Labor’s lasting legacy… Debt.

Debt is the word on the tip of everyone’s tongue at the moment.

Everyone has some degree of private debt, such as mortgages, personal loans or credit cards, but do we really understand what debt is?

A debt is created when a creditor agrees to lend a sum of assets to a debtor.

Debt is usually granted with expected repayment; in modern society, in most cases, this includes repayment of the original sum, plus interest.

So, as most people would understand, debt must be paid back to creditors eventually.

We also have a maximum amount that creditors are willing to lend us.  Normally this debt ceiling is tied to our income and our propensity to pay back our debts.

So debt could be summed up as follows:

Whatever is borrowed must be paid back, with interest, and there is a limit to what we can borrow.

But what about government debt?  Surely that has to follow the same rules?

Well, that is only partially true. Governments do have to repay the debts that they rack up and they also have a debt ceiling.

The difference between people and governments is that governments can vote to increase their debt ceiling which, in a world of spiralling debt that is getting close to being out of control, is a little scary.

While most Australians would be well aware of our increasing level of national debt that Labor has saddled us with, what few would realise is that under this Labor government Australia’s debt ceiling has been raised three times in the last four years and the future is anything but rosy.

Australia’s rising debt ceiling

March 2009

• Debt ceiling raised from $75 billion to $200 billion
• Reason given – To allow for huge deficits stemming from the Global Financial Crisis (GFC)

May 2001

• Debt ceiling raised from $200 billion to $250 billion
• Reason given – Actual deficits exceed initial forecasts

May 2012

• Debt ceiling raised from $250 billion to $300 billion
• Reason given – Wider structural changes included in Budget, mainly to allow Labor to project budget surplus in 2012/13

December 2014

• Debt ceiling will need to be raised again as Government Bonds on issue to fund repeated Budget blowouts finally exceed the current debt ceiling
• Reason given – “Sledgehammer blow” to expected revenues due to dampened commodity prices for resources

Originally, Labor told us that the deficits were temporary and that increases to our debt ceiling would merely provide us with a buffer against the GFC.

In fact, it was Wayne Swan who boldly declared back in 2010:

Well, we’re getting back into surplus in three years. Come hell or high water.

Renowned speaker of truth, Prime Minister Julia Gillard also reassured a nervous electorate in 2010 that her team of economic wunderkinds were all over this surplus thing:

The Budget is coming back to surplus, no ifs no buts, it will happen.

However, the reality is that Australia’s deficits and resultant debt has been anything but temporary, and the oft promised surplus of 2012/13 is now just a distant and faint memory blip in the torrent of soundbites that we are bombarded with from a constant 24/7 media cycle.

While most respected commentators realised that the promises of the magical surplus from Gillard and Swan were hollow platitudes, most of Australian’s took them at face value. How could you not after they trumpeted them far and wide to all that would listen for 3 years?

Estimates abound that between them all Labor politicians promised the surplus over 300 times since 2010.  Catallaxy Files has a great synopsis of the surplus promise timeline which makes for entertaining, yet infinitely depressing reading.

It was Julia Gillard who yet again reinforced Labor’s commitment to balancing the budget at Rooty Hill prior to the last election

Failure is not an option.

Unfortunately for us, failure is the ONLY option when it comes to the Australian Labor Party and money.

There will be no budget surplus in 2012/13 and as Wayne Swan confirmed in his budget speech there will be no surplus for the next four years, and when it does eventually arrive in 2017 it will be so wafer thin that it will have minimal impact on our economy.

By that time the Australian economy will very well have passed the tipping point of no return.

So what has Labor projected for the foreseeable future of our economy?  Deficits, more deficits and even more deficits to come.

Labor’s decade of deficits

• 2012 / 13 – $19.4 billion deficit
• 2013 / 14 – $18.0 billion deficit
• 2014 / 15 – $10.9 billion deficit
• 2015 / 16 – Budget in balance
• 2016 / 17 – Budget in surplus

This is on top of the accumulated deficits that they have already racked up since 2007 (see image at right).

