Budget predicament

The large revenue write downs foreshadowed by Treasurer Gutwein ahead of this year’s May State budget pre-empts the question is this just bad luck or a case of those who ignore the lessons of history getting clobbered.

The metaphor ‘black hole’ has once again been summoned to describe estimated reductions in State government revenue of $560 million over the next four years.

It’s familiar territory. We’ve been there before. At the time of the 2009/10 budget in May 2009 the financial world was in turmoil. The revenue write-downs were more than $2 billion over the ensuing four years. GST reductions comprised one-half and State revenue one-quarter. Policy changes were made, which still left an estimated $292 million cash in the tin at the end of the forward estimates.

The surplus that never was (part3)

This note explains in a bit more depth the measures commonly used to describe a government’s performance, what they imply and what they hide.

The measures are:

·       Net operating balance NOB.

·       Underlying NOB.

·       Fiscal balance.

·       Cash surplus/(deficit).

The surplus that never was (part 2)

“We have delivered on our commitment to fix the Budget” were the words of Treasurer Gutwein when handing down the government’s 2018/19 budget.

The Treasurer’s surplus fetish has obscured the reality that the 2018/19 budget outlined spending far in excess of receipts over the four-year period of the budget and the forward estimates.

This note outlines in more detail the actual cash position of the government before and after the Revised Estimates Report described in the last blog.

The surplus that never was

The Treasurer’s Revised Estimates Report for 2018/19 released on Wednesday 30^th January reveals we are on the brink of a disaster.

The Treasurer still says otherwise. “(W)e will remain in surplus this year and across the forward estimates”, according to his media release.

How can the government be running surpluses if its net debt position worsens by $1.2 billion over the forward estimates? That’s because they’re not real surpluses. The Treasurer is not entitled to describe his bottom line as a surplus, because that term implies a cash surplus. Most people think the government is running cash surpluses. The reality is the exact opposite. For example, in the current year, the government will spend $522 million more than it will receive.

This is not a temporary blip caused by the Hobart hospital. Even after Revised Estimate changes, spending on the rebuild will only be $210 million this year (and $80 million in 2019/20 to complete the job).

In the next year or two the government will finance its excess spending by internal borrowings. In three years’ time however the cupboard will be completely bare. Even the $270 million that the government has supposedly set aside to cover insurance (the government is a self-insurer) will be gone.

Labor's tax policy

A system supposedly to avoid double taxation, has become a tax deferral system for the privileged. Company tax has become a withholding tax to be refunded later.

Lies, damn lies and budgets

A new year provides the opportunity to start with a clean slate. Health Minister Ferguson missed his chance. His Talking Point article Rolling out the health fix for growing needs (published January 2^nd) continued with the disingenuous claim that the current government is spending” an additional $757 million over the next 5½ years”.

Whilst not an outright lie, the claim nevertheless fits comfortably into the broader category of a Trumpian untruth.

What do banks do? An accounting perspective

This paper was given to a U3A Group. It's a look at settlement services and borrowing/lending practices. It is not intended to be a blueprint, rather an accounting explanation of what banks do and to question whether there's another way.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is appropriately named. There’s been plenty of misconduct revealed. The aim of this seminar is not to trawl through all the misconduct, but to have a closer look at what banks do. Do we need them? If we were designing a new banking system would we come up with the current model?