Budget – Revenue versus Payments

Here is a chart I just created of the revenue against payments from the budget papers. See the downturn in revenue. Does anyone think that the Australian government did anything to cause that downturn?

Revenue vs Payments

The only way that I can see for the government to keep a surplus would be to completely slash spending or to increase taxation.

Can those who oppose a deficit please detail how they would keep a surplus?

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204 Responses

  1. I think what you’re trying to say Joni is:

    “Howard and Costello’s Policy Failure

    The current economy circumstances bring into focus the inept, short-sighted and hopelessly misguided handling of the economy in the final years of Howard and Costello government. In the period from about 2003 – 2004, Howard and Costello were continually surprised by the size of the budget surplus as the economy boomed on the back of a once in a century surge in national income from the staggering strength in commodity prices and remarkable growth in Australia’s major trading partners.

    Had Howard and Costello managed the economy well and accumulated much of the windfall gain in large Budget surpluses in the period 2004 to 2007, inflation pressures would not have been as intense, the RBA would not have hiked as dramatically as the government would have somewhere between $50 billion and $75 billion is spare cash to support the economy at its time of need. Simply put, the government would now have greater flexibility to cut taxes and increase spending when the economy is cascading towards recession.

  2. or said another way

    Instead of saving for a rainy day or building war chest of money for when this bubble burst (insert your own cliché!), they spent the windfall fiscal gains like drunken sailors, which fuelled a surge in inflation, which in turn caused the RBA to hike rates aggressively, which in turn is one reason why Australia is so vulnerable now to the global slow down. Right now, the near certain collapse of the terms of trade and the risk of a deep recession are not helped by this past profligacy.

  3. John

    No – the past is the past. What I mean is that the downturn in revenue is what has caused the deficit and governments do need to spend more in recessions.

    The cry from the coalition that the deficit is bad is just a meme that we need to put to rest for good.

  4. joni

    I understood what you said. Being a good leftoid John just wants to blame Howard, the GFC, the moon landings or anything else other than Showpony or Daffy Duck (as i guess you do to).

    Why has income crashed?? Have a read of this link

    “China helps us to second-best trade surplus”

    http://www.theaustralian.news.com.au/story/0,25197,25440881-2702,00.html

    From the link
    “A MASSIVE surge in exports to China has allowed Australia to shrug off the downturn in global trade and report its second-best trade surplus.”

    and
    “However the export story would have been very different were it not for the contribution of China, whose purchases of Australian goods leapt from $3.5billion in February, itself a record, to $4.4 billion in March. China’s purchases from Australia had never exceeded $3 billion a month until last August.”

    So up to August last year we had never exported more than $3B/month to China. Since August last year we regulary do this and in March exported $4.4B. Much more than during the so-called mining boom.

    Our terms of trade are still good. So why the sudden drop in revenue?? According to your graph the revenue started to drop the day Labor was elected.

  5. joni, on May 13th, 2009 at 1:20 am

    Arguably, that ‘new’ meme is just an extension of the same kind of wrong-thinking from the-past-as-determinant-of-present-as-determinant-of-future: the inability to be planful over longer time-frames, eg the full cycle, or even across multiple cycles. Arguably, it’s such a silly meme because Government should be operating as counter-weight on both sides of the cycle; and, once again, the Coalition understands neither side of that cycle, apparently, is misunderstanding the bust as much as the boom was misunderstood.

  6. It’s a fascinating read, Neil; in its entirety. I think it tends to add credence to ‘leftoid John’s’ and others’ persistences in stressing that China, while important, isn’t the be-all-and-end-all for Australia as ‘light of the East’, nor more than part of a more complex set of global interrelationships. Additionally, I’d be prepared to go out on a limb and hypothesise that the graph pattern identified by Bacchus, and to which your attention was drawn when you raised similar query a couple of threads back, is a perhaps not unimportant part of the jigsaw puzzle, and also a pattern which is likely being replicated variously across many advanced industrial nations as import-exporters of a massive contraction in debt now (un)winding its way through the real economy globally.

  7. Joni

    The GFC is the exogenous threat, our ability to cope and how we respond and with what resources is an endogenous threat. You can’t ignore past policy failures. Economics 101.

  8. Arguably, that ‘new’ meme is just an extension of the same kind of wrong-thinking from the-past-as-determinant-of-present-as-determinant-of-future: the inability to be planful over longer time-frames, eg the full cycle, or even across multiple cycles. Arguably, it’s such a silly meme because Government should be operating as counter-weight on both sides of the cycle; and, once again, the Coalition understands neither side of that cycle, apparently, is misunderstanding the bust as much as the boom was misunderstood

    Joni, Legion’s spot on. Neil’s clueless.

  9. John,

    the RBA would not have hiked as dramatically as the government would have somewhere between $50 billion and $75 billion is spare cash to support the economy at its time of need.

    What do you call this little nest-egg? If only the government had the political will to use it.

  10. John,

    Instead of saving for a rainy day or building war chest of money for when this bubble burst (insert your own cliché!), they spent the windfall fiscal gains like drunken sailors

    Refer my last comment.

  11. Tony, on May 13th, 2009 at 7:14 am

    A chicken and egg game; the money isn’t spare, and it’s been locked up by the previous Government on the basis that it isn’t spare, and presumably stays that way on the basis that the present Government also somewhat concurs with that analysis. Unlocking it would also both involve acknowledgement that it isn’t spare, and therefore involves another set of opportunity costs for the economy, and involve bipartisan political will, or at least not obstruction. Moreover, arguably, the actual spare cash went into recursively bootstrapping an overheated economy; and has now been annihilated in the credit crunch which has seen any such wealth which was formerly in Government’ hands disappear from the overall wealth pot without the possibility of injecting it now rather than earlier.

  12. Any reasonable thinking person with half a brain will now realise that the Howard/Costello era squandered the opportunity to put this country in a good financial position, but they squandered it on self serving programs directed to getting themselves reelected. They shifted public debt to the private debt and look where that got us.

    Deficits are not totally a bad thing in the correct circumstances, it needs to be constantly managed and kept as a reasonable percentage of GDP though

    What possible options do the ALP have. Again if one has half a brain, one can see that a World Wide recessioon will bring financial pain to our Country…we are part of the world. It makes you wonder what the Libs would have done, they have already flagged they would have needed to take the country into deficit. Lucky for us we have a caring Prime Minister and he has targetted those who can bear the load most. The Libs form is to tax the poor and look after the rich.

    It makes one wonder if the Libs have a policy when they say they want the Government to keep revenue raised by Alchopop tax, but are opposed to it.

    I watched Hoss Hockey last night, he couldn’t stay on point and really had no idea what he was objecting to, a deficit or the budget program. He is pathetic.

  13. Dave @ 7:54 am.

    Excellent points Dave. I agree with every word.

  14. David

    I watched Hoss Hockey last night, he couldn’t stay on point and really had no idea what he was objecting to, a deficit or the budget program. He is pathetic.

    He was absolutely lost, I agree

  15. Tony

    The future fund is there to offset the growing liabilites that come about as the result of an ageing public service. Do you know what that liability is or is likely to be in the future.

    Raid that nest egg and we’ll end up having to cover it one way or another and possibly to a much larger tune than the government is currently undertaking by borrowing from other sources.

    In fact, superannuation has taken a huge beating overall and is unlikely to recover lost ground for many years to come.

  16. Fair enough, John, but while we’re putting false arguments to rest, let’s put to rest also the one where “the previous government didn’t put anything aside for the a rainy day”, shall we?

  17. Nice graph Joni, but the question you pose is too simplistic – “Can those who oppose a deficit please detail how they would keep a surplus?”

    You might like to name someone that is actually “opposing” a deficit?.

    I think many, me included, as legitimately concerned about the size of the deficit, concerned about the long term sustainability of the debt and very concerned about the effectiveness of government spending programs.

    Without labouring the point too much, $4bn on insulation, and over $10 bn on handouts is not well targeted.

    For example, the const of the insulation package puts an additional $800 burden on a typical ‘working family”.

    Not only that, but this government is just as expedient with their election promises as the last one.

  18. David @7.54. Can you advise how much the broken promises contributed to savings in the $58,000,000,000 deficit?

  19. What no headlines…………………………

    ” Cigarettes Up………….Beer Up”

    Other than that they still did not start a faster phase down of Family Tax Benefit B

    And a few cuts to the Canberra Public Service would have helped.

    I just hope we dont get another recession within the next 5 years or so………………………or we will really be stuffed.

  20. “I watched Hoss Hockey last night, he couldn’t stay on point and really had no idea what he was objecting to, a deficit or the budget program. He is pathetic.”

    But, but, but didn’t you hear what Big Joe’s approach would’ve been if he was in charge…??

    It’s a simple solution really, and I for one, am surprised that no one else thought of it.

    Joe insists that all we need to do to traverse these difficult economic times is to “Grow the Pie.”

    I’ve got no idea what he meant by that. Maybe he was talking about his lunch or something.

    But he kept repeating it, like it did mean something even if it was just himself that understood it.

    What a Goose.

  21. Tony

    I’ve not been able to stomach the crap coming from the previous government simply because they didn’t, and it would seem, still don’t have a clue. Had they shown any insight they’d have received more respect – they simply didn’t get it, even on a basic level.

    I still have doubts about the current government and their push with FHOG’s. Dangerous indeed!

    Julie Bishop
    Costello reforms help Australia weather financial storm
    http://blogs.watoday.com.au/business/juliebishop/2008/10/07/costelloreform.html?page=fullpage#comments
    * John McPhilbin
    * October 07, 2008

    On ‘All points West’ today’s question is: Is Australia’s economic miracle a mirage?

    My answer is simple yet my explanation more detailed.

    Mirage! was my answer and to quote Michael West:

    “The shape of the world economy has changed in the last 18 years. China has boomed.

    Although Australia’s GDP growth has historically tracked the US, this time we are in a particularly fortunate position of having a mining boom (although commodity prices have begun to come off sharply). And Government debt is not an issue.

    That said, Australia like the US is a current account deficit country (currently 6.2% of GDP) which means our banking system borrows from the rest of the world to support our lavish lifestyle.

    No longer can this country rely on a debt-funded spending spree to fuel a recovery. This is bad news for both the banks [business] and the consumer.”

    I know Howard and Costello laid claim to being the masters of the economy and interest rates but that is simply no longer a viable claim, and it never really was. They were simply riding a favourable economic wind.

    They were also front and center when it came to cheering Australian who took advantage of artificially low interest rates by taking on boatloads of debt. Nor did they monitor the lending practices of the financial sector, in spite, in spite of the obvious lending lunacy that was going on.

    Our banks assure us that we are in a stronger position than the US to cope with any fallout, I tend to be more skeptical. Our banks have surely been aided in earning record profits off the back of complex and risky debt arrangements with other lending institutions, businesses, and individuals in recent years? This has been a global issue, not just one relating to the US alone.

    Rewind back twelve months and I can still hear Howard repeating the same dangerous mantra “interest rates are lower and people can borrow more.”

    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.”

    Yes, our hero was pushing a dangerous mantra indeed. In his opinion, it seemed as though a new era had arrived under his leadership.

    He then went on to say: “Debt levels are rising, but we are choosing to use the debt more productively to buy assets that traditionally rise in value, like shares and property.”

    At around the same time the Reserve Bank’s figures on household finances showed that assets were rising faster than debt (in spite of many Australian’s carrying record levels of debt). Households, they claimed had assets, including housing, superannuation and other investments, that are equal to eight times their annual income.