Excuse me if I call “Shenanigans”

The last time a Labor Treasurer delivered a surplus was way back in 1989 so it’s hardly surprising that this year’s Labor surplus promises in 2013 are no more believable than the 300 odd promises they have given us since 2010.

By the time that these clowns manage to eventually get the budget back to surplus our national debt will have balloned to more than $400 billion dollars, all but blowing our current debt ceiling out of the water.

That is FOUR HUNDRED THOUSAND MILLION DOLLARS OF DEBT.

Let’s ask the world’s greatest treasurer if we will once again have to raise our debt ceiling due to his gross ineptitude:

When asked if whoever won the election would need to raise the ceiling, Mr Swan said:

“Well, that will be a matter for them.”

Um, no Wayne me old mate.  It is not just going to be a matter for the Liberals.

It is going to be something for ALL OF US Wayne. You know us, the REST OF AUSTRALIA?

If there was ever a clear cut example of the complete lack of care about this dire situation by the Labor Party, then surely Swan’s disgraceful comment must be it.

Don’t worry about the NDIS or Gonski reforms being Gillard and Swan’s legacy.

Labor’s legacy is a mountain of debt.

Always has been.

Always will be.

Help! We can’t count…

Most pundits understand that Labor’s economic credentials are extremely shaky given that it appears that no one from Labor actually understands basic budget or fiscal policy.

However, the rest of Australia has been constantly reassured by both the Prime Minister and the Treasurer countless times that Labor would be bringing Australia’s budget back into the black for the first time since they took office in 2010.

In fact Labor promised to deliver a surplus over 300 times over the course of the journey since the last election until Treasurer Swan announced last December, right just before Christmas when no one was paying attention, that the wafer thin projected surplus for the 2012-13 financial year of $1.1 billion just wasn’t going to happen.

Nope.  Just not gonna happen man. Kaput.  Gone.

This is despite Prime Minister Gillard giving an iron clad guarantee during the 2010 election campaign about returning the budget to surplus.  Gillard was so emphatic that she stated boldly that:

Failure is not an option. No ifs, no buts: it will happen.

That sounded pretty definitive didn’t it? Doesn’t sound like there’s a lot of wriggle room there or the opportunity to make excuses.

Well someone better tell Treasurer Wayne Swan, Finance Minister Penny Wong and the rest of the numerically challenged members of the Labor party about this no ifs, no buts rule because all we have heard since December last year is excuse after excuse.

Excuses about why things havent turned out as rosy as Labor predicted in relation to Australia’s budget position.

The Treasurer laid out all of these excuses in his Economic Note in February this year and has been building the case that it is purely external factors that will cause Labor to deliver yet another budget deficit in June.

Firstly they talk about tax receipts being drastically down, but as the Catallaxy Files shows in it’s post Budget Myths and Reality, saying that tax revenues are down is an outright lie.

The only way they are down is if you actually believed the wildly optimistic projections that Labor made in order to be able to project their promised 2012-13 surplus, but the reality is that revenues are still higher than previous years, and increasing each year.

The diagram labeled Receipts $m to the right  shows that tax receipts have actually gone up every year that Labor has been in office, except for a slight dip in 2009-10.

So to say that revenue is down is incorrect. While the actual amounts are not quite as good as Labor expected, Australia has still generated MORE REVENUE than it ever has previously.  We have more money coming in, not less.

Ok, good to get to the bottom of that.

Now onto Labor’s recent statements on payments.

In Swan’s update in February and again yesterday, Labor’s economic ministers are once again trying to hoodwink people with mealy mouth excuses.

While Labor bemoan the external factors that are applying pressure to the budget, what they neglect to mention is that most of the underlying deficit is due to internal pressures, namely drastically increased government spending.

Government spending since Labor came to office has gone through the roof to all time highs.  This is shown in the Payments $m diagram to the right.

This drastic increase in outgoing is mainly due to Labor money spinners such as:

• GFC cash splurges
• Carbon Tax compensation
• one off Family Assistance packages
• Building the Education Revolution
• Pink Batts
• School Kids bonus
• School Kids Laptop program
• Low Income Super scheme
• Drastic increase in government employment

While receipts have gone up, so have our payments.  It seems that we are spending money we just dont have.

