End of Recession in Sight!

I hate to say I told you so…

BUT, according to Wayne Swan the economic recovery will be much faster than previously expected with the turnaround anticipated by the end of 2010.

So all you doomsayers were wrong, and me and Shane were right.

Of course, that is if you believe Wayne Swan.

Mr Swan says Australia’s recovery will be faster than international forecasts predict.

He’s rejected suggestions by the International Monetary Fund (IMF) that recovery will be slow.

“No, absolutely not,” he told ABC Radio.

“We are in extraordinary times. We are in the middle of global recession. The forecasts do need to reflect that.”

Mr Swan reportedly has told state treasurers his recovery scenario in the budget would have the economy bouncing back to above-average growth rates, close to four per cent, at the end of the recession.

The turnaround should be visible around the end of 2010, followed by good growth.

That’s in line with what occurred after the 1990-92 and 1981-82 recessions, although the IMF predicts this recovery will be much slower.

The government will provide detailed forecasts for both 2009-10 and 2010-11 when the budget is delivered on May 12.

The forecast for 2010-11 would normally be based on trend growth, Mr Swan said.

A new report pointing to a $40 billion reduction in revenues, due to the fall in commodities prices, demonstrated the brutal impact of the global financial crisis on government revenues.

“The consequence of that is a higher temporary deficit,” he said.

You don’t say. I wonder if Wayne is softening us up with this long term vision of good news in the lead up to the short term bad news budget. No doubt the World’s Greatest Treasurer will surface from the pit to provide his remarkable analysis of the budget in a couple of week’s time.


155 Responses

  1. reb

    Saying I told you so now is a bit early LOL and reminds me of Will & Grace when she was doing the Told You So Dance.

    I disagree with both Swan and the IMF. I think somewhere in the middle of both of their comments would be the truth.

    I think the recovery will be slower but not as slow as the IMF state but slower than previous recoveries. Apparently there are already glimmers of a recovery in the Chinese domestic market economy.

    Ive lost on Timbercorp and now await news of the next lot of shares to collapse in my portfolio.

  2. Did he say when the budget will next be in surplus, or how many years decades it will take to repay the $200 billion plus debt?

  3. Howard and Costello had the government in debt of $50 billion since at least 2004.

    The Guardian , UK, 24 April 2009:

    The country has kept its outstanding debt steady at around A$50 billion for the past five years


  4. reb,

    Swan’s comment (which is copied from the article you link to) is actually taken out of context:

    When Swan said:

    “No, absolutely not,” he told ABC Radio.

    “We are in extraordinary times. We are in the middle of global recession. The forecasts do need to reflect that.”

    he was responding to criticisms that they had used two year forcasts and the projections rather than the usual process of 1 year forcasts and then forward projections for growth. He wasn’t directly responding to the IMF projections.

    The Access Economics forecast out today is pretty favourable for the Government. Either the Coalition is learning that their negative attacks aren’t working or they know there is nothing in what is out today that supports their view. The Access economics report supports the stimulus efforts.

  5. I framed my cheque and hung it on the wall as I could not bring myself to bank it.

    I’ve spent many times that amount in the last month stimulating the local economy.

  6. Lets hope it doesn’t drag on too long and get too deep. NSW is really feeling the pinch.

    NSW tops mortgage arrears list
    THE jobless rate in parts of Sydney has almost doubled in a year and in some areas up to one in 16 homeowners are behind in their mortgages.

    Of the top 20 postcodes for mortgages that are more than a month in arrears, 19 are in NSW, data obtained by The Daily Telegraph reveals.

    See which areas are in arrears (jpeg)

    The revelation has prompted an unprecedented study of 200 in arrears by the University of Western Sydney – funded by the Reserve Bank – to understand how they are slipping through the cracks.

    The move comes as the Federal Government announced a crackdown on unscrupulous lenders.

    The laws will make it illegal for lenders to extend credit to a consumer who is unsuitable or who cannot meet the repayments.

    An analysis by the UWS’s Urban Research Centre has found that areas along the M4, Windsor Rd and Canterbury Rd corridors, as well as the Central Coast, are bearing the brunt of the looming recession. The hardest hit is the area around Fairfield and Liverpool, where latest figures show the unemployment rate has jumped to 10.5 per cent – its highest level since 2001.

    The shock figure is up from 5.9 per cent this time last year. The Richmond-Tweed area is also just into double figures.

    Are you in mortgage stress? Find out here (pdf document)

    Urban Research Centre director Phillip O’Neill said it was cause for concern that regional centres would struggle to get employment because they had been “starved of government infrastructure spending”.

    The centre is now undertaking a survey into the causes of mortgage stress and is asking those suffering to register via its website at http://www.uws.edu.au/urban

    The top area in NSW for mortgage in arrears was Nelson Bay, followed by Raymond Terrace, Katoomba, Greenacre, Guildford, Fairfield, Cessnock and St Marys.

  7. The G8 club, the World Bank, and the IMF have not to my knowledge handed Mr Swan his good news speech as yet. I think it’s a case of Mr Swan reading his horoscope again and getting carried away.

    Cancer: full moon in your solar return chart marks the reappearance of halcyon days. Long pleasant bar-b-qs are to be had as you forget about the world’s economic woes (shit! Who care about that train wreck). The Sun conjunct Mercury in you Solar Return chart suggests that you should always carry a spare set of underwear because you’ll soil yourself many times during the day. Venus conjuncts Saturn and opposes Neptune around the time of your birthday this year which shall give you enough courage to stand up to your boss and tell him he’s a kumquat.

    The Sun’s hard angles to Saturn and Neptune suggest some conflicts. Saturn and Neptune’s influences are contradictory which means predicting the end of the world’s financial woes will be more accurate if you use the tried and true method of throwing a dart at a dart board.

    With the Sun trine the North Node of the Moon, you are more likely to improve the nation’s wealth if you withdraw all commonwealth revenues and head to Eagle Farm for the Winter Carnival.

  8. All those doomsayers complaining that it will take their children/grandchildren lifetimes to pay off the stimulation packages is utter twat.

    The RWDBs keep telling us that Howard inherited a $96b debt. The China boom paid for this and all the time we were receiving tax cuts. The China boom is only temporarily stalled and I am confident that when the world rights itself we will quickly go into surplus again.

    That’s my 2 cents worth.

  9. Miglo,

    All those doomsayers complaining that it will take their children/grandchildren lifetimes to pay off the stimulation packages is utter twat.

    That would be me.

    The China boom is only temporarily stalled and I am confident that when the world rights itself we will quickly go into surplus again.

    I sincerely hope your guess is as good as better than mine.


  10. Miglo

    Additionally – how much of the deficit is caused by a collapse in government revenue as opposed to government (mis)spending?

    And how much extra revenue did the previous government collect that allowed them to pay off the $96 billion debt?

    I will hopefully have some time later to get a graph together of total federal government revenue over time and it’s relation to government debt.

  11. “That’s my 2 cents worth.”

    And it was worth every cent.

  12. Migs just found this re JWH’s stance re the China boom. You’ve never had it so good. Record household debt now means that your assets are worth so much more.

  13. I was expecting that Tom.

    And Joni, it was the extra revenue from the resources boom that allowed Howard to wipe off the 96b debt. We may be in a recession, but we haven’t seen the last of the resources boom.

    Think happy thoughts.

  14. How long did it take for the debt left by Keating to get paid off?

    George over at Meganomics explained that underlying debt that has always been the case relates to government bonds and establishing a value.