    Mark Davis, author of The Land of Plenty writes:

    “Australia’s ‘age of prosperity’, as Peter Costello calls it in his memoirs, has been underwritten by the mining boom (even as manufactured exports stagnated during his tenure) and massive increases in household debt (now more than $1 trillion – about the same as the annual national output), even as the government has wound down its own debt. The national debt has in effect been privatised while, at the same time, risk has been shifted away from government and business onto the shoulders of ordinary people, in the shape of long working hours, casualisation, and the sort of uncertainty that is written in the fact that Australians take the least holidays of any western nation.”

    It just doesn’t get anymore succinct and to the point than that. And it was the Howard Government that have left us in this precarious position.

    In fact it was reported just recently that our “economy is even more vulnerable to an economic downturn than the struggling US, leaving us facing the spectre of soaring unemployment, falling house prices and a long-drawn out economic slump.

    Experts say the only way to head off a crisis is to quickly cut interest rates and improve household finances decisively.

    The bleak picture is painted by economists who point to a series of data showing how we compare to the US.

    Australia has some of the most expensive property in the world, relative to incomes, according to the Demographia International Housing Affordability Survey.

    It says the median Australian house price is 6.3 times median household income, higher than the US, Canada, New Zealand, Ireland and Britain. A median Sydney property will cost nine times the average Sydney income.

    Australia also has more debt per household than the US, with Australians owing 177 per cent of household income in mortgage and other debts compared to 138 per cent in the US.

    This is coupled with the fact Australians save an average of 0.5 per cent of their income compared to 2.6 per cent in the US.”

  22. “Grow the Pie”

    If in doubt about the intricacies of your argument its always a defensive measure to talk in the abstract…………………….Kind of like “Core” and “Non Core” promises

  23. Reb,

    I think I get where Joe is coming from. Did he mention four-and-twenty blackbirds at all?

  24. (How to have fun with frames: the mythbuster edition. Arguably, the Powers-That-Be required a Future Fund precisely because Government owed obligations which were previously unfunded, and still might be not fully funded, even with the Future Fund. Arguably, and using one sort of frame, it might be well possible to say that the former Government placed a partial down-payment (c. $60 billion as of ’09) on obligations already then owed (c. $90 billion in ’05, when the Fund was first slated as a definite thing for operation in ’06), and did not in fact put any money aside for a rainy day, or even an amount commensurate with their existing and future obligations (c. $140 billion in 2020, when the Fund becomes available, a target amount that presupposed both the sell-off of public assets and the re-direction of further posited future surpluses as rehearsed features for the Fund when it was established, in addition to Fund target returns of 4.5-5.5% annually) for the purposes to which those funds were to be directed. Which is to say, per that other frame of reference, the Future Fund cannot be characterised as a ‘rainy day’ account, nor an exercise in pure saving of abundant surpluses by Government over the course of its time in office, given its heavy reliance on the disposal of assets, at all. 😉 )

  25. Reb

    Joe insists that all we need to do to traverse these difficult economic times is to “Grow the Pie.”

    I’ve got no idea what he meant by that. Maybe he was talking about his lunch or something.

    You could tell his attention was driven by his stomach. He obviously loves the perks of being politician. Reminded me of Homer Simpson salivating.

  26. I’ve not been able to stomach the crap coming from the previous government simply because they didn’t, and it would seem, still don’t have a clue.

    If that’s true, John, then I despair, because in my opinion, this mob’s got no idea either.

  27. John McP

    “………………….A median Sydney property will cost nine times the average Sydney income……………….”

    Some of the people you endlessly quote can offer up some of the dumbest comparisons I could ever read.

  28. Could someone suggest the reason that there is so much attention on the opposition?

    This is the real perspective –

    • We have a government that has created a record level of debt, at 5% of GDP.

    • It squanders our money on wasteful programs to increase this debt.

    • It breaks election promises to appease interest groups and factions, rather than because this makes any meaningful contribution to the deficit.

    And we still do not have a disparaging nickname for Therese, as we had for the wife of the previous PM.

    IATW – “Kind of like “Core” and “Non Core” promises”

    Yes, I wonder when we will start to define the broken pledges of this government in this way.

  29. Does anyone know if the Libs get a televised “right of reply?”

    If they do, do we want to have a “live blog” like me and Tony had last night?

  30. I bet it was four-and-twenty blackbirds in that pie, too.

  31. Any reasonable thinking person with half a brain will now realise that the Howard/Costello era squandered the opportunity to put this country in a good financial position,
    david, on May 13th, 2009 at 7:54 am

    Dave- they put plenty away. If what you say is true labor is just as bad. The states (all Labor) would have got lots of revenue from the mining boom to. Furthermore Federal labors first budget last year in may was still in a time of posterity.

    If it is so easy to run a surplus why didn’t Labor do what you said the Libs would have done in the last May budget???

    Furthermore the Lib paid back $96B of federal debt. Put billions into the Future Fund, HEEF and had $30-40B in the kitty which labor has just flushed down the toilet in the cash splash

    And even furthermore, as if Labor would have saved any money if they had been in power they would have wasted the whole mining boom.

    Also how about this comment- revenue has dropped due to stupid ALP policies??

  32. Legion,

    Since that whole plan about depositing further surpluses in the fund has now gone out the window (no surpluses predicted for the foreseeable future), the future fund in its original guise, with its original purpose, is, arguably, redundant. (Not to mention the fact that the predicted 4.5-5.5% annualised returns are actually more like minus 4.28%).

  33. Reb,

    Yes, Turnbull should get equal time tomorrow night. And yes, that was fun.

  34. Something to chew on Walrus. You could do better with your insults.

    Seriously ‘Unaffordable’ Housing
    https://blogocrats.wordpress.com/2009/01/27/seriously-unaffordable-housing/

  35. And here’s one I prepped earlier, but didn’t post…it assumes that the meeting of the obligations hasn’t become redundant…

    Raid that nest egg and we’ll end up having to cover it one way or another and possibly to a much larger tune than the government is currently undertaking by borrowing from other sources

    That’s the thing I couldn’t work out; it hurt my head even trying to anticipate the trade-offs in opportunities and potentials. On the one hand, there’s the effect of trying to save the same initial amount again as the economy repairs coming out of recession AND building on it from that later point onwards to (re-)generate the amount required to meet obligations; dissipating it now means that the run-up and build-up telescopes. Then, on the other hand, there’s having that pre-saved amount already on hand to catch the next breeze that comes along for established savings to capture returns from the earliest pick-up point in the economy, if and when that occurs. And then, also, a comparison of those comparative costs with the fiscal impacts at a macro level of that later borrowing or dis-spending, as components of foregone consumption etc, of some other amount up-when if those savings were to be dissipated now, in whole or in part. And that’s about as far as I got, without any real data with which to work. One assumes the econo-boffins probably have real data and have modelled the scenarios, including some factors and scenarios to which I am (economically) oblivious.

  36. You are so tiring John,

    To quote your own link the compilers of the survey you link to

    “…. use a ratio of Median House Price to Median Household income…………..”

    Note the use of “Median” to “Median”

    But as others have noted anyone who disagrees with you is either “insulting” or “blinkered”………………YAWN !

  37. Legion

    I’m glad you’re bamboozled simply because the challenges we face are complex and perilous to our wealth if mismanaged. That conundrum should keep you occupied for some time to come (wink)

  38. ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ Walrus

  39. By the way John……………..we are 5 months on from the article you linked to. And guess what……………….we are almost 10 months on from when your much loved Professor Keen first predicted 20% unemployment (which 3 months later became 15%). But hey…….no mention of that from you.

    I’m all cashed up waiting for this 20% fall in property prices in Sydney…………..and I don’t mean the Top End…….Waiting…………………Waiting…………………………Waiting…………………………..?

  40. Anyone that pays attention to anything that Professor Steve Keen says ought to have their head examined.

  41. That’s the nature of bubbles Walrus.

  42. Will it explode or won’t it explode, that is the question? I’m saying it will, you seem to be saying it won’t Walrus. Lets wait and see. I agree with the attached assessment for a multitude of reasons, you obviously don’t.

    First-home grant a ‘$25bn time bomb’
    http://www.news.com.au/dailytelegraph/money/story/0,26860,25273566-5015795,00.html

    THE First Home Owner’s Grant may become a $25 billion time bomb and make it even tougher for people to get their first house.

    As the development industry called for an extension of the $14,000 grant to all homebuyers to stimulate a dormant market, Reserve Bank deputy governor Ric Battellino warned the funding could backfire.

    Analysts also forecast a potential housing crisis later this year with rising unemployment pushing up to 460,000 households “close to the edge” through mortgage stress.

    Mr Battellino said the $21,000 available to first-home buyers could end up being priced into the cost of the home.

    “It doesn’t take long for the average house price to increase by $20,000 and leave the buyers no better off,” he said. Forecasts were for a “substantial rise in unemployment”, he added.

    Human Resource manager Emma Holmes, 26, moved into her first home, a unit at Seaton, less than two weeks ago and described the grant as a “massive boost”.

    “It was great because it basically covers stamp duty and fees, the sorts of costs that creep up on you a bit,” she said.

    “I’d hate to see it not around after June, because too many people will miss out.”

    Stock market analysts ABN Amro said the first-home owner segment was becoming “inherently risky”.

    “The confluence of artificially high housing prices, lack of savings record and higher unemployment risk makes the first-home buyer segment a high-risk segment,” he said

  43. The blackbirds have landed:

    The Real Rudd Budget

  44. Walrus

    Take last night’s bleak forecast and apply it to the economic reality many homeowners are living and will continue experience and the mix (watch as banks also increase their provisions for bad debts – business and personal loan defaults)

    Mortgage delinquencies rise
    http://www.theaustralian.news.com.au/story/0,25197,25268991-12377,00.html
    MORTGAGE delinquencies in Australia on full-documentation loans deteriorated during the December quarter, while delinquencies on non-conforming low-documentation loans reached a record high, according to global ratings agency Fitch Ratings.

    Delinquencies on full-documentation home loans that are past 30 days due increased to 1.75 per cent for the December quarter from 1.5 per cent during the June 2008 quarter, Fitch said in a statement.

    But delinquencies on non-conforming, low-documentation loans that are past 30 days due now stands at a new record high of 19.73 per cent, reflecting the sector’s inability to refinance since the virtual closure of the low-documentation origination market, Fitch said.

    Fitch expects delinquencies to deteriorate further during the March quarter and a gulf to develop throughout 2009 between struggling borrowers and those feeling relief from the Reserve Bank of Australia’s five interest rate cuts since September.

    The key factor will be each borrower’s ability to retain full employment during the economic downturn, Fitch said.

  45. catallaxyfiles:

    The other interesting point that Swan keeps going on about is the collapse in revenue and the greatest recession since the Great Depression. That is just bullshit! Australia is not experiencing the greatest recession since the Great Depression, nor does Treasury forecast such a thing. Unemployment is now 5.4 percent – the same level as in September/October 2004 and only slightly higher than at the 2004 election. There was a budget surplus then. The government is forecasting a decline in revenue, yet at the same time is forecasting a return to above trend economic growth. So how does that work? (We should also recognise the Treasury has a woeful record of forecasting revenue – a record that will be complicated and compromised by the uncertain economic environment).

  46. With the benefit of hindsight, does anyone still think that Rudd and Swan were correct to highlight the risk of increasing inflation in early 2008?

    There does seem to be some credibility in the suggestion that interest rates were held higher than needed, reducing growth during that period, and therefore reducing government revenue.

