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No Surplus Anytime Soon

Michael Cornips

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Wayne Swan may be committed to a budget surplus, but he should keep softening his rhetoric since the weekly Government Debt report shows the annual deficit being maintained at about $47 Billion for the past 3 months. The short term trend in debt issuance is similarly grim. Over the past 3 weeks of September $7.7 Billion of gross debt was issued. In August about $9 Billion of gross debt issued.

Once the Government sets its budget course in May it holds the fiscal course in the hope the forecasts made in May hold true. The budget of course predicted a beginning to a return to surplus. The reflection of this is simply the amount of outstanding Government gross debt published each week. And that growth in annual debt is simply not being reduced and if anything may be growing. The rhetoric of the RBA is the same as 2008 as interest rates were held at high levels: weak international data but inflation expectations due to our commodity boom and great terms of trade. The RBA will hold the steady interest rate line until things really fall over the cliff - just like 2008, when it dramatically dropped interest rates in a catch up.

The world is in austerity mode, the IMF has lowered world growth forecasts, consumer confidence is hitting lows and the RBA insists that the world's best economic performer has to have the highest interest rates among the developed countries. Australia has a cash rate of 4.75% against US's rate of zero and Great Britain's rate of .50%. The Australian consumer is doing the only logical thing - the people are saving and reducing spending. And in the paradox of thrift, what is sensible for the individual is terrible for the country. The mirror of private savings of financial assets is the growth in Government debt,increasing unemployment, with the automatically stabilizers increasing social security payments.

Wayne Swan may be the world's greatest treasurer, but the captain has the ship on auto pilot in a fog of rhetoric.



Michael Cornips
 

Julia

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Michael, Wayne Swan has not ruled out further taxpayer largesse in the form of stimulus if necessary.

If this were to happen, and it were to take the form of more $900 cheques to individuals, wouldn't the current mood suggest these windfalls would go to paying off debt rather than boosting retail as happened previously?
 

Michael Cornips

Formerly known as TradersCircle3
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Michael, Wayne Swan has not ruled out further taxpayer largesse in the form of stimulus if necessary.

If this were to happen, and it were to take the form of more $900 cheques to individuals, wouldn't the current mood suggest these windfalls would go to paying off debt rather than boosting retail as happened previously?
Julie, I think he has ruled it out when he says the budget will get back to surplus by 2012/13, and he has committed annual expenditure increases to only 2% in the hope revenue catches up. Currently he has been saying that revenue may not be there and returning to surplus could take a little longer. The stimulus cost peaked out at $95B extra expenditure, so I can't see him sending $900 cheques without breaking another "promise". I think he has locked himself into waiting for revenue to increase because of the impending boom (?).
 
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Julie, I think he has ruled it out when he says the budget will get back to surplus by 2012/13, and he has committed annual expenditure increases to only 2% in the hope revenue catches up. Currently he has been saying that revenue may not be there and returning to surplus could take a little longer. The stimulus cost peaked out at $95B extra expenditure, so I can't see him sending $900 cheques without breaking another "promise". I think he has locked himself into waiting for revenue to increase because of the impending boom (?).
Listen to moi.....

I've got one word to say -

TAXES!

This IS a Labor gummint, right? IMO I'd expect some announcements soon on a variety of "tax reforms" (ultimately designed to give a nett boost to Fed gummint income).

Swan's rhetoric & propoganda will be biased towards how beneficial these new Labor "tax policies" will be for us all :cool:
 
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