    I’m not up on this, does anyone care to elaborate further?

  15. Good grief..the whole Youtube thingy has come up on the blog. No idea why as I just posted a link. It wasn’t that crash-hot an analogy, but a good one me thinks re recession, good times and bad.

  16. Min, and there I was thinking how clever you were by posting a YouTube vidoe, rather than just a link.

  17. Thank you Miglo. It must be all in the wrist action.

  18. The recession will end, they always must.

    By then we will have put a few billion worth of handouts through poker machines, supported the plasma TV industry, and unnecessarily insulated plenty of houses that have leaking roofs…

    We won’t have provided old age pensioners with some home maintenance or painting or home insulation, if that’s what they need.

    In other words we will have wasted billions.

  19. “In other words we will have wasted billions.”

    Maybe Talcum is right.

    Perhaps the money would be better spent of visionary infrastructure projects.


  20. Caney did you start to read the Guardian in 2005? Around the same time you had your “epiphany” regarding politics? I’m still laughing at that.

  21. ‘Like CRAPOPOLIS!”

    Exactly, just like Crapopolis. At least with Crapopolis, we’d have a local fly frying industry, fly caviar (maggots) and fly veal (maggots). All these new, emerging industries.

    We’d also have a high speed railway, linking the (desolate) west to the more desolate centre. We’d use this to collect fresh rail kill, to supplement the fly based local cuisine.

    Tourists and “our fellow Australians” would flock there.

    If only we had competent politicians were able to understand a vision when they heard one.

  22. Tom, I see you are warming to my vision.

  23. Interesting


    And why is the opposition continually calling for independent enquiries on everything that they disagree with even though the majority of the population support the Government. Shouldn’t they be investigating why they have no traction on anything and their lack of credibility in the peoples eyes rather than wanting indenpendent enquiries on evrything under the sun. This issue used to be one of the major strong points for the coalition in polling surveys.

  24. Crapopolis could also offer “roo huntin'” tour groups.

    “Kill, skin and eat your very own worm infested national icon”

    It’s all part of the Crapopolis experience!!

  25. Reb, that’s a great idea…you’ve got the job in the tourism department.

  26. The roo huntin’ tour groups would expect outstanding service in the “Kill, skin and eat your very own worm infested national icon” industry.

    “Would Sir like a slab with that animal carcass?”

  27. Joni wrote:

    get a graph together of total federal government revenue over time

    May I help you with some figures from Peter Hartcher.

    Sydney Morning Herald , 21 March 2009:

    … The big picture of Howard fiscal policy was much worse. As the Treasury reported last year, from the 2004-05 budget to the 2007 election the China boom and a robust economy added $334 billion in windfall gains to the budget surplus. Of this, the Howard government spent, or gave away in tax cuts, $314 billion, or 94 per cent.

    A Treasury report compared Howard’s fiscal policy with that of that touchstone of recklessness, Gough Whitlam.

    Howard and Costello should have set aside much larger sums from the once-in-a-generation mining boom.

    [Emphasis mine]

    Hartcher’s point about their waste is endorsed by Saul Eslake (ANZ chief economist). Speaking on The World Today , ABC Radio, 11 September 2008:

    It also would have been possible to set funds aside for future tax reform, for rebuilding the nation’s water supply, dealing with the Murray Darling basin problems, dealing with climate change and the like, as well as for spending on infrastructure and education and hospitals.

  28. If the link to ‘The World Today’ story doesn’t work, please use this one:


  29. Caney

    Problem with the previous government was that all states had state labor governments and the coalition aim was to destroy those governments at all costs. By denying them funds to build infrastructure they could continue to blame them for the messes rather than use their windfalls to benefit the population as a whole through infrastructure they chose to give tax cuts to the rich and continue to deride the labor state governments ( of which some of it was warranted)regarding schools, hospitals, water, and anything else they ran. This was their aim, problem was it backfired badly in the end.

  30. Most state governments really do a pretty hopeless job without the intervention of the previous government.

    State governments used to build and own infrastructure, roads, railways, ports etc. Now they can’t even maintain the ones they’ve built. It is all crumbling.

    Schools are a state government responsibility, have you seen the condition of a government classroom?

    They can’t run the public hospital system, even the new federal government has come to this conclusion.

    How many more managers, accountants, administrators do hospitals have now? Their number has increased exponentially, far more than the increase in those that actually look after patients.

    Most state governments are hopeless. And it is no use blaming the previous federal government for their failings.

  31. Did I mention water? haven’t the states done a great job there too?

  32. Tom of Melbourne, on April 28th, 2009 at 5:39 pm Said:

    Most state governments are hopeless.

    The implication being that some aren’t or weren’t ‘hopeless’. Care to nominate the ‘good’ ones? You know the State Governments that did the infrastructure building and provided the maintenance as well.

    But keep in mind the decline in infrastructure, broadly defined, is not of recent origins but apparent for decades regardless of the political party in power.

    Perhaps the problem is much more fundamental than ‘hopeless’ State Governments? Indeed it may be the case that the ‘hopeless’ tag is itself a ‘hopeless’ explanation.

  33. Sorry about that bolding.

  34. Outsource your own job and have more time for drinking, watching sport, gambling (or even developing inland metropoli).

  35. The RWDBs keep telling us that Howard inherited a $96b debt. The China boom paid for this and all the time we were receiving tax cuts.
    Miglo, on April 28th, 2009 at 3:13 pm Said:”

    What a load of crap. The mining boom did not start until 2002-2003. Howard/Costello had already run several budget surpluses by then. Furthermore if the ALP was in power they never would have paid off this debt. It is not in the DNA of the ALP to pay off debt. The ALP is good at only two things

    1. increasing unemployment
    2. creating enormous debt

  36. Nature 5, I wasn’t being partisan.

    Government/public administration is complicated, obviously.

    Politicians generally aren’t up to it, particularly at the state level. The gene pool is very limited; there is only one kind of politician – a career politician. And I think they are revolting types. This is one of the reasons I prefer the US model.

    My assessment of some state governments –

    I think Greiner and Fahey were hopeless in NSW. Then followed by Carr, who was initially very good, followed by a decade of steep, relentless decline in government performance.

    I thought Goss was outstanding, I had some time for Beatie and I think Blight seems OK.

    I always said I would leave the state if Kennett became Premier of Victoria, and I did just that.

    I think Brumby is ok. He’s just stuck with the legacy of the bumbling Bracks, who was a hopeless waffler.

    I really don’t understand how we can have record levels of tax, new (and lucrative) sources of state revenue from various forms of gambling, more public servants… but declining services and declining performance from existing ,decaying state infrastructure.

    I think it is entirely fair to blame politicians for this situation.

  37. Neil, what I was trying to convey was the emssage that Howard was able to pay off that debt without taking it from our pockets.

  38. Some message. I can’t even spell message right.

  39. Miglo, on April 28th, 2009 at 8:36 pm Said:
    Neil, what I was trying to convey was the emssage that Howard was able to pay off that debt without taking it from our pockets.”

    Please explain!!!! My poor RWDB brain does not understand this.

  40. Tom of Melbourne, on April 28th, 2009 at 8:23 pm

    Let me state at the outset, I agree that State Governments have failed over a significant time span and would argue that ‘under-achievement’ is likely to continue regardless of which political party occupies the Treasury benches.