    Given some of the stupid spending they’ve approved, why not give them a bit of criticism for the entirely unnecessary size of the deficit?

  47. What a Goose.

    Reb, last night I said Hockey was a complete goose. Our great minds again are in sinc.

  48. Miglo – Hocky may be a goose, but he isn’t the Treasurer. In fact he has absolutely nothing to do with government!

    On the other hand, we have a Treasurer – Wayne Swan, and a government.

    Swan has overseen the deliberate breaking of pre election commitments, on grounds of expediency rather than economics.

    He was also fighting the inflationary dragon while the recessionary pressures were building.

    He has handed out billions in cash to employed reasonably well paid people, most of which is now in their banks.

    He has overseen a budget deficit of 5% of GDP, while splurging billions on home insulation for the well off.

    And you think Hockey is the goose?

  49. I just had a closer look at Joni’s lovely graph. At almost exactly the same time as the blue revenue line went into decline, the pink spending line went off-trend in the other direction. Talk about timing.

  50. Tom, thanks for reminding me that you’re still out there.

    I take it you don’t like the deficit. Well I’ll tell you how to reduce it a bit. Let your local member and your employer know that you don’t want your tax cuts. On your massive wage the savings will be substantial.

    Also let the local member know that you don’t want any money spent on hospitals that one day may need to provide a service to you. Tell them you don’t want them to treat your ulcers or nervous condition.

    Also tell your member that you don’t want to travel on any roads etc so they can reduce the costs a bit.

    Also tell your member not to worry about putting extra money into education, in particular uni places, as your kids won’t be going to uni. In fact, if you pull them out of school then I reckon that would save the govt heaps.

    I can go on . . .

    The deficit is looking a lot better now.

  51. “…..while splurging billions on home insulation for the well off.”

    Tom of Melbourne, on May 13th, 2009 at 11:24 am Said:

    Something else that is overlooked in the “great insulation debate” is that the home owner must pay for the installion of the insulation first and then apply for reimbursement (which must be directly credited to the home owners bank account) for which you need to allow 8 weeks for processing.

    Now considering that we are talking about amounts of $1,600 per home that is going to put a temporary squeeze on quite a few people.

    And why the Hell does it take a government department 8 friggin weks to reimburse someone ?

  52. Miglo – Hocky may be a goose, but he isn’t the Treasurer. In fact he has absolutely nothing to do with government!

    And you think Hockey is the goose?

    I note a contradiction there Tom (as is evident in most of your posts).

  53. Miglo, I have no problem with well directed spending. I understand that in an economic decline we will have a deficit. Roads & hospitals need to be built.

    It isn’t a matter of tax cuts, it is a matter of spending our money wisely.

    The houses that many pensioners live in are in more urgent need of repair and maintenance than some other spending programs the government has committed to – eg cash handouts, insulation.

    I think insulation is estimated to cost $4billion. That’s $800 that my household is kicking in – for many lazy people that can afford it themselves.

    It is an (almost) complete waste to spend this. In continuing with this program alone, Swan has no credibility as a prudent manager of our taxes.

    He’s a goose.

  54. Turnbull reckons the Libs would’ve delivered a SURPLUS!!

    Such hilarity for a Wednesday…!

    http://www.news.com.au/business/story/0,27753,25473150-31037,00.html

  55. Walrus..the reimbursement for insulation is only until 1st July. After this time, insulation can be installed to the value of $1,600 from a registered tradie. The above was sensibly bought in by the government so as to not create a huge rush after 1st July. Also, often omitted is that if you already have insulation the above also applies to installation of a solar hot water system.

    Tom, my mother certainly isn’t ‘lazy’. And she will benefit from having insulation installed in her 80yr old home via comfort and reduction in her power bills.

    I am certain that there would be a very tiny % of people who are ‘lazy’ re having insulation installed. However, the major reason that people do not have insulation or solar hot water is upfront costs.

  56. Over at DR the editor is going off (LOL) I agree, wholeheartedly, of course!

    In other budget news, the $21,000 first home buyer’s grant for newly built properties has been extended past June 30th to September 30th. The $14,000 grant for existing homes has also been extended to September 30th. Between October 1st and December 31st, the grants will be reduced to $14,000 and $10,500 respectively. And next year, they will revert to measly $7,000 figure for each that John Howard set when he introduced the subsidy to the real estate and building industries in 2000.

    –Both the Howard and Rudd governments will rue the day they subsidised higher house prices with government handouts. It’s going to impoverish a whole generation of Australians, making them house poor and mortgage-debt rich. Why?

    –House prices do fall. They don’t double automatically every seven years. If we had a three-bedroom house for every time we heard that in 2004 we’d be incredibly house rich. In the U.S., the National Association of Realtors reported that median U.S. house prices fell 14% in the first quarter of 2009 compared to last year. Existing home sales also fell by 6.8%

    –It was the largest quarterly decline in U.S. house prices ever reported. Of the 152 metropolitan areas surveyed, prices fell in 134 of them. The price declines were especially shocking in places where the boom was greatest In the Cape Coral-Ft. Myers area of Florida, prices fell 59%. In Saginaw, Michigan they fell by 54%. In Akron, Ohio they fell by 48%. And in San Francisco, they fell by 43%.

    –There are people who tell you those sorts of declines could never happen in Australia. But those people are morons. A contraction in bank lending, a rise in unemployment, a restriction on immigration, and a rise in interest rates remove all the props that have supported the soaring Aussie property market up until now. If you don’t think it can happen here, you’re kidding yourself.

  57. John,

    Who’s DR and have you got a link?

  58. John McPhilbin, on May 13th, 2009 at 12:56 pm Said

    Of course Non Recourse Lending in the USA and much lower Credit Worthiness of the Borrowers compared to Australian Lenders never gets a mention as one of the primary causes of the US and UK housing declines.

    No……..of course……………….no mention of structural differences in the markets themselves.

    Oh………and if you dont agre your a Moron apparently. Oh yeah a great piece of research there.

    Still waitin’ for that 20% fall……………………..!

    Oh and by the way. Since approximately 160,000 high income earners are going to be affected by the cap on Superannuation Contributions……………………….guess where they are now going to put their spare $50K…………that’s right into negatively geared property………………………and that creates or equals…………………..greater demand………………….and that creates………………….higher prices…………or at a minimum puts a floor under the market. But that cant be correct according to your Economics 101 Book…………….. can it ?

  59. Hockey is a turkey.

  60. Yes, Walrus I’ll hang around long enough to prove I’m right, but not long enough for your apology (LOL)

  61. Great site Walrus – packed jam full of interesting facts, statistics and comparisons
    http://www.whocrashedtheeconomy.com/

  62. A contraction in bank lending, a rise in unemployment, a restriction on immigration, and a rise in interest rates remove all the props that have supported the soaring Aussie property market

    More doom n gloom John?

    “A rise in interest rates..?”

    Is that a prediction? Based on what exactly? Sounds like a lone voice to me…

    “The soaring Aussie property market…?”

    What soaring Aussie property market is he referring to?

    The market has been more or less flat for about 6 years now.

    But of course, those who question such hyperbolic nonsense are just called “morons” or what is it again – “we all have our blinkers on”

    😉

  63. John,

    At first your Link says this………….

    “…………Both the Howard and Rudd governments will rue the day they subsidised higher house prices…………….”

    And then it goes onto say this

    “……..There are people who tell you those sorts of declines could never happen in Australia. But those people are morons……………….”

    So which is it…………………….higher prices…………….or lower prices…………..?

    One thing is for sure………………It cant be both……..which kind of suggests that whoever you are quoting from is actually the “Moron” in all this.

  64. Great site Reb – packed jam full of interesting facts, statistics and comparisons
    http://www.whocrashedtheeconomy.com/

  65. Hockey is a tit.

  66. Migs

    He’s a ‘man boob’

  67. “Great Site John.”

    Yes I noticed your enthusiasm for this “web site” already when you recommended it to Walrus.

    Care to respond to the questions raised about how your quoted author, who’s opinions you support, thinks that interest rates are rising and that we are in the midst of a soaring property market?

  68. “Professor Quentin Grafton”

    John…………………..do you not listen. I pointed out 2 weeks ago that his specialty is Aquatic Economics………………….Now unless Climate Change is accelerating at a rate faster then we were led to believe I dont think we can rely on his opinion on property.

    I dont advise people on UK income taxes because I’m not an expert. But I can give an opinion that they look rather high. But it does not mean I’m qualified to even offer that opinion.

  69. Hockey is a sea lion in a suit.

  70. Walrus,

    When has “not being an expert” ever prevented anyone, and on person in particular, from acting like they are…!!

  71. Subsidised higher (who wouldn’t incorporate the subsidies into the housing price?) thereby prolonging the bubble …wait for it…can you hear the air ?

    Flat property market? Interest rates will remain at low levels?

    Come on Reb, start doing some research and thinking

    Did I mention… Great site Reb – packed jam full of interesting facts, statistics and comparisons
    http://www.whocrashedtheeconomy.com/

  72. Reb

    Stick to drinking red wine, it suits you.

  73. reb, on May 13th, 2009 at 1:37 pm Said:

    Reb………..we must be Morons !

    On a serious note. I think we are revisiting a sluggish market similar to the early 1990’s which followed a similar massive climb in RE prices following the 1987 share market collapse.

    I dont buy into this cataclysmic stuff.

    And if John would care to do a bit more research he’ll find the UK market also contracted back then by 20 % or so from memory………but not here in Oz it did’nt.

  74. John

    Could you also please explain how the real estate market went up from around 1999 until 2004 when unemployment was rising or at least much higher than today ?

  75. “Reb

    Stick to drinking red wine, it suits you.”

    The typical reply I see

  76. Min waves..yoo hoo. Computer crash and I don’t have your email addresses nor anything received since Monday.

  77. “Come on Reb, start doing some research and thinking”

    “research?”

    Like that found on well-informed and highly credible amateur web sites like whocrashedtheeconomy.com?

    Or from whoever happens to be crapping on about some doomsday scenario at the Telegraph or on 2UE?

  78. Could you also please explain how the real estate market went up from around 1999 until 2004 when unemployment was rising or at least much higher than today ?

    Or even John, perhaps you might care to explain how the during the thick of the property boom in the early to mid 1990’s unemployment was at 11%..??

    Come on John, start doing some thinking rather than just quoting old newspaper articles….

  79. Hockey is a walrus.

  80. Increasingly lax lending standards and an obsession with capital gains via negative gearing coming from a rising market perhaps Walrus. The preferred method has been to borrow increasingly on growing equity resulting from capital gains resulting from market increases.

    Unemployment has also been fairly stable no real problem until now.

    In fact, I cite one of Reb’s previous posts. He was right on the money with this worrying trend.

    Australians going broke in record numbers
    Posted on November 10, 2008 by reb

    “Looking right across the country the economy is balanced on a knife-edge and very vulnerable to any number of destabilising shocks that could spell truly significant hardship for many,” Mr Leroy said.

    “The recent decrease in interest rates is an attempt to avert a severe downturn in the economy and bears all the warning signs.

    “This financial year we’re expecting an even higher number of bankruptcies. It may all hold together if the economy and high employment levels can be maintained but the likelihood of a downturn in the economy is becoming increasingly apparent,” he said.

    “More people are more critically dependent upon next week’s pay cheque than at any time for the last 10 to 20 years,” Mr Leroy said.

    There are also some real hot spots around the country where bankruptcies are running at record high numbers.

    The ACT had the dubious honour of having the biggest jump in insolvencies, up 31 per cent, while previous boom-time state Western Australia recorded a 25 per cent surge, in the three months to September.