As anyone who manages their own personal finances knows, you just can’t spend what you dont have. If you do, then you end up with a deficits.  Just like the previous five deficits that Labor has gifted Australia with since we were stupid enough to vote these “financial conservatives” in to power in 2007.

Where does that leave us now?  In trouble.

The Underlying Cash Balance $m diagram on the right illustrates what you get if you add the two previous diagrams together.

Note the candy stripe bar on the far right of the graph.  That is the projected deficit that has been estimated since Labor started it’s steady march away from bringing the budget back to surplus as they crowed for near on three years.

But what is worse is that now we are hearing more bad news from the bad news bunch that threatens to make reality worse than any possible nightmare.

As Judith Sloan from The Australian (behind Evil Rupert’s Evil Paywall™) observes today, the projected surpluses for the coming years have also bitten the dust.

We are now told that being in deficit is no big deal. Not only will there be a budget deficit this year, there will be a series of deficits over the forward estimates.

So the projected budget surplus of $2.2bn in 2013-14 – forget it. The projected budget surplus of $3.3bn in 2014-15 – forget it.

And the projected budget surplus of $6.4bn in 2015-16 – you guessed it, forget it.

Further to us already spending more than we make, Labor has openly promised that massive new social welfare policies, such as the NIDS and Gonksi, will underpin their re-election campaign.

However to actually pay for these grand schemes, Labor intends to borrow even more money than it already has wasted and tax Australians even more than they already have in order to pay for their utopian social fantasies.

If we don’t have the money, then we just can’t spend it. If these new programs are so important, then we need to prioritise where they fit into the overall scheme of things.

This government just does not know how to live within it’s means.  Further more, it seems these clowns just cant add up.

Might be time to bring in the Count, blah.

5 things Labor won’t tell you about low income super contributions

Superannuation has been a very touchy subject for the past few weeks, but it is a topic that is not going to go away for a long time.

Labor has been roundly condemned from nearly every quarter, including from within it’s very own ranks, for their very transparent efforts to link super to yet another round of attempted class warfare by attacking the so called “fabulously wealthy” and supposedly sticking up for the lowly paid.

Labor has tried to place considerable spin on the Liberals plans to end funding for the Low Income Super Contribution (LISC).

For those of you that are not familiar with the LISC, it is a government super payment to help low income earners save for their retirement.  The LISC is 15% of the concessional (before tax) contributions you or your employer makes from 1 July 2012.

The maximum payment you can receive for a financial year is $500 and the minimum is $20.

The LISC is meant to be funded by the receipts of the almost useless Mineral Resources Rent Tax, more commonly known as the Mining Tax , or as I like to call it the little tax that wasn’t.

I call it this because the Mining Tax that Julia Gillard negotiated herself after Wayne Swan stuffed up the first version prior to the 2010 election has not delivered the rivers of gold that Labor promised and it actually costs more to implement than it brings in.

The backdown from Swan’s original version was one of the main catalysts for Labor deciding to knife deposed Prime Minister Kevin Rudd, but that is another story for another day so let’s get stuck into the 5 things that Labor don’t want you to know about the Low Income Super Contribution (LISC) scheme.

1) Funding drives welfare programs

The Liberals position is pretty simple given Australia’s substantial debt position.  If the tax that was meant to pay for the LISC doesnt generate any money, then the programs it was meant to support need to be removed.

It’s simple case of balancing a budget, just like most households do every month or year in order to get by.

Or if you don’t have a budget of your own to balance, it’s just like the game of Monopoly – NO MONEY IN, NO MONEY OUT.

If you promise something to someone on the provisio that it is dependent on something else, which doesnt materialise because of poor management, then it might be impossible to deliver wouldn’t it? it’s common sense, but that isn’t what Labor focuses on is it?

No, they run with the class warfare angle that Liberals want to take from the poor.

Well, that’s not entirely true either and that brings me to…

2) Liberals introduced the LISC

Since 1 July 2003, the Australian Government has provided the incentives of a government funded co-contribution for lower income employees who make personal contributions to their own superannuation fund.