    State Governments are ‘hopeless’ not because of some genetic weaknesses (although I could cite a few examples) but because they have little control over their own destinies. They don’t really determine how much money is raised and at the same time they are faced with constantly rising expectations and dramatic increases in the cost of ‘technology’ broadly defined.

    Simply, the ‘tasks’, and the costs of implementing same have changed but the ‘resources’ haven’t matched the new realities.

    I am curious as to why you think Goss was outstanding.

    As for Beattie, he was the best natural ‘politician’ I have ever met. And yes Bligh is not too bad.

    BTW, all the politicians you mention failed to significantly improve public infrastructure, despite the rhetoric.

  41. Neil,

    People are concerned that the budget deficit due to the stimulation packages will take many lifetimes to recover.

    I was suggesting that this may not necessarily be the case. Howard was able to return a healthy surplus in a reasonably short time (while still providing mums and dads with tax cuts).

  42. Oops – hit submit too early.

    In my opinion, once the world balances itself out, the resources boom may well continue and the income this generates to the govt will go a considerable way into returning us with a surplus.

  43. Neil,

    Please try and refrain from using the word “crap” in your response.

  44. I was suggesting that this may not necessarily be the case. Howard was able to return a healthy surplus in a reasonably short time (while still providing mums and dads with tax cuts).
    Miglo, on April 28th, 2009 at 9:19 pm Said:”

    Well i hope you are right. But we are talking about numbers not seen in our nations history ($200B). Furthermore Howard/ costello hacked into spending to get the budget back into surplus. Swan had a chance to hack into wastefull spending in the last budget. He cut some jobs at ANSTO, abolished the solar panel rebate, destroyed the Regional partnerships Scheme and wound up with a budget surplus no different than what Costello would have produced. He didn’t cut any wasteful spending.

    And now it is all gone. A $20b budget surplus has become a $50b deficit in just 18 months.

    I never believed that the budget surplus that Costello produced was due to dumb luck.

  45. Hi Caney (Caney, on April 28th, 2009 at 5:05 pm Said:)

    I would like to say that your heroes Rudd/Swan were also in power with the mining boom going full steam, booming economy and no GFC. If you recall our last federal budget was all about getting the inflation genie back into the bottle. This poor little genie was released by costello due to reckless spending. Well Swan had the power and authority to do something about it at the last budget.

    Swan was handed a $20B budget surplus on a platter just like a waiter hands someone their meal at a restaurant.

    If the references you presented are true it should have been easy for Swan to produce a $40B surplus.

    Your references are a load of crap.

  46. Nature 5 – “‘under-achievement’ is likely to continue regardless of which political party occupies the Treasury benches.”

    Of course. There is a cycle; governments have a use by date. But state governments and oppositions are still full of hopeless politicians.

    “they are faced with constantly rising expectations and dramatic increases in the cost of ‘technology’ broadly defined.”

    In part this is correct. But rising expectations and technology aren’t to blame for the decreasing standards of public transport, the ever increasing use of PPPs, the toll roads, longer hospital waiting lists. There is a significant problem with public administration.

    The government applies systems to protect political government from political controversy rather than for the efficient performance of the activity or function.

    Additionally an ALP government has difficulty in reforming the public sector for reasons that I dare not state again. The public sector is loaded up with overheads, shared (rather than singular) accountability, accountants, hangers on.

    I’d like to check the direct to indirect ratios for the public hospital system over the last 15 years for example.

    Hopeless is an understatement.

  47. The Government is borrowing money, dividing it up and distributing it to families. A typical family of mum, dad and two children would by now have received two $1000 bonuses – one for each of the children – and $900 if dad’s income was less than $80,000. That’s $2900 since last October – enough to get a pretty nice home entertainment system.

    And there’s no repayment?

    Actually, the Government borrowed this money, so it will have to pay interest to the lenders. And since it gets all its money from taxpayers, it’s the taxpayers who will foot the interest bill.

  48. Tony, no matter how people will shoot the messenger the message is the truth unfortunately.

    No use in complaining, the damage has been done.

    Have you seen this?


  49. Neil

    The inflation was out of the bottle. At the time Labor took office it was higher than the US, higher than much of Europe. Among the highest in the western world. It was the highest it had been for 16 years.

    As to Costello “handing over a surplus like a waiter hands over a meal”. That implies that the Liberals willingly handed over control of treasury to the new government. That’s not true. They fought tooth and nail to stay in power. They spent more than a hundred million of our money trying to sell the stinker that was SerfChoices. They had a taxpayer-funded dirt unit running out of a Minister’s office. They had a dirt unit – again publicly funded – to discredit Labor’s broadband policy. They enlisted the financial support of business unions to help spruik their IR “changes”. They ran a ridiculous scare campaign against Labor and “union bosses”. To imply they went willingly and gracefully is a joke. It’s just silly to say they “handed over a surplus on a platter” when the reins of government had to be wrested from their cold, miserable hands.

    And a surplus of $22 billion. That’s chicken feed compared to the money they blew in their last couple of years in office. $314 billion between 2004-2005 and the 2007 election. Putting aside just 22 billion is hardly the sort of accomplishment they should be bragging about, especially given Treasury likened the spending in Howard’s last years to that of the last years of the Whitlam government. And especially given their record on infrastructure.

  50. scaper

    If this is true.

    Thats a disgrace, how on earth the Govt can brief a foreign country before our own opposition is amazing.

    Defence is usually a bipartisan area for the sake of the nation and our defence force personnel.

    How dare they release a blue print to any foreign nation before having consultations with our own opposition, they may not be in government but many people voted for them and their input into the defence of our nation and its strategies is essential.

  51. Scaper

    As Shane says – if it is true.

    But what do we really have here? A statement from an opposition spokesman on the purpose of a trip to China. Do we really know the purpose of the trip – or is the opposition trying to create a story where there is none?

    IMHO, this is just the opposition saying something like “Are you still beating your wife?”.

  52. Perhaps Mr Pezzullo has been summoned by the Chinese to issue a ‘prease exprain’ over his pro-US, anti-China stance:

    Defence insiders say Mr Pezzullo believes China’s rise is likely to usher in a new cold war with the US and that Australia must be equipped to fight alongside the US if hostilities ever erupted.

    Why he would go, though, is anybody’s guess.

  53. joni, are you suggesting that the ABC ran with this story without checking the veracity and this has been a concocted lie by the opposition?

    I remember many here deriding the last PM for his arse licking of the last US president but it seems to be acceptable for the PM to arse lick the Chinese.

    A secret meeting and now this does not sit well with me at all!

    We all jump up and down concerning human rights and I’ve watched the debate concerning torture here, or the definition of torture but no one bats an eyelid about our increasing relationship with China because of the mighty dollar!

    We have been easily bought and I object to the governments relationship with the Chinese, arse licking to the extreme when they reveal our defence plans.

    Here are some photos of how the Chinese punish their citizens.


    Not for the squeamish or the one eyed!

  54. [A]re you suggesting that the ABC ran with this story without checking the veracity[?]

    Um, yes.

    And I fully agree that we should not arse lick the Chinese. But really – how do we know that they are revealing our defence plans?

  55. scaper

    As I said. If this is true.

    Regarding any of the media they all run bullshit stories for which they have to back down later. Example Pauline Hanson photos.

    In relation to the secret meeting, do we know what it was all about yet ?

    I have no objection in improving our relationship with China I simply object if the details of our defence plan were provided to an outside country before discussing them with our opposition. Remember George W Bush borrowed 500 billion from them before he left office.