    Going for broke

    Bankruptcies and insolvencies (Sept 2008)

    NSW 3391 +15.7 per cent
    ACT 84 +31.2 per cent
    VIC 2165 +10.4 per cent
    QLD 1943 +7.6 per cent
    SA 608 +7.9 per cent
    NT 45 +15.4 per cent
    WA 507 +25.2 per cent
    TAS 264 +13.8 per cent
    AUS 9007 +12.6 per cent

  81. Unemployment isn’t a major factor unless there are increasingly more people in the market who can ill afford repayments. That’s what we have now. Lax lending and a more severe lending bubble than in previous history. Simple really.

  82. Joni’s blog was also particularly informative, note the debate on 17% interest rates and how relative it is to costs of living and lending.

    Amused to Debt
    Posted on November 29, 2008 by joni
    Now I am not a financial expert at all, and so the values here may be inaccurate, but they are the best that I can find and I think highlight what a huge problem debt is to Australia.

    The total household debt in Australia is currently about $650 billion or over $32,000 per person. In 1992, the ratio of household debt to income was 56%, in 2002 it was 125%. It is now over 150%.
    from http://www.whocrashedtheeconomy.com

    graph from http://www.whocrashedtheeconomy.com

    The graph above is from late 2006 and is from the very good website Who Crashed the economy? His graph on his thread “It’s never a better time to buy” shows just how much our interest repayments as a percentage of income increased over the time of the Howard government. As the thread says:

    When the boomers had 17% interest rates that they will never let anyone forget, house prices and debt was reasonable. As a result payments, the average Australian household put away a little more than 5% of household disposable income to service the mortgage. Even with rates today a faction of what it was in 1989, we have so much more debt and as a result the average household has to put away 11.4% of household disposable income to service the mortgage.

    Julie Bishop writing for Business Day says that “Australia’s debt has grown rapidly from less than 80% of gross domestic product (GDP) in the early 1990s to now stand at almost 170% of GDP”. A question to Bishop: Who was in power for 12 of those years?

    Debt is not a problem, as long as you can service the debt, but what happens when we cannot. What will be the effect on all of us?

    Have we amused ourselves to debt?

  83. But John

    You specifically quoted and agreed with some “author'” who suggested that there was a causal link between high unemployment and declining property prices, when in fact this is clearly not the case.

    And when presented with facts to the contrary, you then suggest that it (high unemployment) “isn’t a major factor”.

    Talk about contradicting yourself.

    “Simple really”.

    Yes isn’t it…?

    Once you are presented by the facts and not just qualifying your persistent pessimism by quoting some other individual who has no idea what he’s talking about.

  84. I’ve got to say Reb and Joni, there was a stage when you both nailed the fundamental problems. Back to basics perhaps. You’re not bad analysts at all when you focus on these facts.

  85. You specifically quoted and agreed with some “author’” who suggested that there was a causal link between high unemployment and declining property prices, when in fact this is clearly not the case.

    It’s relative Reb, increased unemployment with higher personal debt than ever before in our history. Deadly mix.

  86. ….increased defaults, tighter lending, more sellers than buyers etc Reb

  87. Truthfully Reb, I initially enjoyed joining Blogocrats. That was when yourself and joni focused on issues and fact rather than political double-speak. Now I’m reminded of JWH and his rigid positions and lack of insight and incisiveness.

    Try going back to the basic and having an honest opinion of issues based of observable facts – I might actually enjoy coming back.

    Both yourself and Joni were an inspiration when you started this site. Hopefully you’ll reflect and not discount what I have to say, and if you do, well there’s noting else I can say.

  88. Tom @ 901am

    Apologies for the lateness of my reply.

    The opposition keep harping on about generational debt, when in fact (I think) they have admitted that they would have around $170 billion in debt compared to the governments $200 billion… and does that $30 billion was used to prop up the economy from going even worse.

    Do you really think that the opposition would have not have had a “generational debt” if they were in power during this crisis?

    And I know that the opposition (whoever it is) would have jumped on the same meme of “generational debt”… but come on, it is a meme that is just not useful at all.

    And I did see that the budget papers did have graph after graph showing that the Australian debt as a percentage of GDP was way below the other major economies, and that we are better placed than most to come out of the debt sooner and in better shape than most.

  89. ….increased defaults, tighter lending, more sellers than buyers..

    …plagues of locusts, torrential storms, towering infernoes, the black death etc…

    Yes John, we’ve heard it all before….

  90. …reflect? I guess not Reb

  91. And Joni, the Opposition is yet to state by which method they would both raise revenue and cut costs.

    Which things would they cut? And how would they raise additional revenue?

    Listening to both Hockey and Turnbull, not much information is forthcoming.

  92. reflect..?

    What, while taking instructions from you that I should “start doing some research and thinking” when the sources you quote are no more informed than some tabloid journalist??

    Please John, you are welcome to contribute your opinions here. Just don’t expect me to agree with them.

    And another thing:

    “You’re not bad analysts at all when you focus on these facts.

    I presume you mean your “facts”.

    Spare me the faint praise…

  93. Tomorrow night Min – all will be revealed.

    Or not.

  94. Reb

    Back to basics perhaps. You’re not bad analysts at all when you focus on these facts.

    Your typical response ?

    ….increased defaults, tighter lending, more sellers than buyers..

    …plagues of locusts, torrential storms, towering infernoes, the black death etc…

    Yes John, we’ve heard it all before….

    I rarely get sensible feedback

  95. Hopefully you’ll reflect and not discount what I have to say………….

    John McPhilbin, on May 13th, 2009 at 2:34 pm Said:

    Of course unlike yourself who has a standard insult to pull out of your pocket if at all questioned.

  96. Walrus, I wasn’t toalking to you pecker head Lol

  97. So, what does the people here think of the ‘tough’ budget?

    I haven’t had any time to study the detail but it looks like an election budget to me, the only thing tough about the budget was the deficit…so what was Swan wanking on about in the last week concerning hard decisions????????????

  98. Hey, Walrus, when in Rome

  99. “I rarely get sensible feedback”

    Neither do I:

    “Reb, Stick to drinking red wine, it suits you”

    🙄

  100. I personally am reasonably happy with this budget. Given the restraints of the global mega downturn thingy…my Mum gets a $30.00 pay rise via her old age pension and FINALLY something is going to be done re the absolutely incredibly stupid situation re transport NSW/Qld border.

    *The train in Queensland stops at Robina but Qld government is extending this to Varsity Lakes.

    *The train in NSW used to travel as far as Murwillumbah but now goes only as far as Casino. The NSW government has been trying to sell off railways land. For example, the train station at Mullumbimby has been ear-marked for a supermarket. There is a local group plugging on re saving our railways.

    Anyone see anything wrong with this?

    For those geographically challenged it means that there is no connection between NSW and Qld via transport..that is unless you count the Byron Bay Mini buses.

    An example is: Wave, wave Min..we’ve lobbing at the Bris airport and we’re coming to visit. Ans: Well sorry you can’t because there is NO TRANSPORT FROM BRISBANE TO COOLANGATTA, that is unless you count the iffy bus service. When I say ‘no transport’..I mean No Transport…it’s just not possible to get from Brisbane to Coolangatta via train, bus (which goes only as far as the border).

    The effect on our tourism industry is obvious.

  101. Rumour has it this man has confirmed his intention to stay on in his seat, and in so doing has signalled his intention to run for leader of his party:

    One of the lines at the moment is I should have run up bigger surpluses for them to spend. Okay I ran up a $20 billion surplus and I retired all federal debt. On Monday they said it wasn’t enough I should have left them more to spend. I don’t think that actually. Having paid off all federal debt, having left a $20 billion surplus, having established a Future Fund, a sovereign wealth fund with $61 billion, having put Australia stronger than any other country in the world it’s hard to say I should have done more. And in fact if I had run up bigger surpluses they would have wasted them anyway. I think the point here as I look back on it is perhaps as I have said earlier we should have cut taxes more aggressively. But Australians can forget about tax cuts probably for 20 years now I would say. We will be paying off this Federal debt for 20 years.

  102. I’ve got to admit I think it sedates your senses Reb.

  103. John

    WIth respect (and I think that others do this too), when I see a long cut/paste (not just yours) I skim over as I do not have time to read it all. We know that mortgage defaults will go up, we know that house prices will come down, just that the doom/gloom predictions for the Australian economy have not come true (from people like Keen).

    I tried with this post to show how the decline in revenue was the cause of the deficit, and that either side of politics would have the same problem.

  104. “I rarely get sensible feedback”

    Neither do I:

    reb, on May 13th, 2009 at 2:57 pm Said:

    Reb………………….I would not even bother ………..

    I could just imagine John’s Primary and Secondary School Project Books………………………Just pages and pages of cut and pasted articles……………..with constant remarks in red pen in the margins from his teachers

    “Do you ever have any original thoughts to put down on paper Little Johnny?”

    followed by his usual high scoring “1 out of 10”.

    It was clearly a very deflationary experience for him

  105. Oh and Miglo…………………………….I dont see the use anymore of having Ducks in the Canberra Public Service.

    Those days are long gone……………!

  106. Re the pie being bigger. This was a saying floating around Byron Bay.

    Byron Bay was a small country town. There were X number of businesses. It was a pie to be divided into X number of pieces.

    That is, if the number of businesses were doubled or tripled, therefore the size of the slice would be reduced accordingly unless the pie became bigger.

    So is Hockey saying, a HUGE increase in immigration? Otherwise, I can’t work out what the heck he is talking about.

  107. Interesting graph, I see the spike in payments when the new government was elected.

    Wasn’t the peak in the blue line when our mining industry was selling their stuff for outrageous prices.

    Any other graphs where this one came from?

  108. I just hope camel rides go up in price.

    My back is killing.

  109. Joni,

    I tried with this post to show how the decline in revenue was the cause of the deficit, and that either side of politics would have the same problem.

    You are completely ignoring the other part of the equation. A surplus or deficit is the difference between revenue and spending. Although the government had little control over the fall in revenue, they had total control over spending, and so are far from innocent bystanders where the current deficit is concerned.

  110. they had total control over spending

    Tony, on May 13th, 2009 at 3:20 pm Said:

    Yeh…………..and lets start by culling some Ducks from the Public Service.

  111. Walrus,

    In his later years, now he just writes furious “letters to the Editor” signed “Irate of Western Sydney”.

  112. And another thing that I am choofed about is that so called ‘hobby farms’, the weekend getaways will no longer be a tax deduction because these ‘farms’ are making a loss. This rort must have been going on and on and on for at least the last 20 years.

  113. Personally,

    I thought the Budget could have had more revenue raising measures and more cost cutting..

    Maybe it’s in the detail, but does anyone know whether the baby bonus is staying, going or being means tested?

    Did Cigarettes go up by the hinted $2.50 a pack?

    And did beer go up too?

  114. Tony

    And so what should be cut from spending?

  115. The Baby Bonus got “rolled” for Paid Maternity Leave did it not ?

  116. Reb..they’re already screaming blue murder. How dare the government consider that just cos I earn over $150,000pa consider me wealthy. I have expenses.

  117. Min, on May 13th, 2009 at 3:23 pm Said:

    Sorry to disappoint Min ……..but us accountants are already “around” that problem.

  118. And so what should be cut from spending?

    I’m not sure, Joni, although I didn’t agree with the cash handouts, and said so at the time.

    But the point I’m making is that it’s incorrect to imply the government stood by and helplessly watched a deficit materialise our of nowhere.

