dont understand how having extra money makes for a bigger deficit.

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Guest xyzzy frobozz

okay, "The meaning of "deficit" differs from that of "debt", which is an accumulation of yearly deficits. Deficits occur when a government's expenditures exceed the revenue that it generates."

 

expenditures vs revenues...

 

so are debts counted as expenditures? if so, why arent banked current assets counted as revenues?

 

or is investing the money the expenditure? in which case, how is borrowed money not revenue?

 

so confused.

Because the money has not been banked, it has been given to the RBA.

 

I think this is where confusion lies. The government hasn't deposited the money, it borrowed the money to give to the RBA as operating capital. The money now belongs to the RBA. The RBA will use it to operate. This differs to just banking the money as, you're right, if the government had done that, it would have become an asset (albeit a borrowed one). Where if the government had banked the money it would be able to withdraw it as liquidity, the government cannot simply withdraw the money back out of the RBA because, as mentioned, the money now belongs to the RBA.

 

The RBA is an independent body owned by the Commonwealth. When (and if) the RBA makes an operating profit that profit becomes available to the government in the form of a dividend. The government of the day may then choose to take the dividend and apply it to the budget, or it may re-invest the dividend in the RBA in order to seek higher returns or to bulk up the RBA's operating capital. It should be mentioned that the RBA's chief finction is not to act as a bank for the government, nor as an investment vehicle (although it does provide those functions), but to look after monetary policy independently of governments who would be tempted to fiddle around with monetary policy for political ends. So whilst the government does "make money" from the RBA, it cannot simply strip it of assets. That's why I said before that the government won't simply be able to go back next year and grab the cash.

 

It's worthwhile mentioning that over 4 years the interest on the $8.8bn is estimated at $1bn. Essentially Hockey has taken a punt on currency movements as, should the Australian dollar slide against foreign currencies (chiefly the Greenback) he stands to receive dividends in the $8.8bn invested. Why this is controversial is that the only sure thing about what has happened is the interest, whereas investing to receive a dividend is a gamble. Given that (U.S.) Federal Resrve Charperson nominee Janet Yellen has predicted that Quantitative Easing is here to stay, it remains doubtful whether there will be a dividend on the $8.8bn at all, let alone enough to cover the interest payments. Making enough to cover interest payments plus principal is all but impossible.

 

So, to summarise, "Budget Emergency Hockey" has made the budget position worse for no other reason that to play politics. He has worsened "Labor's" deficit, and that position will be improved next year by $8.8bn because he won't borrow it again.

 

...in any case, 8 billion put into the RBA would be highly liquid, wouldnt it?

So, no, it isn't because the money now belongs to the RBA, not the government. Edited by xyzzy frobozz

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As for staking my "personality" on it, I'm not sure what you mean, but anyone who knows me knows that I have been very critical of the Labor Party in the past.

It's pretty simple. You know how there's a contingency of the Australian voting population who always vote for one perty, and would do so even if that parties leader was videotaped murdering babies?

 

They do that because they've staked their personality on it. They've said far and wide, to everyone they know, for years, "I'm a labour man, always have been always will be" or "I'm a liberal supporter, I'd never vote for labour".

 

Because they have built their identity on top of a political party, it's very hard for them to vote for someone else when the time comes.

 

Frobozz is a Labor man, Anyone who has seen him post on these forums over the course of his stay can see that. Not that its a bad thing, But you will never see frozbozz vote for anything outside of the left sepctrum of politics.

 

I consider myself pretty dynamic in politics, i voted for howard, then Krudd, now the Liberal democratic party. To get guns and weed legalised, build nuclear power and deregulate stuff, not sure what part of the spectrum the LDP is in. But they got quite a few votes this election.

 

So the debt ceiling has not been raised... Yet.

 

 

"Federal Treasurer Joe Hockey has raised the prospect of a US-style government shutdown, warning there will have to be "massive" spending cuts if the Opposition does not back down on increasing the debt ceiling.

 

The Government wants to raise the debt cap to half a trillion dollars, but Labor and the Greens have joined forces in the Senate to amend the plan and impose a lower limit of $400 billion."

 

 

http://www.abc.net.au/news/2013-11-14/hock...hutdown/5090722

I agree with the unholy labor/green alliance on this one

Edited by xnatex

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Guest xyzzy frobozz

Frobozz is a Labor man, Anyone who has seen him post on these forums over the course of his stay can see that. Not that its a bad thing, But you will never see frozbozz vote for anything outside of the left sepctrum of politics.

Well guess what, I have actually voted Liberal in the past! It's possible I'd do so again in the future. I voted for the Libs when Mark Latham was the opposition leader, and I voted for the Libs in NSW a few years back. I have also split my vote a couple of times as well by voting for the Libs in the lower house and Labor in the upper house.

 

But yeah, I generally vote Labor. I've never voted Green and really can't see any situation where I would be inclined to, although I must say that Christine Milne has proven to be reasonably moderate considering the party of which she's a product.

 

I think Sir_Substance struggles with understanding that the major parties represent two diametrically opposed approaches to government. Without going into the ins and outs of what those are, it's not a case of following a party arbitrarily as one might a football team, but finding a party that aligns most closely with your views. For me that has happened to be the Labor Party although I'm absolutely not above voting against them, even if I generally don't.

 

http://www.abc.net.au/news/2013-11-14/hock...hutdown/5090722

 

I agree with the unholy labor/green alliance on this one

Well the thing here is that it's actually not Labor/Greens threatening to shut down the government, it's the government itself. Which is bloody outrageous!

 

Labor Greens have agreed to raise the debt ceiling to $400bn.

Edited by xyzzy frobozz

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I used to vote greens untill the party started revolving around opening our borders to the middle east and encouraging a welfare state. I wont vote for them again, but i still do the odd donation to the sea shepard. One of the last standing vangaurds of the green party. I like the idea of protecting our environment, The modern day green party is quite different tho

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