    I agree and object to human rights in China but we also trade our rural commodities like wheat and sheep to islamic countries that beat and kill their women and impose sharia law and stone people to death.

    Please expalin how we have been “bought” by the Chinese.

  56. You’d better add The Australian to the list of papers reporting this story, although it does add three other countries visited by Mr Pezzullo:

    THE Defence Department’s second most senior official, Mike Pezzullo, has formally briefed counterparts in Washington, Jakarta, Tokyo and Beijing on the soon-to-be-released defence white paper.

    No date has been given for the release of the long-awaited defence blueprint, now expected within days.

    Mr Pezzullo’s lightning four-country trip was described by Kevin Rudd as a normal part of international diplomacy.

    There is still a legitimate question as to why these countries, as well as India and others, were briefed before our own opposition.

  57. I agree that the Chinese have a questionable human rights record, but they do make much tastier food than the Americans.

  58. Tony

    I agree – now that more of the story is coming out, this is not how government/diplomacy should work.

  59. Tony,

    Costello is being deceptive in that article. The cash hand outs account for around $20Bn, not $200Bn. On top of that is other stimulus which so far accounts for around another $30Bn in this and next financial year. The rest of the projected debt ($100-150Bn) is the result of reduced revenue through tax take and increased social service payments. Costello won’t admit it but any government he was in charge of had he been elected would also have had that $150Bn debt, actually it would have been higher because the projected surplus from their election campaign was less than Labor’s first budget AND they were going to give an extra couple of $Bn in tax cuts to higher income earners which Labor didn’t copy.

    So we have $150Bn+ a bit debt from the Libs in Government without any stimulus as comparred to Labor’s projected $200Bn with stimulus. But that isn’t a real reflection on what the Lib’s position would be because they are advocating spending on infrastructure, so lets raise that $150Bn by say an extra $10 Bn or so. Then there is Turnbull’s and Costello’s proposal to bring forward the tax cuts for 09/10 AND 20/11 to 1 Jan 2009. This takes a further $15Bn or so off the bottom line and includes a TAX REBATE (aka cash splash) for the backdated tax rate.

    So, to put it in perspective, Labor’s debt of $200Bn (which is a max and not the projection) is only slightly higher than the absolute minimal proposed by the Opposition (from what I can gather out of their policy statements) so Costello’s interest payments of $2000/year for a family of 4 under Labor would still be at least $1900 / year under the alternative Government’s proposals – and that is with less infrastructure and stimulus.

    Sorry Cossie, but I’m not buying your argument, even if I only have to pay for it later.

  60. Seems that there is a precedent for the briefing of Defence Papers:

    Howard’s ploy no shield for Crean

    …Before the Howard Government released its 2000 Defence White Paper, officials travelled the region extensively to brief Asian countries, calling in on Indonesia, Singapore, Malaysia, Japan, South Korea, China and Thailand (as well as New Zealand).

    There was nothing like this before the Government unveiled its “Defence Update 2003” last week. Only Indonesia had advance advice, given in Jakarta. Attaches from other regional countries were informed in Canberra that the paper was coming, but the details given to them were thin…

  61. Nice find Kitty!

  62. Nice find Kitty!

    Yes it is. But was the opposition also briefed? Although I can’t be certain, the following leads me to believe the answer is yes (although Crean’s understanding of it apparently left a lot to be desired):

    When the Opposition Leader called a news conference on the strategic update and condemned Australia’s interest in a US missile defence system, one would have thought he would have got himself fully across the facts.

  63. Shane, the Chinese government have been slowly buying into our energy and resource companies through their agents here.

    I know of two in Brisbane that are buying a hell of a lot of commercial property with their government monies.

    I also take note that after the clandestine meeting that the PM had with the Chinese minister before he flew off to push their case at the G20 not one person here raised an eyebrow.

    So typical to use the actions of the last government to justify this governments actions, I suppose if the last PM ate babies it would be acceptable for this PM to eat them too…a pathetic argument that does not improve governance, but I suppose we get what we deserve!

    Does these foreign governments reveal their defence plans to our government?

    I note that not one person answered my query yesterday…how long did the former government take to pay down Keating’s debt???

    Dave, the bottom line is that we are in a lot of debt that will take a long time to pay off…attacking the opposition policy does not change that fact.

    Back to doing the scourge of business, my BAS!

  64. All this talk of the Howard government makes me nostalgic.

  65. Scaper – I am still getting the details together on “Keating’s debt” – but I do note that of the $96 billion nearly $10 billion was from when John Howard was Treasurer.

    Not something that the former member for Bennelong wished to acknowledge.

  66. Back to doing the scourge of business, my BAS!

    scaper…, on April 29th, 2009 at 10:44 am Said:

    You are a day late already …………………………!

    Get your cheque down to the post office now!!!!!!!!!!!!……….Your country needs you.

  67. It’s a point I’ve been making over previous blogs and perhaps irritatingly so.

    Mortgage defaults poised to soar

    Rising bad debts flagged by the big banks may point to an explosion in mortgage defaults in coming months as the recession batters household finances, according to a consumer advocacy group.

    ANZ Bank revealed today it set aside $1.4 billion for bad loans in the half year to March. It follows National Australia Bank’s $1.8 billion bad debt charge flagged in its half-year results yesterday.

    ”We should be a bit nervous because we haven’t seen the worst of it yet,” said Nicole Rich, of the Consumer Action Law Centre, advocacy group. The rising bad loans and provisions were worrying given that both interest rates and petrol prices have fallen in the past half year, she said.

    The full effect of joblessness is also yet to be felt, with economists expecting about 9% of the workforce to be job hunting by the end of 2010, up from 5.7% in March.

    ”Essentially, the provisions are not for people who default on their mortgages per se, it’s for when they default on their mortgages but don’t have enough equity in the property to cover the bank’s losses,” she said.

  68. scaper …
    My point wasn’t that I was critical of the Opposition policy (although I am – what there is of it), but rather that I’m critical of Costello suggesting that the debt would only acrue under Labor when the reality is the same or similar debt levels would arise if the Opposition was in power.

    And yes, it took 10 years to pay down the $96Bn Government Debt that existed when the Libs came to power. However not all of this was debt from the Keating Hawke days as there was a significant Gov’t debt that carried on from the Fraser? Howard Government.

    There is no doubt that it will take a similar period to pay off this debt.

  69. John

    “irritating”? Never 😉

    But what is soar supossed to mean? Soar as in the US sub-prime crisis? Or does it mean that it will rise a little?

  70. Ross Gittins, Sydney Morning Herald, 11 February 2009

    Paul Keating inherited a recession-swollen budget deficit from John Howard in 1983, which it took him five years to turn into an annual surplus.

  71. It’s anyone’s guess Joni, but banks seem to be indicating that the anticipate a surge in loan defaults given their increased provisions for doubtful debts. We’ll just have to wait and see just how bad it can get.

    Unemployment is no doubt a major factor in their thinking along with overpriced housing and substantial debts being carried by mortgage holders.

  72. Joni

    Looks like NSW is going to get hit very hard.

    NSW tops mortgage default list
    EXCLUSIVE by Joe Hildebrand and Vikki Campion | April 28, 2009 12:00am
    THE jobless rate in parts of Sydney has almost doubled in a year and in some areas up to one in 16 homeowners are defaulting on their mortgages.

    Of the top 20 postcodes for mortgages that are more than a month in arrears, 19 are in NSW, data obtained by The Daily Telegraph reveals.