    Every cent the government has spent, and plans to spend, contributes to the deficit, and will be added to our debt.

  119. Now.., now …little rebster and Walrus don’t be so mean. You can keep your faint praise to yourselves (LOl)

  120. And so you accept Tony, that a coalition government would have had a massive deficit too?

    But either they “stood by and helplessly watched” or they tried to stimulate the economy by the cash handouts – which did increase consumer spending above expectations. Both cannot be true.

  121. Tony, I would have expected the tax cuts to be deferred at least, from what I have read so far, there is no real plan to get out of debt…it is like the government is hoping for the ‘silver bullet’!

    Middle class welfare looks like it hasn’t been touched much and is all people on government benefits getting a pay rise?

    In fact, this is the pissiest budget that I remember…attacking the well off ain’t going to balance the budget, oh well.

  122. I never knew i had such a say were my taxes went.
    Unless i joined a party or voting.

    Who do i talk too?

  123. Walrus..you never disappoint. I am certain that Mrs Walrus can verify this.

  124. Joni,

    On the figures I’ve seen it is hard to imagine a situation where there would be no deficit. So yes, there would have been a deficit regardless of who was in government.

    But all deficits are not equal. If there must be a deficit, a smaller one is aways better than a larger one. Spending makes them larger. Just because there needs to be a deficit doesn’t make all spending OK.

    Equally, it doesn’t mean we shouldn’t look for savings. That’s what a “horror budget” should have done. I’d say it failed on this measure alone.

  125. In fact, this is the pissiest budget that I remember

    scaper…, on May 13th, 2009 at 3:46 pm Said

    Its is a bit like that. They could have gone a bit harder on things like Family Tax Benefit B…………just for starters.

    Attacking Superannuation………………….again…………….just undermines people’s long term confidence in Super and deters everyone from tipping more into it. People just dont trust it long term.

    It’s not just a “Rich Persons” lurk. Keating made it into a neccessity for all of us (which it is)

  126. Scaper,

    it is like the government is hoping for the ’silver bullet’!

    Why not? We had the ‘inflation dragon’ so why not the ‘deficit vampire’?

  127. I’ve had spend much of the afternoon stimulating the restaurant and hospitality industry. So I’ve missed some of the more interesting exchanges.

    Yes Miglo, it is all very well to think up names for Hockey, but you still haven’t come up with a disparaging nickname for the PM’s wife, as we had for the previous one. And while Hockey may be one of them or various other marine animals or feathered species, Swan is still just a goose.

    Min, once again, I’ll repeat that I have no problem with pensioners getting insulation if they need it. I have no problem with spending $4 or 5 billion on home repair and maintenance for pensioners. And I’ve NEVER said pensioners are lazy. So please stop misrepresenting my opinion.

    I have a problem with kicking in $800 (the share for my household of the $4billion) to provide insulation to a reasonably well off dual income household, for example.

    It is stupid, ineffective and irresponsible. The $4billion can be better spent elsewhere.

    Joni, I’ve heard the opposition say that a deficit is difficult to avoid, which is why I challenged your question.

    We can only base our judgment on what this government does. The fact that we are in a more fortunate position than some other countries is probably not something this government can claim a whole lot of credit for.

    They are contributing to a significant level of debt. It will be a legacy for our children. They are not exercising prudence and sensible analysis of how to get the biggest bang (for employment and social policy) for our buck.

    Swan is out of his depth. He is a goose.

  128. I fail to understand why a single pensioner is so much better paid than couple-pensioners.

    Sure, they would live together but isn’t their personal consumption of food, water and the such the same as a single?

    Maybe these people who have possibly been married for decades and paid their taxes should just divorce to attain equality with a single pensioner?

    That’s right, they are no longer ‘working families’ so they can just eat cake!

  129. it is all very well to think up names for Hockey, but you still haven’t come up with a disparaging nickname for the PM’s wife

    Howabout Judith, as in Judith Lucy…?

  130. Nice. Alterantively perhaps the character ‘Bubbles” from Little Britain?

  131. I tried with this post to show how the decline in revenue was the cause of the deficit, and that either side of politics would have the same problem.
    joni, on May 13th, 2009 at 3:02 pm”

    Maybe the decline in revenue is due to the elephant in the room. You know the current govt and in particular Showpony, daffy duck and the communist.

    They did abolish a lot of Howard govt programs. Who knows what revenue this has lost. Anyway its just a thought. Does anyone know the reason for this decline in revenue??? Our terms of trade are still good, we are exporting record amounts of stuff to China so why the fall in revenue??? Is it all due to falling company profits and projected falls in mineral prices???

    Also does anybody know what happened to last years budget?? It was going to be a $22B surplus. What is it now??? Is this going to add to the coming $58B deficit???

  132. I read somewhere that Swan did not even have the balls to mention what the deficit was when handing down the Budget.

    If that is true then he is a soft cock!

  133. Scaper re: fail to understand why a single pensioner is so much better paid than couple-pensioners.

    To the contrary scaper, when my dad passed away my mum went from a double pension to a single pension yet she still has the same bills..the same council rates, the same electricity bills, the same gas and water rates etc. She does have less food bills, due to Dad no longer being with us, but she does have to pay for someone to come and mow the lawn. The pension is still abysmal but anything is better than nothing.

  134. Maybe it’s in the detail, but does anyone know whether the baby bonus is staying, going or being means tested?

    The baby bonus stays and it is means tested but it’s one or the other, people cannot claim parental leave as well as the BB – can’t upset the mothers who don’t work and therefore have nothing to take leave from, can we? they demand ‘baby’ money too.

    Maybe these people who have possibly been married for decades and paid their taxes should just divorce to attain equality with a single pensioner?

    scaper it’s well known that two people can live cheaper than one.

    A single pensioner still has to pay the same utility expenses from one income whereas a couple can share expenses. Single pensioners, especially those who rent have been in urgent need of more money.

  135. Hi Scaper

    I found the result for last years budget ( I think) at this link (Table 3)

    http://www.budget.gov.au/2009-10/content/bp1/html/bp1_bst3-03.htm

    Last years predicted budget surplus of $22B is now a predicted deficit of -$36B. Of course this could change. Since Treasury is totally useless you just know that this years is going to be bigger than $58B. The scary thing is the years after.

    Why didn’t Daffy Duck mention that his first budget is now in deficit???

  136. “scaper it’s well known that two people can live cheaper than one………….”

    Yes scaper…………………..us accountants call it fixed and variable costs.

    In fact the whole world is just a giant equation to us

    ……………………………………a rather perfect and a beautiful form…………..methinks.!

  137. Tom you say: Min, once again, I’ll repeat that I have no problem with pensioners getting insulation if they need it. I have no problem with spending $4 or 5 billion on home repair and maintenance for pensioners. And I’ve NEVER said pensioners are lazy. So please stop misrepresenting my opinion.

    But previously you said:

    +- I think insulation is estimated to cost $4billion. That’s $800 that my household is kicking in – for many lazy people that can afford it themselves.

    It is an (almost) complete waste to spend this.

  138. I understand the point of less rates and utilities but does a pensioner that lives with an unrelated pensioner get a lower payment?

    The only thing that I was hoping to see in this Budget was a rise in all welfare benefits to account for the inflation of the previous two years.

    I personally do not know anyone on a benefit but I’ve heard some sad stories out there.

  139. Min,

    Tom’s right…………………………..Pensioners are lazy………………………!

    ……………that’s why they dont work

  140. Min. and I pointed out yesterday my view on pensioners/insulation when you also posted a similar misrepresentation.

    If you choose not to read a response to a misrepresentation you make, don’t blame me.

    I wouldn’t have thought I’d need to continually repeat myself, when I’d already taken the trouble to point this out to you.

    And to save repeating myself I included (almost).

  141. In fact Min……………………my overriding ambition in life is to become a self funded layabout just like Tom’s “Lazy Pensioners”

    What’s wrong with that………….?

  142. Tom, sorry I don’t have as much time as you do to sit in front of a computer. As an hearing impaired person it’s my 3rd stage of communication.

    I am getting p’d off vibes. I just thought that we were in an agreeance to disagree re insulation. I thought that it was a good thing and you said not. I asked well, what would be better. I am not the font of all knowledge and asked your opinion.

    My computer crashed and I wrote to the blog viz same.

    Deep sigh, I’ve mucked it up again obviously because Tom says that I have.

  143. I understand the point of less rates and utilities but does a pensioner that lives with an unrelated pensioner get a lower payment?

    Are you saying that married couples are discriminated against? Seems more like nitpicking to me.

    In fact, most single aged pensioners are widowed women as they tend to outlive the men. But, because of lack of maternity leave and career interruptions due to childraising, women have little or no superannuation savings of their own. Those who worked did not receive the same wage as their male counterparts.

    Maybe with a bit of extra cash, single pensioners won’t be forced to live with an unrelated person in order to make ends meet.

  144. Kitty..was hoping that you might find the time to clock on.

    My mother was (shock horror) a woman who worked ’50’s to 80’s during the days where no respectable woman worked. A respectable woman stayed at home and embroidered and cooked scones,

    Circa Canterbury Girls’ High (Victoria) 1964..Why doesn’t your mother do canteen duty?? It was of course because she (shock) worked.

    My mother worked Evans Bros accountants from pre WW2 for over 40 years. She received no superannuation. They ‘permitted’ her to work even though she wasn’t a Catholic..they ‘permitted’ her to work even when she fell pregnant..they ‘permitted’ her to resume work.

  145. Glad to see I’m not alone.

    First home buyer boost may harm, not help
    Chris Zappone
    May 13, 2009 – 4:49PM
    http://business.smh.com.au/business/federal-budget/first-home-buyer-boost-may-harm-not-help-20090513-b311.html
    The First Home Buyers Grant boost, extended in the Federal Government’s budget yesterday, may end up hurting those it was created to assist, according to a social advocate and an economist.

  146. John, this extension is keeping the bubble alive, somewhere down the track the bubble will burst so the more, the merrier, so to speak!

  147. Min, as everyone here knows, I am entirely tolerant and easy going.

    But this was the 3rd or 4th time you have incorrectly attributed this opinion to me and I’ve pointed this out each time.

    So I really don’t mind whether we agree or disagree, but if you post an something that you represent as my opinion, perhaps you might follow up.

  148. scaper…, on May 13th, 2009 at 4:51 pm Said

    I read somewhere that Swan did not even have the balls to mention what the deficit was when handing down the Budget.

    If that is true then he is a soft cock!

    It is true! Absolutely no doubt. he didn’t mention the bottom line. But does that pejorative and unhelpful description also apply to the previous Treasurer who also made that omission? I’d give a link but it’s from Crikey which is behind a pay wall.

    Now of course one could get nasty and label a particular or indeed any contributor as a ‘troll’, a ‘sniper’ or perhaps now a ‘pornographer’ or do I reserve those pejorative labels for Tony? Lol

  149. They’ve found a way to improve job figures Scaper:

    ‘Rogue’ jobs data sparks ABS shake-up
    http://www.news.com.au/dailytelegraph/story/0,22049,25473782-5014099,00.html
    INCREASED funding from the federal budget will allow the Australian Bureau of Statistics (ABS) to provide a more accurate picture of the unfolding catastrophe in the labour market.

    Back in May 2008, the ABS announced a number of cuts to its data collection program, blaming the move on government-imposed austerity and rising labour costs caused in part by the shrinking pool of workers available to conduct surveys.

