Great article over at Crikey. Particularly for those of you restricted to the New Limited narrative. It's not behind a pay wall so well worth a visit.

http://www.crikey.com.au/2013/03/27/heres-the-real-story-of-australian-debt/

The real story of government debt is much more complicated than News Ltd papers claim. And there’s a deep irony in their campaign against it, write Bernard Keane and Glenn Dyer.

Of all the campaigns against Labor in News Limited publications, its latest one on government debt is the most deeply hypocritical.

The “exclusive” today purported to reveal Prime Minister Julia Gillard would be leaving $14,238 in debt to every working Australian (journalists John Rolfe and Gemma Jones used the wrong workforce number and inflated the calculation, but never mind that). Like the Coalition’s version of recent economic history, the piece airbrushes the global financial crisis from its account of events.

That’s the financial crisis that Tony Abbott recently said had ended nearly four years ago, and that Bank of England governor Mervyn King said on Monday was “far from over”.

The hypocrisy lies in this: let’s assume the Rudd government had done what Christopher Pyne says the Coalition would have done and run surpluses during the financial crisis, thereby ripping tens of billions of dollars out of the economy while the financial crisis and ensuing recession was unfolding. In the absence of the Rudd government’s stimulus packages, and with another $25 billion+ pulled out of demand, Australia’s jobless rate would have soared, particularly in industries like construction, retail and manufacturing. The result would have been massive unemployment across areas like western Sydney — exactly the area whose interests The Daily Telegraph purports to represent. In effect, the Telegraph is telling its readers it would have preferred if many of them had lost their jobs just so we could stay debt free. Still, it’s easy for News Ltd journalists and editors working in Surry Hills and in the bubble of Canberra to cavalierly dismiss the importance of keeping a job for a tradie or shop assistant living in Blacktown.

The Tele’s article invoked some heavyweights to back up its case, including Saul Eslake, who told Crikey he’d been taken a little out of context in the piece. According to Eslake, Rolfe had contacted him to ask if Australia faced a debt crisis. Eslake’s reply was that Australia didn’t, and he compared us with Canada, which will not return to surplus for some years and will likely have a debt approaching 30% of GDP, compared with 11.5% for Australia. Over time, Eslake suggested, Australia might develop a problem due to the actions of a number of governments, including the John Howard government. This prompted Rolfe to ask how soon it would become a crisis, which Eslake answered by noting a debt crisis can come on very quickly — “the lights don’t turn amber, they turn red”. This, said Eslake, was portrayed as him saying a debt crisis was around the corner and it was entirely the fault of this government.

“We have a fiscal problem,” Eslake said, “because what was a temporary surge in revenue before the financial crisis from corporate tax, the GST and capital gains tax was used to fund permanent increases in outlays in welfare programs, public sector payrolls (chiefly by state governments) and subsidies and transfer payments, as well as tax cuts. I was one of the few saying around 2005-06 that this surge wouldn’t last. Chris Richardson did too, there weren’t too many others.”

There are other problems around debt, but they’re not the ones you expect. High-quality debt, like that offered by the Australian government, is in short supply. The Financial Times reported this morning there was a shortage of high-rated AAA debt in the world, as the number of top-rated economies had fallen since 2007. Why is that a problem? Big investors around the world (government agencies, central banks and transnational agencies) need AAA bonds, as do insurers. It’s a form of reassurance for them. That’s why more than 30 foreign central banks now have Australian dollar investments in their foreign reserves, and why giant insurers and investors, such as Warren Buffett’s Berkshire Hathaway insurance group, have been buying Australian government bonds and other assets. Australian bonds pay 3% or better, which is more than you can get in the US, Japan or the UK and Europe. The Financial Times reports:

“The expulsion of the US, the UK and France from the ‘nine-As’ club has led to the contraction in the stock of ­government bonds deemed the safest by Fitch, Moody’s and Standard & Poor’s, from almost $11tn at the start of 2007 to just $4 trillion now.”

Of course, during that time and apparently in defiance of the debt concerns of News Ltd, Australia joined the nine-As club courtesy of the government’s economic management and low debt levels. And if you read the first Stability Review of 2013, issued this morning by the Reserve Bank, you find not a word of concern about the level of government debt, especially federal debt in this country from the nation’s pre-eminent economic manager.

People like simple one liners from their political masters so its no wonder that rusted on neo cons panic whenever Abbott claims that we're all doomed without him and only him at the helm.

longweekend58 wrote on Mar 31^st, 2013 at 4:01pm:

They know the massacre is coming, they just think the sick horse of economic magic will get better if they keep applying hot air.

As usual, labor are on the wrong horse.

MOTR wrote on Mar 31^st, 2013 at 4:11pm:


I could try a balanced and informative post but you would only misinterpret it so why would I say something like "I believe debt was unavoidable but should have been less and there should be more to show for it at the end". you would only say something like you just said.

You are becoming a hysterical thinker.

longweekend58 wrote on Mar 31^st, 2013 at 4:01pm:

Quite simply put, you are deluded.  The article in no way suggests that debt is good. What it suggests is that given  economic climate as a result of the GFC in 2008, taking on debt to support the economy was a necessity.  And what it suggests is that by no means should we never repay debt, but the current economic climate puts us in a position where we are better off then many others, with our debt levels. And, should not be putting such a hysteria on it as Abbott and the likes of you suggest. Further, what has been suggested is that we have a fiscal problem as a result of MIDDLE CLASS WEALTHFARE brought on by the imbeciles like Howard, who did not see the long term problem, but rather a short term opportunity to win votes.

Read properly next time.

longweekend58 wrote on Mar 31^st, 2013 at 4:29pm:

I think that situation could be upsetting because it takes away from labor rhetoric. Tell a lie long enough is labors new motto.

MOTR wrote on Mar 31^st, 2013 at 4:31pm:



Agreed. In Spades.

longweekend58 wrote on Mar 31^st, 2013 at 4:29pm:


If I read the fine print and you read the bulk then how coudl you have gotten so much of it so wrong in your initial reply????  As for Howard, the whole point of many of his middle class wealthfare had NOTHING to do with the poor, hence why it is quite clear we've now become a very needy nation who ACTUALLY believe that being on a middle income is classified as being poor.