    See which areas are in arrears (jpeg)

    The revelation has prompted an unprecedented study of 200 defaulters by the University of Western Sydney – funded by the Reserve Bank – to understand how they are slipping through the cracks.

  73. The Age, 1 January 2009 mentions one of Howard’s deficits. (Howie was treasurer from 1975-1983):

    … a budget deficit of $5.2 billion for 1978-79

    There was no recession at that time, yet he had the budget in deficit already.

  74. Whereas, I’m critical of Costello for thinking I’m stupid and don’t understand that ‘fiscal responsibility’ involves Government SAVING in the good times to SPEND in the bad times over the WHOLE CYVLE, and that a responsible fiscal manager would have done so; not simply spending his valuable political time in the backbench wilderness ignoring that no such ’emergency fund’ was built up under his stewardship; and that when the good times inevitably evaporated in the clearly foreseen tumult of one of any number of possible tsunamis exogenous shocks, that the cupboard was so empty that borrowing against the shortfall of saved surplus was required. Onya, Pete! Way to sell it to the peeps who voted ya out for precisely that reason, among others!

  75. Truth is Joni, the pressure is really on now as far as financing is concerned.

    Lenders say it’s Ruddbank or bust
    Carolyn Cummins Commercial Property Editor

    THE country’s two biggest banks have warned that without the proposed Australian Business Investment Partnership taxpayers and shareholders will face excessive risk from a mountain of debt that will mature in the next two years.

    In submissions to a Senate review of the partnership, dubbed the Rudd Bank, Westpac and the Commonwealth Bank said they were reaching their maximum exposure to the ailing commercial property sector.

    The lenders said that without ABIP the sector could collapse as projects fell over and assets were sold at basement prices.

    CBA warned that within the commercial mortgage-backed securities market (CMBS), where most commercial property loans are concentrated, up to $5.13 billion is due by May 2011 – and financiers may not be able to cover that amount.

    “The CBA is approaching the maximum level of commercial property industry concentration that we deem to be appropriate,” the CBA warned.

    “Demand from clients in the industry may become greater than our capacity to assist through normal lending processes.

    “The lending criteria that govern ABIP’s potential loans to the industry are prudent, driven by a desire from the banks not to expose their shareholders’ funds to excessive risk and the Government’s desire not to expose taxpayer’s funds to excessive risk.”

  76. “See which areas are in arrears (jpeg)”

    How interesting, one of the areas that is apparently the hardest hit is a vast area surrounding Leura.

    Which, if I’m not mistaken is actually uninhabited bushland..??????

  77. Legion,

    That too… if fact, that’s what I’m really critical of! When you throw that into the mix, Costello’s article doesn’t paint him in a very good position does it (although he would assert that he fought hard to squirrel more of it away but Howard wanted to spend it all). IF we had have had the tax cuts that Costello wanted, our ability to run a balanced budget in this financial climate would be even more severly constrained.

  78. Caney,

    Yes – his deficits were:

    75-76 – 1.5 billion (1.8% GDP)
    76-77 – 1.2 billion (1.3% GDP)
    77-78 – 2.0 billion (2.0% GDP)
    78-79 – 2.1 billion (1.8% GDP)

    And this was in a time when revenue was growing.

    The recession in the early 90’s was when revenue was falling – which is where most of the Keating debt was accumulated.

    I am still trying to get all the data together.

  79. reb,

    Isn’t that also where Sans Blog lives? Is it all his fault?

  80. Legion, April 29th, 2009 at 11:30 am,

    In reference to your post, you might enjoy the following article at Rickey …

    This is Howard’s deficit, not Rudd’s

  81. LOL, Howard, the Deficit Specialist!

    Mungo MacCallum, 13 January 2009:

    not long ago he [Howard] was warning Kevin Rudd of the danger of deficits and the long term consequences of going down that seductive path. There at least he was speaking from experience; as treasurer under Malcolm Fraser John Howard became something of a deficit specialist, not that you would have guessed from what he said as Prime Minister.


  82. …… apparently the hardest hit is a vast area surrounding Leura.

    Which, if I’m not mistaken is actually uninhabited bushland..??????

    reb, on April 29th, 2009 at 11:34 am SaiD

    Yep…………..and it still was last time I was up there in March.

    So John…… I would not rely on an “authorative” report from Joe Hildebrand if I were you.

    After all he does work for the same organisation that brought us the “Hanson” photos.

    And by the way if you read the new guidance issued by NAB and ANZ you will find that these rates of default are quite normal for a recession and include business loan defaults not just home loans.

  83. Call me old fashioned, and maybe some of the CPAs here could set me straight on this, but why would a country – Australia, for example – borrow, at interest, to fund current expenditure, when there are funds available in easily cashed-in investments, or ‘future-funds’ in Australia’s case?

    (If individuals did this you would call them financially naive, so why not governments?)

  84. Now where is Howard’s debt truck? I remember him saying that it was his governments #1 priority, but that was quickly dropped. And by the end of his term the debt had risen dramatically.

    I have tried to find a photo of Howard with it but have come up blank.

  85. Joni,

    Here is Pete at the wheel,

  86. Sleepy Pete & the Deficit Specialist flee the runaway Debt Truck …

  87. Tom of Melbourne, on April 28th, 2009 at 11:07 pm Said:

    rising expectations and technology aren’t to blame for the decreasing standards of public transport, the ever increasing use of PPPs, the toll roads, longer hospital waiting lists.

    True. But at the heart of the problem is a lack of money to do what needs to be done and that applies to all States regardless of which Party is in power.

    I have no evidence of decreasing standards of public transport but I concede there has been a failure to keep pace with an increasing population and an even greater proportional increase in motor vehicle ownership.

    As for the ever increasing use of PPPs, I find PPPs disgraceful but understand the necessity for same given the chronic underfunding all State Governments face.

    Certainly the Health Systems are failing but in some part at least that failure is due to a shortage of doctors and nurses – a responsibility that can only be sheeted home to the Federal Government.

    While some of the problems can be sheeted home to a lack of political courage (QLD’s subsidy of fuel is a clear example) I don’t think the gene pool, incompetence, and the like are at the heart of the problem.

    Any genuine reform of the public sector (and it’s way overdue) must see a clear definition of State and Federal responsibilities AND better funding must be provided to the States at the expense of a (normally) cashed up Commonwealth.


  88. Call me old fashioned, and maybe some of the CPAs

    Tony, on April 29th, 2009 at 11:49 am Said:

    I wont answer that………………………………I’m a CA which is a much higher form of intelligent life than a mere CPA !

  89. Lol Walrus. I meant to say CA, really I did.

  90. Simple answer……….we are a net importer of capital. Have ben since I can remember and will be for many years to come due to our small population and huge appetite for new infrastructure.

    Whereas China for example has such a huge population its proportionate ned to import capital is smaller because it can internally generate the $

    That’s as simple as I can explain it

  91. Question: What does an accountant use for contraception…?

  92. More figures showing the Deficit Specialist at work

    Howard treasurer, Fraser prime minister:
    Budget deficit (underlying cash balance)

    1981-82 0.3% of GDP surplus
    1982-83 1.7% of GDP
    1983-84 3.3% of GDP

    [Christian Kerr, Crikey.com.au, 27 June 2007]

  93. reb

    Their personality!
    (Sorry Walrus, I’m sure your the exception that proves the rule)

  94. Walrus,

    Thanks for that, and I know that these future-funds were meant for other purposes (although they were designed when the GFC was still the Geelong Football Club), what good reason is there not to utilise this capital now that we are in such an unprecedented crisis?