  150. Nature 5,

    Now of course one could get nasty and label a particular or indeed any contributor as a ‘troll’, a ’sniper’ or perhaps now a ‘pornographer’ or do I reserve those pejorative labels for Tony? Lol

    Have a look for yourself and tell me if you judge that picture to be pornography. It will be most enlightening to hear your reply. (In case you missed them, instructions for viewing said picture are posted on the thread in question.)

  151. Even Bloomberg have picked up on it Scap

    Australia May Face Debt Crisis From Grants to Young Home Buyers
    http://www.bloomberg.com/apps/news?pid=20601087&sid=azjnQbCD2dm8&refer=home
    May 11 (Bloomberg) — Australian Prime Minister Kevin Rudd’s bid to ensure his housing market avoids the global property slump may push a generation of buyers into a debt crisis.

    Grants of as much as A$21,000 ($16,142) to first-time buyers and the lowest interest rates in 49 years have emboldened more than 40,000 young Australians to take out home loans since October, stoking demand for properties that cost less than A$500,000.

    These buyers may be vulnerable when interest rates begin rising, potentially triggering a jump in foreclosures that will drive down property prices, cut profits at banks and damp household spending, which accounts for half the economy. A surge in defaults in America was a key trigger for the financial crisis that pushed the global economy into its worst recession since World War II.

    “We’re mirroring what happened to the U.S. three years ago, when people who shouldn’t have been in the market bought houses,” said Martin North, managing director of Fujitsu Australia, a Sydney-based property-consulting company. “It’s a strategy set for an unfortunate outcome.”

  152. John

    I call bulls**t on the latest claim. The loans given here are nothing like the loans in the US where people can just walk away from their debt. And I reckon that anyone buying a house at the moment has to jump through many more hoops before they could get a mortgage.

    This is tabloid journalism. Note the words of caution “may”, “potentially”. And how do we know that they are “young Australians”? Has that data been released or is it a guess by the journalist?

    And just because Bloomberg have picked up on a news feed does not make it valid.

    All I am saying is that yes, mortgage defaults will go up, but not by the amount that it happened in the US. As reb says, a unemployment rate of 8% means that 92% are still employed.

  153. Tony, on May 13th, 2009 at 8:23 pm Said:

    ‘Enlightening’? Tony, wouldn’t it be simpler to call me a ‘troll’ and, in so doing, add a measure of consistency to your on-line persona which was also reinforced by that Kiwi train comment.

    Oh dear, judgement is not your forte as is evidenced by your support of Plimer and Simon. Lol.

  154. “your on-line persona which was also reinforced by that Kiwi train comment.”

    I must have missed something else. Dare I ask?

  155. Here is the supposedly persona-reinforcing remark, Toiletboss.

    https://blogocrats.wordpress.com/2009/05/12/budget-fallout-have-your-say/#comment-38264

  156. Toiletboss, on May 13th, 2009 at 9:05 pm Said:

    I must have missed something else. Dare I ask?

    Probably. But i am not in the business of adding to the Matthew Johns case, as obscene as it maybe. Personally I am tired of those (who have some claims to credibility and I include Tony under that umbrella, for the present at least), when under pressure re their claims resort to ‘base’ labels.

  157. OK guys thanks.

    I think that labels such as “troll” or “sniper” are cheaply used. I notice that this is a reflexive tactic on some other blogs (Hi Andrew Bolt) used to smear contrary opinion.

    To me a troll is someone who interjects periodically with the sole aim of pushing buttons & provoking an angry response, commonly totally unsupported by facts (be they right or wrong).
    I see virtually none of that here. Even Neil is looking for answers, not trolling. The odd exception is rare…davo (I think) comes to mind.

    I think both of you have credibility & well articulated, substantiated positions in your respective posts.

    “Personally I am tired of those (who) when under pressure re their claims resort to ‘base’ labels.”

    I understand this well, & it would be wise for me to say no more.

  158. Tony, on May 13th, 2009 at 9:12 pm Said:

    Here is the supposedly persona-reinforcing remark

    You mean that the ‘meaning’ doesn’t leap out at you? ‘Kiwi train’? Whatever did you intend?

    As far as I can ascertain, that descriptor of ‘kiwi train’ is down to thou. Perhaps a claim to fame?

    Yes i know, I am a ‘troll’ with nothing to offer. lol.

  159. Toiletboss, on May 13th, 2009 at 9:49 pm Said:

    indeed!

    used to smear contrary opinion.

    Again, I agree. Perhaps a few ‘rules’ or ‘guidelines’ as to ‘appropriate’ behaviour?

  160. I’ll try that again:

    I think that labels such as “troll” or “sniper” are cheaply used.

    Agree!

    used to smear contrary opinion

    Indeed.

    But you then say

    I understand this well, & it would be wise for me to say no more

    ‘wise’? Perhaps? But only in the political sense.

    Perhaps it might be useful to debate issues rather than … whatever. Not likely. Lol.

  161. Joni

    Our loans are nothing like the US’s?

    THE BIG LIE EXPOSED: Big banks ignored sub-prime troubles
    Posted on October 13, 2008 by johnmcphilbin
    https://blogocrats.wordpress.com/2008/10/13/the-big-lie-exposed-big-banks-ignored-sub-prime-troubles/
    AUSTRALIA’S big banks ignored the sub-prime crisis in the US and actively took greater risks in the home mortgage market to see off a challenge from rival lenders.

    The banks not only relaxed their lending standards in recent years – ultimately luring many customers into financial distress – but held off tightening their terms of credit to build a better market position.

    Reserve Bank documents, obtained by The Australian using Freedom of Information laws, show the change in lending standards was driven by competition and the housing boom.

    In the last six months of last year, banks informed the Reserve Bank that the proportion of new mortgages described as non-standard – such as low-document loans and those with high loan-to-valuation ratios – was increasing.

    That was despite the sub-prime crisis, rising interest rates and evidence that more of their existing mortgage customers were unable to make repayments.

    In April this year, as the Reserve Bank ended its run of interest rate rises, an RBA analysis found the relaxation of lending standards had allowed some Australians to take on extraordinary debts. Households with annual incomes of $60,000 or more could borrow up to five times their annual income – up from 4 1/2 times in 2004 – requiring repayments of about 50 per cent of gross income, up from 45 per cent in 2004 and well above the common cut-off point that lenders applied of 30 per cent.

    Single individuals could borrow amounts requiring repayments of 50-75 per cent of their net income, about 5 per cent higher than in 2004.

    Although most borrowers had not utilised their greater borrowing capacity, the analysis found “recent low-income home buyers do appear to have taken on relatively larger loans”.

    The median mortgage debt servicing ratio – the proportion of income spent on a mortgage – for recent mortgagors had risen from 20 per cent in 2003-04 to 22 per cent in 2005-06 and had been “accompanied by an increase in financial stress”.

    Based on income scales, the largest increase, 4 per cent, came from lower-income households and first-home owners.

    The analysis noted that new and poorer mortgagors had increasingly found themselves in financial trouble; since 2004 there had been a gradual increase in the proportion of loans that were at least 90 days in arrears.

    A follow-up analysis in July this year, based on data collected in May, found that for households earning $90,000 or more, their borrowing capacity had fallen by 6per cent since late last year. But most of that was due to rising interest rates as lending standards were “still much looser than in 2004″.

    That month, the Reserve Bank’s financial stability department also warned that the relaxation of standards, and particularly the rapid growth in low-document loans, “may mean that the average borrower in arrears is now less able to ’self-cure’ than in the past”.

  162. All I am saying is that yes, mortgage defaults will go up, but not by the amount that it happened in the US. As reb says, a unemployment rate of 8% means that 92% are still employed.

    The dynamic of debt needs to be accounted for regardless of employment figures. Unemployment will accelerate loan defaults, but so will rising interest rates.

    Worth noting again, Mark Davis, author of The Land of Plenty writes:

    “Australia’s ‘age of prosperity’, as Peter Costello calls it in his memoirs, has been underwritten by the mining boom (even as manufactured exports stagnated during his tenure) and massive increases in household debt (now more than $1 trillion – about the same as the annual national output), even as the government has wound down its own debt. The national debt has in effect been privatised while, at the same time, risk has been shifted away from government and business onto the shoulders of ordinary people, in the shape of long working hours, casualisation, and the sort of uncertainty that is written in the fact that Australians take the least holidays of any western nation.”

    And your own posting, yes, our position is precarious and even more so since you posted it.

    Amused to Debt
    Posted on November 29, 2008 by joni
    Now I am not a financial expert at all, and so the values here may be inaccurate, but they are the best that I can find and I think highlight what a huge problem debt is to Australia.

    The total household debt in Australia is currently about $650 billion or over $32,000 per person. In 1992, the ratio of household debt to income was 56%, in 2002 it was 125%. It is now over 150%.
    from http://www.whocrashedtheeconomy.com

    graph from http://www.whocrashedtheeconomy.com

    The graph above is from late 2006 and is from the very good website Who Crashed the economy? His graph on his thread “It’s never a better time to buy” shows just how much our interest repayments as a percentage of income increased over the time of the Howard government. As the thread says:

    When the boomers had 17% interest rates that they will never let anyone forget, house prices and debt was reasonable. As a result payments, the average Australian household put away a little more than 5% of household disposable income to service the mortgage. Even with rates today a faction of what it was in 1989, we have so much more debt and as a result the average household has to put away 11.4% of household disposable income to service the mortgage.

    Julie Bishop writing for Business Day says that “Australia’s debt has grown rapidly from less than 80% of gross domestic product (GDP) in the early 1990s to now stand at almost 170% of GDP”. A question to Bishop: Who was in power for 12 of those years?

    Debt is not a problem, as long as you can service the debt, but what happens when we cannot. What will be the effect on all of us?

    Have we amused ourselves to debt?

  163. The Rudd Government fu%ked this up, well and truly.

    Home boost extension surprises economists

    Home boost extension surprises economists
    http://www.abc.net.au/pm/content/2008/s2569632.htm
    Many economists were surprised that the boosted First Home Owners Grant was extended in last night’s Budget.

    It was, after all, the Prime Minister who said about it that “all good things must come to an end”.

    Some economists say bigger grants are pushing up prices for existing houses, making the affordability crisis even worse.

    Many prospective home buyers agree.

  164. Tony, on May 13th, 2009 at 10:47 am

    That’s an interesting choice of frame by the Liberals; except most of us have graduated early primary school, and some of us can even deconstruct the semiotics of the cautionary yellow bargraphs, when we aren’t doing the maths and working out that there’s been a lot of liberal rounding up and down and changing of what apples were being compared with what apples when it suits the narrative. It really makes me wonder how embedded the ‘naughty corner’ mentality is in the fabric of Liberal Party conceptions of an, apparently, infantilised constituency. 😉

  165. John McPhilbin, on May 13th, 2009 at 10:01 am

    I’m often bamboozled by perplexing conundra, John, especially those as long as pieces of knotted string stretching into the unknown future. My new pool of meta-reflection for today, however, is a conscious shifting of focus away from the mediated insularity of the microcosm of the particularised Ostrayan budget and its retinue of aye- and nay-sayers, and onto contemplating where that budget fits into the larger, centralised, quasi-coordinated prescriptions of, say, the IMF or the G20; or, indeed, what the local-global implications might be of the sundry competing scenarios implicit in the proffered alternative visions for an ‘Australian budget’, when considered from a perspective which doesn’t place Australian, or Canberran, or petty Party Room politics as navel(s) of the world.

  166. Legion

    It’s on! And away we go!

