Flat White

Throw another bundle of banknotes on the barbie

14 May 2021

1:30 PM

14 May 2021

1:30 PM

If I may plagiarise Anthony Albanese — who plagiarised Michael Douglas in The American President — “In Australia, we have serious challenges to solve and we need serious people to solve them”.  Unfortunately for all Australians, we don’t seem to have anyone serious in positions of power. 

Yes.  This is budget season.  No doubt people are interested in a subject more pleasant.  Perhaps a trip to the dentist for some root canal work.  However, Australians should cheer up.  There is a light at the end of the tunnel, but it’s a train.  Not an Anthony Albanese dream of a high-speed train, but a real train.  A debt and wealth nationalisation train travelling really fast and about to crash. 

Below is a table from the Government’s budget website: 

The government is predicting that, within four years, the Commonwealth’s gross debt will be $1.2 trillion. This does not include the debt of Australia’s state and territory governments who have their own spending self-control problems. Basically, our governments have put our children, grandchildren and great-grandchildren into fiscal penury and are asking us to thank them for it. 

As can be seen, gross debt is projected to nearly double from 2019-20 to 2024-25. Don’t fret. By the time 2024-25 comes around, the gross debt will almost certainly be more because new spending will need to be announced to keep Canberra busy. But let’s just go with these projections.   

A $1.2 trillion debt, or around $95,000 for every household, achieved through bi-partisan policy and incompetence is not a bad effort given Commonwealth debt was $60 billion when the Rudd government was elected.  This is cumulative average annual increase approximately of 20% per annum.  Impressive.  And the Labor Party’s response, let’s spend some more. 

In his budget reply, the wannabe American President Anthony Albanese offered his alternative vision.  Lord know why it would be considered an alternative when all it just a bit of additional spending on top of the government fiscal profligacy buffet.  But hey, when the deficit is projected to well exceed a trillion dollars, what is a couple of extra dozen billions between ideological mates. 

Maybe Kevin Rudd was a fiscal conservative when he said “This sort of reckless spending must stop.”  After all, he never delivered a $100 billion deficit.   

Nonetheless, there is a solution to this debt and deficit addiction problem of all sides of politics.  The debt can be reined in when the international capital markets say non-mas and when the RBA money printing presses lock up. There is a precedent. The Argentina solution. 

In 2009, the Argentinian Government nationalised the private pension system to shore up government coffers. This was the equivalent of confiscating superannuation savings to pay off government debt. 

I don’t want to give the government or opposition any ideas because superannuation balances are a bit over $3 trillion at the moment so not all of it will need to be confiscated. But if you believe that Australia’s gross debt is going to only $1.2 trillion in 2024-25, have I got an investment in a blockchain securitised Harbour Bridge and Sydney Opera House token to sell you. 

Australians should prepare themselves because government debt is going to get much worse before it actually gets catastrophic.  Especially as the policy race seems to be who can spend more. 

And when there is, at some point in the future, a Labor government who want to rack up debt for a Green New Deal or a Universal Basic Income or a Mission to Mars, there will be no credible opposition able to contain them. 

One of Scott Morrison’s go-to lines from the budget is that it puts Australia on the road to recovery. He is half right. We are on a road — not to recovery, but serfdom. 

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