  95. Ten points Dave 55…!!

  96. and no, I don’t want the bloody CD as a prize reb 😉

  97. LOL D55

    Actuarial Studies: for those who find accountancy too interesting.

  98. Tony, on April 29th, 2009 at 12:29 pm

    Pete’s reaction to even the thought of doing something like that back in ’07. Apparently, a deficit is indeed preferable to raiding the inviolable ‘lock-box’ until 2020, if his words are to be believed. Then there’s the pesky matter, perhaps, of getting the amending legislation through both Houses.

  99. I’ll have you know that the CD remains a highly sought after item and is meticulously guarded in the vaults of reb manor with a 24 hour security guard contingent.

  100. Tony, the Future Fund is a no go zone until 2020 I believe, the last government ensured that this government can not touch it.

    It could be legislated to utilise the over $30B in cash that is sitting there but I believe the government has more of a chance of getting its flawed ETS through the upper house than this eventuating.

    BAS done!

  101. Legion,

    Exactly. The reason this idea hasn’t been floated is that such a move would be too politically difficult. My esteemed colleagues here – even the CA – haven’t been able to offer a good reason not to do it. It’s purely that Mr Rudd and Mr Swan would leave themselves open to criticism from the opposition benches.

    But is that a good enough reason to put us in $200 billion hock when it could be “only” $140 billion if we used the $60 billion-odd reserves from the future-funds? I think not.

  102. Nice fault reb. I might get one for my wine cellar, less the security guard. I find crocodile pits are a lot cheaper.

  103. But wont the income from the Furture Fund offset some of the interest from the deficit? In effect having the same effect?

  104. “……. what good reason is there not to utilise this capital now that we are in such an unprecedented crisis?”

    Tony, on April 29th, 2009 at 12:29 pm Said:

    Mainly because the Future Fund has a certain return that it needs to achieve and although some of its assets are liquid (e.g. cash) most of it is in bonds and shares. For instance it owns a truckload of Telstra and if it liquidated even some of its current holdings of Telstra the share price would likely collapse and all it would be doing is draining the domestic economy of cash from lets say mums and dads or super funds. Essentially it is just swapping one asset (Telstra shares) for another (Cash). So overall the economy has not raised any further capital its just been shifted around.

    We need to import capital and rely on the future dividends (i.e. greater efficiencies or income )of the new infrastructure (i.e. a new port facility to ship greater amounts of coal) to pay the interest and the principal back to the people we borrowed from overseas.

    A good example of nations being surplus in capital are some of the Arab states who have earnt so much in petrodoillars over the years all their infrastructure has pretty much ben built. All they can do now is spend their money on cars and bigger houses or lend it to us as they dont ned anymore ports, hospitals or schools.

  105. Legion

    I wonder how Peter Costello came up with $140 billion in the future fund by 2020. Im sure that figure is cactus now.

  106. BTW, I’m not saying I trust the government to spend the money wisely; it’s just that I’d rather them waste money we already have than waste borrowed money and pay interest as well.

    (The other qualification I’d offer is: if the F-Fs are showing a better rate of return than the rate of interest payable on commonwealth borrowings, then leave them alone.)

  107. And any cash that the Future Fund has is already in a bank account anyway. There is no gigantic safe in some cellar stacked to the ceiling with $100 bills. The cash has already ben “lent” to one of our banks which has already lent it to a new home buyer or a business.

    If the Future Fund called in all its cash then our banks would ned to refinance their loan books to repay the Future Fund. And guess where they’d have to go to do that ?

    That’s right………………..Overseas !

    So we are back to importing capital again.

  108. suggestion for this weekends Top 5 – Music in our CD collection that we would rather not admit to/own. I’m guessing reb will have at least one CD in the vault that fits the criteria!

    Re the future fund,

    The interest on the future fund is to cover otherwise unfunded superannuation liabilities – if the Government uses the FF to pay for decreased revenues, it will need to borrow 20 years from now to fund the super liabilities.

    Interestingly, if you read Legions last lionk to the Oaks/Gratten interview with Costello, a lot of it is Costello wiggling out of questions about why the FF couldn’t be used to fund broadband expansion. If the Government gets the NBN proposal through and does want to hock off it’s share in it down the track, it could be done in exactly the same way that Costello palmes off the Telstr shares into the Fund. I think the FF could and probably should be used to fund the NBN if there is a decent business case for the network. If there isn’t, I have no prob with it remaining in public ownership as a subsidised service although I doubt that will need to occur.

  109. Here’s something I was working on a few weeks ago.

    The Future Fund still holds 16% of Telstra shares and is holding at least $30 billion in cash, that is accounting for a possible loss of $5 billion as the quarterly report has not been released which is in contravention of the Future Fund Act 2006, Subsection 81(3).

    I believe that it has been possibly released to the government but they are not revealing this to the general public.

    Now for the Future Fund to invest in Telstra to secure a controlling interest it would cost by my estimates, $20 billion at most to achieve this end, but if the proxies of certain institutional investors were directed towards the Fund then this figure could be reduced.

    The result would give a measure of control by the government to utilise the infrastructure and also the corporate structure to construct the NBN and to attract further investment through share issues whilst protecting the shareholders that will suffer losses due to the divisive nature of the policy that has been announced.

    One hurdle would be to overcome the 20% restriction of the Fund to hold shares in any one institution…this could be legislated and the trade off to the opposition and the others in the senate would be a possible extension of drawing of funds from 2020 to say 2025.

    This would save this nation many billions of dollars and reclaim a proportion of our lost asset and the Fund could be further utilised as a vehicle to establish more national assets.

    Pick holes in it please.

  110. The cash has already ben “lent” to one of our banks which has already lent it to a new home buyer or a business.

    Now where have I heard something like that before? Hey, wait a minute….

  111. Tony – LOL

  112. Dave,

    Re FF and broadband. I had a chuckle at this from Legion’s link:

    Mr Costello, wouldn’t most people in the community say that spending roughly $3 billion from the Future Fund to build a national broadband scheme is money well spent when compared with the purpose you’ve set it aside for which is (inaudible) future liabilities of public service superannuation?

    “[R]oughly $3 billion.” Three billion dollars. What are we at now – $42 billion? Talk about inflation!

  113. Dave

    Thanks for the update on the FF very interesting. I just shudder every time I see the name David Murray.

    Looks like the $140 billion by 2020 according to our previous treasurer is pie in the sky now.

  114. Tony,

    The $43Bn is a massive hike on what both Labor and the past Government contemplated.

    The $3Bn from memory from the FF as a top up on the $2.7Bn the Government would find in savings/ budget surplu (making up the $4.7Bn Fibre to the node PPP proposal that was part of failed tender process.

  115. Yeh………….I wish they’d hurry up and get the faster broadband downloading going as I just heard there’s some X rated images of Carla Bruni doing the rounds.

  116. Thanks Dave,

    Based on those returns (admittedly in difficult market conditions) I think we can say with some certainty that interest on government debt would far exceed returns from the future-fund:

    The Future Fund’s return for the quarter (ex Telstra) was minus 5.86% and for the first six months of the 2008/09 financial year it was minus 7.56%. For the 2008 calendar year the return was minus 8.49%.

    Since the effective start of the Future Fund’s investment program on 1 July 2007 the annualised return (ex Telstra) was minus 4.13%. Reflecting the Future Fund’s long term investment mandate the Board will continue to focus on assessing performance over rolling five year periods.