    Betting on the house
    http://business.smh.com.au/business/betting-on-the-house-20090513-b3cs.html
    Paddy Manning
    May 14, 2009

    THINK house prices here are going to fall? Soon you’ll be able to short-sell Sydney housing, by taking out a derivative contract based on indices compiled by Rismark/RPData and quoted daily on the sharemarket.

    It’s a world-first for the ASX, which means institutional and retail investors can get exposure to housing-like returns – positive or negative – without owning a home.

    It’s a financial product likely to attract banks anxious to hedge against the risk of falling property values undermining the value of their mortgage books.

    It’s also likely to attract high-profile bears such as the University of Western Sydney professor Steve Keen, who thinks house prices will fall by up to 40 per cent, peak-to-trough.

    So far Australian house prices have not suffered the dramatic slump seen in the US and Britain, dropping only 6.7 per cent in the year to March, according to an ABS estimate across eight capital cities.

    Debate is raging: will lower interest rates and the apparent undersupply of dwellings continue to support prices here, or will they collapse as unemployment rises and recession bites? Australian house prices are among the most expensive in the world, relative to income.

  167. Legion

    Keep an eye on bad debts, they’re accelerating.

    Bad debts take toll on CommBank’s earnings
    http://business.smh.com.au/business/bad-debts-take-toll-on-commbanks-earnings-20090513-b3ct.html

    THE Commonwealth Bank has underlined the difficulties facing the Government’s recession-busting budget with a warning that bad debts are spreading at an increasing rate among home owners and small businesses.

    Figures released by the bank yesterday to accompany its quarterly trading update detailing net earnings of $1.15 billion to March 30 showed the amount owed by mortgage holders over a 90-day repayment period jumped 28 per cent to $1.34 billion.

  168. Legion

    Central to my thinking is the personal debt conundrum. Recession puts pressure on the level of loan defaults, yet, even a recovery still sees many people trying to pay down the mountain of debt we have. This equates to a long and very slow recovery, in my opinion.

    http://www.theaustralian.news.com.au/story/0,25197,25475932-5017014,00.html

    Mr Hogan said the budget was based on a “best-case” scenario for Australia’s growth.

    “This begs the question of what the budget would look like on a more reasonable set of forecasts,” he said.

    Mr Hogan said that running a “disorderly” budget was not an option, so the markets were counting on government policy eventually responding with higher taxes or spending cuts.

    Macquarie Bank chief economist Richard Gibbs said growth was more likely to remain below its long-term trend as the economy emerged from recession because people would still be trying to reduce their debts.

  169. Legion

    Also, putting aside the Howard Governments failures to save for a rainy day, we have state governments like NSW who are basket-cases. This isn’t just about what the Federal Governments have and haven’t done, we also need to take into account the reckless management of state finances to date.

    Revenue collapse wrecks NSW fiscal sums
    http://business.smh.com.au/business/revenue-collapse-wrecks-nsw-fiscal-sums-20090513-b3en.html

    THE dramatic $4.8 billion collapse in GST revenue has all but guaranteed a horror state budget. It will result in deeper deficits, a detailed review of planned capital works, and a struggle to maintain the coveted Triple A credit rating.

    This comes amid mounting criticism about the future of the $8 billion western Metro project: the federal budget outlays just $91.5 million for planning and engineering studies, and makes no further funding commitment.

    “That’s a vote of confidence in the western Metro plan, because it acknowledges there will be a [$5.3 billion] CBD Metro, which we are funding” the NSW Treasurer, Eric Roozendaal, said yesterday, pushing back at criticism of the paltry size of the federal funding. “

  170. Legion

    Worth reading the whole article, Verrender gives a good summation of what’s happening, in my opinion.

    http://business.smh.com.au/business/investors-look-to-new-season-20090513-b3cu.html
    Essentially, the big four have taken a much bigger slice of an increasingly mouldy old pie, because if you delve beneath those flashy headline numbers, a disturbing story of distressed borrowers – business and personal – begins to emerge.

    The Commonwealth Bank’s quarterly update yesterday pretty much backs up the experience of the other three, all of which reported their first-half profits in the past fortnight.

    Bad debts are on the rise, not just with the captains of industry at the big end of town, but down in the economy’s engine room; small to medium-sized businesses.

    At a personal level, too, defaults on home loans, personal loans and credit cards are heading higher as rising unemployment makes it impossible for some borrowers to meet their commitments.
    CBA’s boss, Ralph Norris, described conditions as “challenging” and noted a “slowdown in the domestic economy”. And this from the bank that has emerged as Australia’s most profitable lending institution.

    Even some so-called bright spots in CBA’s results have a vaguely uneasy ring to them.

    As is usual in a recession, banks concentrate on retail operations – home loans and personal lines – to cover earnings shortfalls as big business loans evaporate.

    For the Commonwealth, this has been a bonanza. Home loans are up 22 per cent, way above the industry average of 5.9 per cent. And guess where a huge chunk of that business has come from? First-home buyers, spurred on by government grants, have accounted for almost a quarter of this new business.

    Young, inexperienced borrowers lured with artificial sweeteners at a time when interest rates are approaching zero, amid rising unemployment. Not exactly encouraging!

    It’s worth remembering – despite the major differences
    in our banking systems – a similar lending spree in the US caused a housing bubble that led to all these tears.

  171. John McP, I agree with most of what you say. To me a big problem is going to be how to get out of the fix that so many people are now finding themselves in. That is, they bought homes beyond their ability to repay.

    I am not so certain that a small extension to the 1st home buyers grant is a bad thing due to reports of ‘panic buying’. The extra months will help young couples to properly assess the market and work out what they can afford.

    Just from memory, one of the worst things of the last recession was falling house prices. That is, when people lost their homes they could end up not just with nothing, but could in fact end up owing the banks money. I think that this is something this time around that we would want to avoid at all costs as it takes a long time for society to recover.

    My thoughts are..try to maintain the status quo re house prices but put mega into public housing which will then be a BIG encouragement for developers to compete. As I’ve mentioned before, currently there is no competition at the bottom end of the market.

    Anyway..just my three pennies worth.

  172. I’m going global today, John, and I do have concerns, for Australia and more generally, when these two pieces of observation from one of your links are forced together…

    “We think that is an entirely reasonable thing to do, particularly given the experience of this country coming out of the previous recessions in the eighties and the nineties,” the Treasurer told the National Press Club. He rejected the IMF’s view that growth would remain sluggish for years as it emerged from the recession. “This is the very best assessment that we can get from our professional advisers,” Mr Swan said. He acknowledged that the economic environment remained highly uncertain….

    ….Moody’s vice-president Steven Hess said that, although the rise in debt was rapid, the starting point was low relative to other nations. “If we view this as a one-time shock coming from the global recession, then the longer-term fiscal trajectory should return to sustainable levels,” he said.

    Part of the uncertainty for the economic environment is in how the global, and not just the domestic, environment plays out under conditions of globally synchronised contraction and (un)synchronised whatever, as against a backdrop of not one-time shocks to the fiscals and not relatively low starting points, but repeated and arguably unsustainable deficit spendings and relatively high, even historically unprecedented, sovereign debt levels elsewhere.

  173. Min,

    “That is, they bought homes beyond their ability to repay”

    I thought you subscribed to the school of thought that it was all the fault of the “lenders”? I seem to remember being taken to task by you for suggesting what you have just suggested?

  174. You know Sparta I probably did. It’s 6 of one and 1/2 a dozen of the other isn’t it. Yes certainly the lenders should not have given $$$s to people who would have come under the category of ‘mortgage stress’ due to income versus repayments. And nor should the banks have given credit cards to people on the dole. But they did..and so the question is, how do we get out of this mess.

  175. Min,

    I know we don’t agree on much but your “egoless nature” is much to be admired……Now if you could just pass some of that “style” on to the rest of us (to include myself)………Again Min, the majority of people knew better. Like John has said many times before, there is simply no way out of this without going through some pain….Rudd and Obama are just trying to confine it to a “trickle” instead of a “hemorrhage” but the bleeding is inevitable….

  176. Sparta, that’s so sweet. I actually do have an ego..or else I wouldn’t keep posting to this wretched blog now would I 😉

    It’s just that once having identified a problem, then to me stage next is to debate different issues with the aim being, solving the problem.

    Most definitely I agree Sparta, there is going to be pain..but how to minimise it..a slow deflation rather than a crash to earth to me seems a better option.

  177. My thoughts are..try to maintain the status quo re house prices but put mega into public housing which will then be a BIG encouragement for developers to compete. As I’ve mentioned before, currently there is no competition at the bottom end of the market.

    Saw on TV recently a man from Sydney’s West who was told he’d be lucky to sell his modest three bedroom home for $300K, imagine his surprise when he got $420K.

    In 97 I bought our first house, at modest at $95K. Sold at the end of 99 for $175K, upgraded to a two storey brick veneer home with 5 bedrooms and a study for $215K.

    It was at this stage that I realised their was a limit relative to earnings and the amount of debt most families would, or should be allowed to carry. Despite being out of work, I am still able to comfortably meet my obligations.

    My neighbour and his wife recently bought in next door and his wife had to stop work to have their first child. His work hours have been reduced and he’s now being forced to rent and move back home to his parents.

  178. John..son in Cairns is trying to find an affordable home. He will receive some $s from the Navy, some $s from the 1st home buyers and yet there are zilch homes under $360g. At this price even with these grants, he still can’t afford the repayments and so the only way that son can get into his own home is if M’ gets a job. This would require stopping breast feeding and putting daughter into some sort of day care and son won’t allow this and so they will keep renting.

  179. “wretched blog?”

    “wretched…????!!!!!”

    That’s gratitude for you.

  180. And hugs back to you Reb. And can you please revert to your previous avatar as this one looks as if you were dressed at Lowe’s.

  181. Min, on May 14th, 2009 at 12:06 pm Said:

    John..son in Cairns is trying to find an affordable home. He will receive some $s from the Navy, some $s from the 1st home buyers and yet there are zilch homes under $360g. At this price even with these grants, he still can’t afford the repayments and so the only way that son can get into his own home is if M’ gets a job. This would require stopping breast feeding and putting daughter into some sort of day care and son won’t allow this and so they will keep renting.

    Exactly Min. Lending standards have deteriorated and standard assumptions about people’s ability to meet debt obligations under varying conditions have been largely ignored for far too long. Now we’re paying the price.

    Tell your son to be patient and bide his time, sincerely

  182. Min

    You might want to share this with your son and his wife. A very well researched article.

    Time to pick and choose: Housing or Jobs
    March 21st, 2009
    http://www.whocrashedtheeconomy.com/blog/?p=397#comments
    You could be mistaken for thinking we didn’t each have a part to play in the Global Financial Crisis. It wasn’t that long ago Kevin Rudd was saying “As Prime Minister I will not sit idly by and watch Australian households suffer the worst effects of a global crisis we did not create.”

    But the cause is closer to home than we think.

  183. Min

    Lol I just received this offer in my inbox.

    Dear John

    $$$ Massive Reduction in sale price… Prime Location in Newtown, Sydney $$$

    The Developer has given aps growth and Imminent Wealth Academy in an exclusive 5% off the final stage. What does that mean? You have an extra $22,000 – 30,000 in your pocket!

    http://www.apsgrowth.com.au/property_newtown

    First Home Buyer? The government will pay all your stamp duty and give you $24,000 cash.
    Investor? See the exclusive added benefits below for your prime investment. Over 5% returns!