And guess who was in power in 2003.  The LIBERALS.

It was John Howard and Peter Costello that initiated the Low Income Super Contribution, not Labor.

So it was the Liberals who actually initiated contributions to the superannuation of those working in low paying jobs.

3) Labor have already reduced the LISC – part 1

Another thing that Julia Gillard, Wayne Swan and Bill Shorten don’t want you to know about the LISC is after Labor got into office in 2007, THEY LOWERED the LISC from the level that John Howard’s Liberals established it at in 2003.

The amount was lowered by $500 so that the maximum low income earners could obtain was $1,000 (up to and including FY 2012).

4) Labor have already reduced the LISC – part 2

Don’t worry, it gets better as most Labor spin stories do when you start to scratch the surface to examine where the the all-to-present fetid stench of ineptitude emanates from.

The kicker is that Labor will once again lower the LISC for the 2014/15 financial year.  This is the second such reduction of the LISC by Labor.

Not only will the maximum entitlement now be reduced to just $500 (down from the $1,000 offered in 2007), there will also be a reduction in contribution matching rate from 100% to 50%.  So this means to get the $500 in 2014/15 financial year, low income earners will need to contribute $1000 as opposed to the dollar for dollar contribution of the Costello / Howard years.

5) Low income earners will not use their superannuation as the primary basis of their retirement income stream

People who earn the low incomes that qualify for the LISC (no more than $37,000 p.a), will NOT have any meaningful superannuation when they retire.  Almost certainly, all of these people will be wholly dependent on the Aged Pension, which the government provides them courtesy of the Australian taxpayers.

So in summary….

Next time you hear Gillard, Swan and Shorten, or any of the pack of lying miscreants that represent the Australian Labor Party start talking about how Tony Abbott is going to take money away from the lowly paid just think back to this post. Labor have removed 2/3’s of the contribution that the Liberals initiated when they were in office.

When you are ever confronted with a post on Facebook by one of their economically challenged supporters telling you just how bad AbbottAbbottAbbott is, just tell them these simple facts.

1. Howard and Costello created the LISC and set the amount at $1500
2. Howard and Costello funded the LISC by way of running consecutive surpluses as a result of prudent economic management
3. Gillard and Swan subsequently decreased the LISC to $1000 and tied the funding to the mining tax that Labor designed,
4. As the MRRT subsequently didn’t generate any tax revenue, Gillard and Swan have again been forced to decreased the LISC to $500
5. The amount that Labor bangs on about is only a third of the amount originally provided to low income earners by the Liberals in 2003 under John Howard.

These are the facts about the Low Income Super Contribution scheme, not some factually incorrect, piss poor photoshop slide posted on Julia Gillard’s Facebook page.

Labor – We are us – Moving forward in politics by misrepresentation since 2007.

Crean draws a line in the sand on our Super

Simon Crean has completely washed away any lingering notion that he was merely a Gillard stooge in the recent failed leadership spill by openly criticising Labor’s looming changes to superannuation legislation.

The feeling that we are in for yet another policy brawl within the ALP was only exacerbated by a seemingly combative appearance by Dr Emerson on Sky New last night.

The Australian reports Crean’s principled objection to any changes to super today in an article entitled Simon Crean to fight plan for superannuation tax changes as internal rift deepens.

As this article is once again behind Evil Rupert’s Evil Paywall™, I will summarise it for those of you who chose not to pay for your news.

Simon Crean has deepened the rift within Labor over looming budget changes to the superannuation regime, declaring he would oppose any move by the government to tax earnings on super accounts.

Launching an attack on Labor’s inability to frame serious policy debate, the senior party figure would not comment on whether he would cross the floor to vote against any changes.

But he called on the government to explicitly rule out changes that retrospectively taxed earnings generated by super accounts, saying it was “tantamount to taxing people’s retirement surpluses to fund our surplus“.

Mr Crean delivered his ultimatum shortly after Trade Minister Craig Emerson called for a discussion on lifting taxes on the superannuation accounts of the “fabulously wealthy”, highlighting the rift in Labor ranks over values and policy substance after last month’s leadership crisis.