    The Future Fund’s holding of two billion Telstra shares, which were released from escrow on 20 November 2008, generated returns of minus 8.49% for the quarter and minus 5.54% for the first six months of the financial year.

  117. scaper…

    Re your idea about buying the Maj share in Telstra, it would be better if the Gov just compulsorily acquired the Telstra hard line infrastrucure and left the retail and mobile component alone. This new company could then roll out the NBN project. Cost would probably be similar. Problem is, the telstra infrastrcuture, with the exception of the fibe networks in the cities, is old and (probably) won’t handle the net speeds needed in the future. Accordingly, just using the same amount of money to buy a new you beaut network which renders Telstra’s obsolete but allows them to compete nonethelss is even better. Whilever there is a competing network for web services, the sale of the NBN will be a reasonable proposition because we wont be selling a monopoly.

  118. shane,

    The thing that worries me is the ‘debt securities’ making up 17% of the FF… I wonder how many sub-prime defaults are in those?

  119. Good catch Kitty @ 9:54 am. 2000 was the last White Paper, 2003 was an update. My understanding is that protocol is as per 2000 that other (perhaps effected) governments be formally advised of the thrust of defence priorities/defence concerns (compared with hardware and personnel issues) prior to the release of details into the public domain.

    The reason that other countries receive diplomatic briefings prior to the Opposition is obvious. Any government would prefer that diplomatic representations be made BEFORE details are leaked to the press and the debate begins.

  120. Dave, do you believe the customer base in this country warrants two entities as far as the infrastructure is concerned?

    The way I see it, utilising the FF to acquire the majority share would be a cheaper option due to the pipes and right of way that Telstra enjoys.

    Correct me if I’m mistaken but is not the government looking at massive compensation to acquire right of way?

    I suppose it is all speculation as the announcement is lacking in the detail and I’m at a loss to how they came up with the figure without such.

    I’ve always had a beef with the FF because it could have secured a better return in the long run and been beneficial to our development.

    Gee, the loose funds could have been used to form a peoples bank with branches at the local PO and mobile lending managers, I bet that would have generated more profit and reintroduced that word, now what was it…competition.

  121. Who does Wayne Swan think he’s kidding? Of course the recovery will be slow. Many major economies are under strain over the medium to long-term due to significant debt and other issues. Japan is in a rut with deflation and interest rates stuck at zero. The UK and the USA, among other countries, are going to shackled for years due to years of poor economic policy which has now saddled their countries with enormous debt (and economies heading towards bankruptcy). These global factors will inevitably restrict the speed of Australia’s eventual economy recovery

  122. Dave55, on April 29th, 2009 at 1:54 pm

    Jolly good question. Does anyone know in what exactly the Northern Trust Bank of Chicago (not to be confused with the Northern Trust Bank of Chicago that was fined for dissipating Enron pensions or the Northern Trust Bank of Chicago that was publicly pilloried for its megabucks LA partying and golfing jaunt after being bailed out with TARP money) custodian invests on behalf of the FF Guardians? Public equity in what? Private equity in what? ROI is fine and all, but good global citizens take an interest in whether their investments are invested in good corporate citizens at arms’ length from their custodial banking directors, also.

  123. scaper

    We had the peoples bank with branches at the local PO. It was called the CBA. But the Government was told it had no business operating in the banking industry as that was better left to private eneterprise who can run it better and therefore should exit by way of sale of the CBA.

    What we sow we reap. I have no doubt our forefathers would be turning in their graves at the number of government owned entities now sold off that were built from scratch to service the whole of the country now servicing the greed of the few

  124. By the way, what temporary deficit is Wayne Swan talking about? It seems like it’s becoming rather permanent. The last Liberal Government just expected a never-ending boom and didn’t prepare enough for an eventual downturn. Unfortunately Labor has also, until recently, underestimated the potential impact of this inevitable economic downturn to the budget’s bottomline.

  125. the number of government owned entities now sold off that were built from scratch to service the whole of the country now servicing the greed of the few

    And the superannuation funds of the many.

  126. Shane, what is your take on the POOR profit result by ANZ as reported today?

    Do you believe that there might be some creative accounting going on to cloak the real profit margin?

    By my reckoning it represents over a 20% margin…not bad.

  127. scaper

    Regarding the poor profit I do believe there is creative accounting. In this type of climate any profit is good. Their operating income is up 7% and their Underlying profit is up 4% so if you take out the one off factor of increase in bad debts then the result is very good.

    In addition provision for bad debts is just that a provision. It allows the company to reduce its profit based on possible future losses. If those losses do not crystalise then it can report a higher profit in the future.

    I have not yet analysed the full profit announcement to give my overall opinion but will let you know what I think as soon as I have had a more detailed look.

  128. AI76..welcome to the blog..I don’t believe that I’ve seen you here previously. Apologies if this is incorrect.

    So very true about the previous government. My favorite quote from Howard is:

    John Howard said the heavier debt burden reflected rising affluence.

    “It is the case that people are buying ever more expensive houses, and they are doing that because of a number of factors,” the Prime Minister said. “One of them is that interest rates are lower and people can borrow more.”

    Unbelieveable that this is what the former government’s stance was less than 2 years ago.

    I agree, it seems that the entire world was completely unprepared for this meltdown.

    It seems that until very recently Costello was also in denial: From http://www.smh.com.au/news/national/gloomy-pm-threatens-confidence-costello/2008/11/26/1227491636548.html

    Gloomy PM threatens confidence: Costello…”Nobody around the world is saying that Australia will go into recession. The only people that seem to me to be maximising the talk of doom and gloom are the Government themselves,” Mr Costello said in an interview with the Herald.

    As for Swan it’s as per Costello..Gloom threatens confidence.

  129. ”Nobody around the world is saying that Australia will go into recession. The only people that seem to me to be maximising the talk of doom and gloom are the Government themselves,”

    Just a small technical point: although all the “experts” seem to agree that we are in a recession, we haven’t yet experienced two quarters of “negative growth”, which is the “official” measure of a recession.

  130. Tony

    Personally I don’t give a rats about super funds, my own inlcuded. Their are hundreds upon hundreds of listed companies and investments and opportunities open to super funds. And my god havent the super funds made a killing out of Telstra ( NOT ) or QANTAS ( NOT). CBA has 400,000 shareholders whereas it serviced 20,000,000 Australians before it was sold.

    I would have thoght that the determination of whether a sale of a public entity would have been based on the outcome for the country and benefits for the population.

    Now let me see, with regards to the sale of the CBA which was supposed to bring us better services and cheaper borrowing costs. We have branches closed. An absolute host of new fees introduced for everything other than breathing in their branches and these fees were supposed to be user pays so that the subsidised margin added to cost of funds would reduce. Surprise that margin is now greater than before the CBA was sold. So please Tony tell me the benefit of the sale of the CBA to the country.

  131. All good points, Shane, and I’m not necessarily defending the CBA privatisation. It was, after all, one of the Hawk-Keating government’s crowning achievements. 😉

    My point stands, however, that super funds have substantial holdings in all four major banks, therefore any success those banke have will benefit all superannuation beneficiaries.

  132. Tony

    That it was and he deserves a flogging for selling it. I am not politically aligned like you seem to be.

  133. Don’t see any of our high flying companies in the top 10 here.


  134. scaper…

    the NBN company would not be competing with the Government on easements – the easements are enabled by statute and must be shared where possible. Competition with Telstra is therefore not a problem.