    Apartments are available from low $400k’s and we only have 6 available for our clients.
    Exclusive Benefits to APS Growth Clients… In addition to the massive price discounts, apsgrowth has been able to negotiate the following for our clients who purchase in this development:

     Purchasers will have rent paid at market rent until a tenant is found*
     Depreciation schedule supplied (valued at $660)*
     First years Landlord Protection insurance is supplied (valued at $400)*
     and the $22,000 – $30,000 discount on only the next 6 properties sold

  184. Hello John..the ring is yet to be on the finger, and so it’s partner.

    It does get difficult re ‘biding one’s time’ as every week that passes it’s $$$s for rental accomodation rather than paying off an asset. For example, at an average rental of $300pw, that’s $15,600pa going into someone else’s pocket.

  185. Quick John,

    You’de better sign up now – before the offer expires!!!!!

    It sounds to good to pass up on!!

  186. But can they handle the debt load long-term? Also, rental yields are also likely to drop more more affordable levels if foreclosures increase and there’s a drastic increase in affordable housing development projects.

    My point is, they need to think very carefully and not be panicked into getting into a position where they’re bogged down due to excess debt. Often takes a toll on relationships as well.

  187. Na Reb, you can have it. I’ll pass (wink)

  188. You bastard Reb, I bet you put them on to me didn’t you?

  189. John..son and partner went house hunting last weekend. The developer at the new housing estate said We will GIVE YOU the first home buyers grant. Son replied, But the first home buyers grant is provided by the government. The sales person umm’d and walked away.

    And off topic re computer: Unbelievable!! The computer technician phoned saying that it’s $150.00 but that he doesn’t take cards and nor does he take cheques. That is, it’s cash in hand. He added, Better than giving Uncle Rudd 40%. It was on the tip of my tongue to say, Yes just let all the rest of us pay our taxes on your behalf while you pay none.

  190. Dear Mr Insider…the best laugh all day goes to you again, reb…LOL!

    At least you got a plug for this site.

  191. Thanks Scaper,

    I trust we’ll be honoured with your presence for the Live Blog…??

  192. It seems that the traditionally more affluent suburbs are being hit by higher unemployment. Although this is a tentative assessment, the trend is still worrying given the higher levels of personal debt often carried in these areas.

    Jobless rate doubles in inner-city Sydney
    http://www.smh.com.au/national/jobless-rate-doubles-in-innercity-sydney-20090514-b4ti.html

    JOBLESSNESS in the inner city is already approaching 10 per cent, while working hours are also falling as recession eats into working conditions.

    Detailed labour force figures released yesterday by the Bureau of Statistics show the uneven spread of job losses throughout Sydney and NSW.

    In the inner city, for example, the number of unemployed has more than doubled since the end of last year – from 15,800 in December to 31,900 in April.

    The figures are sketchy – the bureau urges caution because of small sample sizes – but trends are emerging in the geographic sweep of joblessness.

    The unemployment rate in inner Sydney and in the inner west increased every month from the end of last year, from 4.6 per cent in December to 9 per cent in April. For men in the area, unemployment has hit 12 per cent, while the female rate is about 6 per cent. For most of last year unemployment in the region was closer to 4 per cent.

  193. A very slippery slide indeed.

    Crisis hits millionaires’ row
    http://business.smh.com.au/business/crisis-hits-millionaires-row-20090515-b5dq.html
    Australia has fewer million-dollar suburbs as the global financial crisis erodes home values, according to a report.

    The total number of suburbs where the median home price is $1 million or more fell to 134 in the year to the end of February, from 152 a year ago, according to real estate research agency RP Data, with median home prices plunging more than 20 per cent in the some suburbs.

  194. Fingers crossed, our exports recently took off again, however, ongoing demand could become a serious issue if China continue to struggle.

    China’s recovery is on shaky ground
    http://www.theaustralian.news.com.au/business/story/0,28124,25489885-5018063,00.html
    CHINA’S economic turnaround, on the back of its spectacular boom, is not looking so assured after all.

    A glut of disappointing data emerged this week highlighting the narrow focus of the Government’s 4 trillion-plus yuan ($770 billion) stimulus package, fuelling concerns it is not a sustainable base for the longer term.

    The questions are not about whether gross domestic product growth will be 7 or 8 per cent this year, but about more fundamental and longer-term issues.

    Perhaps the biggest near-term problem is that the country’s once booming private sector is struggling.

    The huge licks of cash coming from the Government are being mainly directed at the 170 state-owned enterprises controlled by the State Assets Supervision Commission and a raft of provincial-owned SOEs.

    While the factory closures and pain in the export-orientated provinces in the south and coastal east of the country have been well documented, the problems are continuing to spread across the country.

    Beijing Hitech Company, in the suburbs of the Chinese capital, which specialises in using high-end technologies to stick together different materials such as glass to steel and alumina to silicon, has been forced to cut half its 70 workers.

    “Business is no good, and my neighbouring factories complain that there is no business too,” the company’s production manager Yu Yongmiao said.

    “Our best time was in 2006 and 2007, the first half of 2008 was not so bad, but the Olympics was a turning point.”

    His company lost more than 2million yuan when all factories were forced to close during the Olympics. “Then the crisis came before our business could recover,” Yu says.

    “The central Government is investing, but mainly in infrastructure, not many buildings. Our products are used in building interiors and exterior decorations, not on roads and bridges.

    “We cannot see the bottom.”

  195. Last year figures showed that Australia has more debt per household than the US, with Australians owing 177 per cent of household income in mortgage and other debts compared to 138 per cent in the US.

    This is coupled with the fact Australians save an average of 0.5 per cent of their income compared to 2.6 per cent in the US.”

    My greatest concern has been the lack of preparedness moving into a downturn, and frankly this study confirms it.

    Savings slump brings crisis closer to home
    http://www.smh.com.au/national/savings-slump-brings-crisis-closer-to-home-20090517-b7eg.html
    ALMOST 30 per cent of NSW residents have no savings, according to a new study that shows many have been caught unprepared for the recession and rising unemployment.

    Record levels of personal debt on top of poor savings is a recipe for disaster. Major loan defaults and personal bankruptcies have been underway in the US and UK for some time and both of which share similar problems with personal debt and poor savings, and both of which are only marginally better than ours.

  196. John, I can’t follow this.

    Australian workers have to save 9% of their income, this is superannuation.

    Unless this figure is included this type of comparisons don’t make sense.

  197. Super is reserved for retirement Tom, the ups and downs of daily life and changing economic fortunes demand we maintain a buffer in case we run into trouble. Like losing our jobs. We can’t very well go and raid our super can we?

  198. Don’t forget that a large chunk of super comes from employer contributions.

  199. John, these comparisons are not intended to show the ability of people to cope with the swings and roundabouts of the economic cycle.

    It is about the propensity of a population to save, and not just for a rainy day.

    It is irreverent whether the contributions are made by an employer or directly by an employee. They are part of the built up cost of employment. The contributions are in the name of the employee.

    Superannuation is compulsory saving; you only have to look at the size of the funds to know that. If any analysis disregards it, it is deficient.

  200. Tom

    Access in the here and now is the most relevant measure and on an individual basis. Also, consider the value that’s already been wiped of future savings (super) due to the GFC and ongoing economic fallout.

    Having been an above average earner in the past, I’ve been forced to live on much less than I previously earned due to circumstances beyond my control. This experience has shown me just how hard it is having financial commitments to meet with very little savings to spare.

    I’ve mentioned previously that I’ve been very fortunate as far as my own homeownership has been concerned simply because I knew the level of debt I’d be comfortable just in case of the worst case scenario occurring. Well, it did, and I thank my lucky stars that I haven’t lost everything.

    I look at the level of personal debt to earnings that many people are carrying and I note that so many are living on the edge with little or no ‘margin of safety’ to buffer them if their circumstances change.

  201. John, possibly anecdotal information is illustrate and useful.

    But when making international comparisons about the propensity of a population to save, it just doesn’t make sense to ignore superannuation. It is long term saving, and that is what most saving is for.

  202. Tom understood, however, my point is the very real limits that super contributions have on allowing us to deal with the here and now, when our debt commitments are high and personal savings are low.

    You’ll find that the study focuses on bank savings directly from disposable income. It matches oranges with oranges.

    I can’t find the link, but that is one aspect of the study, I too, questioned.

  203. Here’s another consideration that needs to be taken into account Tom, according to a recent report our banks have over-lent which has meant a huge divide between lending and bank deposits has occurred over time. So the record level of lending we’ve seen in the past is due to slow considerably so that our banks restore a sensible the balance.

    http://business.smh.com.au/business/savings-grace-to-be-found-in-this-recession-20090517-b7bl.html?page=-1
    ANZ CEO Mike Smith recently “voiced the view that Australian banks were “over lent” – that is, their loan books had been expanding at a much faster rate than the deposits they were taking in. The banking research team at Citi picked over the same theme with the help of information the big four provided in the just completed reporting season.

    The Citi report has examined the 30-year history of this loan-to-deposit ratio (LDR), placing particular emphasis on how the growth in housing loans has thrown the balance between the two out of whack.

    At the same time it has resulted in an increased – and now permanent – dependency among the banks to finance the difference from a variety of onshore and offshore sources, namely the wholesale funding (debt) markets.

    Throughout the 1970s and ’80s the in-flow of deposits largely kept track with the outflow of loans. But this all began to change in the early 1990s, as first, home ownership financed by mortgages, and second, lending to business, accelerated after the last recession.

    The peak in the LDR was reached in 2007 at 220 per cent – the banks had lent out $1.7 trillion but had only taken in just over $750 billion in deposits to help fund their loan books.

    No surprises, therefore, in the sources of the rest of the money.

    With the advent of the GFC and the so-called flight to quality, in which customers sought the safe haven of banks they perceived to be strong, cash has rushed into the banks. But this slather of new deposits has only reduced the sector’s LDR to 190 per cent.

    That means $1.76 trillion of loans are outstanding, of which housing accounts for $999 billion, business $620 billion and personal $145 billion. Deposits in the meantime have grown to a smidgen under $1 trillion.

    The point here, says Citi, is that many banks worldwide with similarly high LDRs fell over or had to be rescued by their governments because suddenly their outside sources of funding – the global credit markets – had frozen as a symptom of the GFC.

  204. Tom

    The point I’m trying to get across relates both to a macro and micro level of economic and financial management and in the long run we’ll all be better off. We don’t know what lies ahead, but the better prepared we are for worse case scenarios the better. Hence, the government’s willingness to go into significant debt has been largely unavoidable, in my opinion.

    The question remains as to how well those funds are directed and we, on a personal level, are obligated to change of spending and savings habits otherwise suffer the consequences.

    We don’t know where the economy is going
    http://www.theaustralian.news.com.au/story/0,25197,25497154-7583,00.html
    THE heated debate about the Treasury’s rapid growth forecasts beyond 2011 overlooks the fact that we really don’t know what is happening to the economy now.

    It is still not clear whether the pattern of the global downturn resembles Japan’s lost decade, the Great Depression or, as Treasury believes, something much more benign.

    The data that is emerging from the world economy is all over the place. Some measures show improvement, some show things are getting worse, while many economists are pinning their hopes on statistics showing the rate at which things are getting worse has itself stopped getting worse.

    On the same day last week that the European Central Bank president Jean Claude Trichet declared the economy was at an “inflection point”, meaning the rate of decline was slowing, the IMF released its regional assessment warning that Europe’s recession was at risk of deepening.

    In the space of 24 hours last week, the oil price rose above $US60 a barrel, Japan reported a 48 per cent fall in exports, which was nevertheless better than expected, China reported growth in industrial output that was worse than expected and the US reported unexpectedly severe falls in retail sales and house prices.

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