Crean is not the only Labor stalwart who has openly criticised the Gillard Government’s approach to superannuation policy following the recent failed leadership coup, with both Martin Ferguson and Bill Kelty voicing concerns about retrospectively taxing superannuation in order to balance the Government’s faltering bottom line.

Even Bernie Fraser, former Reserve Bank governor, Treasury secretary in the 1980s under the Hawke government and a former voice of the industry super movement, said yesterday

…the government’s rhetoric on class warfare and on foreign workers was divisive and desperate but argued that a “good case” could be made for re-examining super concessions for high-income earners.

“It’s very true,” Mr Fraser said of the criticism. “I share the same concern and frustration as to how Labor has lost its way over recent years compared to the Hawke-Keating years, which were devoted to making the whole country and the whole community better off.”

As many other commentators who are far more qualified than I have pointed out,  no “good case” has been made by the Gillard government to tax superannuation, regardless of the respective balances of people’s funds.

Crean continued to not only walk the walk, but talk the talk….

“I will oppose anything that seeks retrospectively to tax people’s accumulated earnings in superannuation,” Mr Crean said.

“..But if the question is the need to ensure the sustainability of the system in the future, then frame the debate properly about what is sought to be achieved and let’s have that debate.

One of the big criticisms I have of this government is that it has failed to frame the debate in its terms. And you are always behind if you fail to frame the debate in your terms.”

Mr Crean would not be drawn directly on whether he would cross the floor but said any attempts to retrospectively target super earnings should be explicitly “ruled out”.

While the article discusses potential changes to the super for what Dr Emerson described as the “fabulously wealthy“, it does note the negatives of any such move..

An alternative strategy would be to increase the tax on contributions to super by high-income earners from 15 per cent to 30 per cent. However, this would not raise as much money.

So it seems it is all about how much money can be potentially raised by increasing taxes on peoples super, as opposed to some noble socialist cause.  It was Margaret Thatcher who famously said in 1976 that

…Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people’s money. It’s quite a characteristic of them.

Perhaps we should first start to look for “savings“, as Wayne Swan egregiously describes any proposed changes to taxation, in the extremely generous superannuation entitlements of our top public servants and politicians before they look to raid everyone else’s retirement savings.

As the article suggests

One of the problems with raising the tax on earnings is applying it to defined benefit schemes, such as the generous schemes for politicians and public servants that have been closed to new entrants.

If Wayne Swan is defeated at this year’s election, he is eligible for a parliamentary pension of $168,106 a year.

Julia Gillard, if defeated in September, would be eligible for a pension of $177,520 a year.

A worker not on a defined benefit scheme would need to build up a superannuation lump sum of up to $5.6 million to secure the same amount.

I wonder if Dr Emerson would regard Swan and Gillard as falling into this new class of the “fabulously wealthy“, or is that definition only reserved for those of us that actually work for a living?

Labor = Taxes, more taxes and even more taxes

Yesterday I read the most astounding article in The Australian – End low-tax virility contest by Patricia Karvelas.

I must warn you though, once again it is behind Evil Rupert’s Evil Paywall, so unless you have already coughed up some dough for your news you probably wouldn’t have heard it reported in the rest of the mainstream media.

And no wonder when you hear what Sen. Doug Cameron was talking about yesterday.

In true Labor fashion, Cameron was spouting on about how the Labor Party should…. wait for it… raise even more taxes to pay for Labors wonderful social welfare initiatives, which are currently unfunded because they have already wasted over $300 billion in less than seven years and the country’s piggy bank is empty.

So much for Rudd’s fiscal conservatism.

Let’s see what Big Spending Doug has to say for himself and the Labor Party that he represents so wonderfully.

Senator Cameron has challenged his party’s leadership to increase tax on super contributions for high-income earners, crack down on trusts, raise the mining tax and introduce other taxes to pay for social welfare initiatives.

“A mere 0.7 per cent increase in the ratio . . . would raise sufficient for us to realise our aspirations to be a good society.”

Senator Cameron said even if Labor did increase taxes, Australia would still be the fifth-lowest taxing country in the OECD.