    Competition will be good down the track for the consumer as Telstra will need to compete with the NBN to remain profitable, the NBN will also need to remain competitive to get a ROI. The problem at the moment is that we have a monopoly on the hardline infrastructure. Telstra could have taken advantage of this infrastructure and its monopoly by putting in a tender – it didn’t. I undersstand that the proposal to go it alone was suggested by the tender panel itself and this may have been a bench mark against which they assessed the tenders. The best party about cutting Telstra out of the loop is that it encourages competition in the sector and enables a brand new netrok capable of being expanded to be installed with FTTH. I’m pretty sure the productivity commission would be creaming their pants over the NBN proposal.

  135. Dave, you are most probably correct on this but I still have doubts until I see the detail in a year or two.

    Another concern I have is access to the international gateways, especially the new Internet trunk line from Guam.

    I believe Telstra has exclusive rights and that could be another compensation issue.

  136. Murdoch on the financial crisis

    News Corp chairman and CEO Rupert Murdoch cautions governments on their response to the global financial crisis.

  137. Reb

    Bottom line reality is due to kick-in.

    Banks squeeze home owners to save profits
    HOME owners face higher interest rates as the Big Four banks try to protect their bottom lines from rising bad debts and the higher cost of borrowing.

    With both the ANZ and National Australia Bank warning yesterday that the recession-hit economy will see their multibillion dollar bad loan problems spread to consumers over the next 12 months, the prospect of any further Reserve Bank rate reductions being passed on in full are receding rapidly.

    ANZ revealed yesterday it had made $1.4 billion this year, following NAB’s $2 billion result. Earlier the Commonwealth reported a $2 billion profit. The Westpac and St George group is due to report a figure of at least $2 billion next week, taking the Big Four’s combined latest earnings to nearly $7.5 billion.

    They are on track to make net profits of around $16 billion for the full year, say analysts.

    But despite the informal pact with the Federal Government following its funding guarantee scheme that borrowers would not be penalised, the results have shone a light on the increased margins enjoyed by banks – or their surplus on the interest rate they charge customers.

    Bankers warn that they will continue to be unable to pass on any future Reserve Bank rate cuts in full, due to an increase in bad loans to businesses, home buyers and credit card users as the economy sours.

  138. John

    Bad Debts are simply a forecast on possible losses.

    Example: If one of my rural clients was in default of their payment the loan receives a different rating and the figures are collated from those ratings from all areas of the Bank to give a figure to the board. If the loan was $1,000,000 and the farm was worth $2,000,000 the potential loss to the Bank is ZERO. Yet the loan is classed as a bad debt even though the security held will more than cover the loan if sold.

  139. Tony, isn’t Murdoch echoing what Costello has warned?

    He must be a coalition plant.

  140. Tony

    Murdoch was 1 of 500 speakers. What did the other 499 have to say. In addition he owns the Australian so who do you think they would post on their video site.

    He ahd some interesting comments though and some I agree with and some I disagree with.

    Low Doc ( an offshoot of NINJA loans although not as carefree) lending was and is still a craze world wide and while it may have started in the US there was no government pressure anywhere else to introduce these type of loans. If there was then the previous government muse be held to account because they started in Australia in 2003 with the first big bank being the NAB who introduced them then abandonded them and then re entered them when the other major banks took up this type of lending.

    Low Doc lending still continues today however the rules have changed and the evidence for capacity to repay being provided tightened.

  141. Interesting post over at Peter Martin’s Blog which includes Treasury’s reasons for changing the Budget porcast and projection process. Worth a look:

  142. Interesting post over at Peter Martin’s Blog which includes Treasury’s reasons for changing the Budget forcast and projection process. Worth a look:

  143. Shane

    It’s going to be interesting how actual losses against bad debt provisions work out.

    From Dan Denning at the Old Hat Factory:

    –ANZ followed NAB’s shocking result with a bad one of its own. CEO Mike Smith dished out the bad news to investors yesterday. He said bad debts had doubled to $1.4 billion. He also revealed that the cash profit-a measure that excludes volatile items-had fallen 43% to $954 million from $1.67 billion.

    –You don’t need to own subprime loans to take loan losses in a credit depression. Smith said the area that concerned him most was the surge in small and mid-size businesses simply closing up shop unexpectedly. “In the real economy,” he said, “there is no evidence that the world economy is yet bottoming.” Commercial property looms as the big threat to the Aussie banks this year.

  144. John

    It certainnly will be interesting, however with the GFC it is an opportunity for all businesses to place their houses in order by provisioning of possible bad debts. It also allows the company to bounce back with a hefty profit in the following year ( mostly) as it has made provision over and above actaul losses incurred.

    My guess is most profits will be down this year ( don’t have to be a genuis there) (or steady) and huge again in 12 to 18 months time. Look at BankWest as an example.

    Look back at the the provisions made by the Banks in previous recessions. An opportunity to sweep everything away even if the GFC didn’t cause it.

  145. John. Given that the forthcoming budget is going to be a doozey. Where do you (et al of course) consider that savings can be made.

    I am agreeing with Kenneth Davidson in today’s Age. http://www.theage.com.au/opinion/welfare-for-the-rich-makes-for-a-sick-system-20090429-and1.html

    This was reinforced by a $20 million “run for cover” advertising campaign whose message was: beat the queues for elective surgery in public hospitals by taking out private health insurance.

    The advertisements strongly implied that those who continued to rely on Medicare, despite the financial carrots, would be doomed to reliance on a second-class public health system as they got older.

    That was a promise the government was serious about keeping. The rebate has largely been funded by the reduction in the Commonwealth share of funding for state public hospitals.

    I’m not certain about the last phrase whether increased funding to one caused a reduction in Commonwealth funding of public hospitals.

  146. Min

    Where to start? I haven’t been giving it considerable thought.

  147. Latest in FHOGs war


    Looks like a blatant Real Estate self interest whinge to me.

  148. Good grief Shane..I had to laugh..the idea of a FHOG was since Howard’s day meant to stimulate building activity. But instead it meant churning. The HIA wants new houses (but at least this means jobs) whereas the REIA wants all houses stating..wait for this one (from Shane’s link):

    Airey said to suggest that there is “little economic stimulus” from spending on existing home is a “fallacy” and added that the stimulus effect of first homebuyers buying existing properties had been underestimated.

    Yup think of all those RE agents kept in jobs via churning compared with brickies, plumbers and sparkies re new homes.

  149. MIn

    It just goes to show the lengths the REIA will go to, to keep houses churning for their exhorbitant commissions. The problem they have with new homes is that most of them are marketed and sold by the developer and not a real estate agent, therefore saving the buyer the cost of commissions on top of the building cost.

    Keeping my fellow blogocrats up to date with the news as it happens 🙂

  150. Agreed Shane. An example might be a subdivision with 25 new homes, this requires 1 advertisement (or one set thereof) and maybe just 2 or 3 agents to look after the whole thing which compares with 25 houses sold individually.

  151. Min

    Some rellies of mine are moving into their first home using the FHOG. It is a new home sold by the developer direct as they walked into their door first. If they had walked into the real estate agents door only 4 houses up form the display home first they would have ahd to pay $11,000 more for the home. That just amazed me.

  152. Shane..son and partner are doing the same and have gone straight to the builder/developer. Fortunately still some good deals around Cairns.

  153. Min

    There are still some good deals in many places, so good on your son and his partner.

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