Regardless of where we stand in comparison to other countries, I would hazard a guess that most Australians probably think that they already pay enough taxes. I know my wife and I do,  almost 40 cents in the dollar to be exact. Anyone who says they are happy to pay more taxes obviously has too much money to care about losing more of it to the tax man.

And when he says “our aspirations” is he talking about all of us, or an ever shrinking band of unionists and green tinged lefties who represent no one but themselves?

Let’s get this straight, my wife and I are not “rich” by any stretch of the imagination and we certainly don’t qualify for any of the government largesse that seems to be readily available for some other people  in our society. But we struggle just as much as the next “working family” to get what we want in our lives.

• We drive a 15 year old car, a hand me down from my folks that is so clapped out we call it the Old Grey Ghost.
• We struggled and went without to save up our money to buy a block of land
• We then struggled some more to save up to build the house on that land, all the while we were paying rent as well.
• We struggled and went without to save up our money to pay for our own wedding.
• We struggled and went without to save up our money to have our baby.
• And currently we are struggling and going without to just put food on the table while I look for a new full time job after leaving my last job, which was driving me insane.

But now that we are temporarily on only one wage there is no government assistance for us because apparently my wife earns too much.  Could of fooled me, because we never seem to have any money after we pay all our bills and meet all of our financial commitments.  We don’t depend on anyone else but ourselves to look after the things that we want in our lives.

• No unemployment benefits to help bridge the gap in the short term, despite being both of us being net contributors to the support of others for over 15 years.
• No rent assistance for us either, despite having a $400,000 mortgage that always has to be paid otherwise the bank will foreclose on our dreams.
• No family assistance to help pay all the myriad of doctors bills and medical tests that go with trying to have a baby.

Now, I dont necessarily want any government handouts because I think the sense of entitlement that many Australians have is extremely unrealistic and extremely unsustainable, especially so given that we have a rapidly ageing population as well as importing another cohort of intergenerational welfare recipients into this country, whilst demonising productive workers who actually contribute to our society in a meaningful way.

Heck, we take responsibility for our own lives to the point that I am even doing night time work as a bloody carpet cleaner to make ends meet while I look for “proper” work and undertake further study/training to further up skill myself and make myself even more suitable for full time work.

I’ve found out in recent weeks that there are so many jobs out there that many Australians consider “below” them, hard low paying jobs that are done increasingly by people who have only just arrived  to our country legally or are just travelling through because they all actually understand first hand that there is no such thing as a free lunch… unless you qualify somehow for a handout from the ever increasing welfare state here in Australia.

And Labor want to slug us tax payers again to pay for their wonderfully utopian ideas for a “fairer” Australia?

Tell me what’s fair about taking money from someone who has earned it from the sweat of their own brow and giving it to someone whose only sweat is from sitting down for so long that they dont even know what work is anymore?

What’s fair about being a taxpayer  for 15 years and contributing to the welfare of others but not receiving any support when you actually need it to get back into the game?

The never ending Age of Entitlement and the assumption that someone else has to pay for things you want has to end.

If you want something, then you have to work for it, not take it from someone else who has.

First it was your super, now it’s your savings…

If it wasn’t so scary it would be funny…

Not content with pinching not only inactive super accounts and super accounts under $2000, which I discussed previously in Already banking on your retirement, the Federal Government has now announced that it’s got it’s eyes on people’s inactive bank accounts in order to bolster the budget’s rapidly collapsing bottom line.

A recent post on Catallaxy Files shows the real budget receipts and it’s not pretty.  We are staring a deficit of somewhere between $10 and $20 billion dollars.  Bit of a change from that $1 billion surplus they told us about over 200 times, isn’t it?

Anyway, back to the Sheriff of Canberra-ham.

As the Herald Sun reports, your inactive bank accounts are now able to be rolled into consolidated revenue so that the Government can go on a massive spend-a-thon to persuade voters to keep them in power, despite running the good ship Australia well and truly onto the rocks.

However, I think it is tricks like these that are sticking in the craw of everyday voters, and you dont have to be a card carrying Tory to think that this is just not on.

It’s our money Wayne, so get your greedy little mitts off it!