Wayne Swan, Australia's current Treasurer, is proving to be an even better juggler than our own Nick Hubble, who actually knows how to juggle. Yesterday, the Treasurer threw up a bunch of brightly coloured balls in the air and announced it would result in a $1.1 billion budget surplus, down slightly from $1.5 billion the last time he threw things in the air.
We won't dignify most of those measures by calling them savings. If you're a government scrounging for every last cent — and what government isn't these days — it's all about bringing more money forward without actually cutting the kind of spending that wins you votes. For example, Swan has proposed that the company tax now be paid monthly, rather than quarterly. This measure won't go into effect until 2014. But the Australian government reckons it will net them $8.3 billion.
None of this chicanery would be necessary if the mining boom had the decency to keep booming. The Mineral Resources Rent Tax will deliver $2 billion to the Australian Federal Government, according to Swan's numbers. But even that's down from $3 billion the last time he checked. And it's certainly a far cry from the easy money the government hoped to siphon off Australia's mining sector at the height of the boom.
There are two underlying problems here. First, the Treasury and the Reserve Bank have been consistently wrong with their long-range forecasts about China and commodity prices. To be fair, long range forecasts are stupid to make. Yet Australia's fiscal and monetary policies have been based on rosy, bullish, and benign long-range forecasts. That's dumb.
The second problem is more basic. The Australian government refuses to live within its means. It consistently spends more than it earns — and that's being generous, given that government never earns anything. It only takes. But then, this is not just an Aussie problem. It's a government problem, and it's worldwide.
Luckily, there are always poor saps to be taken advantage of when you're a government trying to make up for your own incompetence and greed. The latest example is the budget move that will allow the Australian Tax Office to confiscate 'inactive' super accounts with balances less than $2,000 to which there have been no contributions in the last 12 months.
The previous rule only allowed the ATO to raid the money if the 'inactive' accounts had less than $200 and there had been no contributions for the last five years. This novel way of 'bringing forward' money could net the Australian government an extra $900 million, according to projections. A little super here...a little there...and pretty soon you're talking real free money. Our old pal, Kris Sayce has written about the Australian government's 'super theft' for years. He's continuing to write about it in his new free eletter, Pursuit of Happiness.
Two weeks ago Kris said 'super theft' would be one of the big stories of 2013. It looks as though the big story is taking place sooner than that.
Can you see what's happening here? Australia's government continues to claim it's in the best fiscal position of any nation in the industrialised world. It will be the first to return the budget to surplus, if Swan can keep juggling. This is supposedly a display of sound economic management.
The economy doesn't need economic management by the Fed, the Treasurer, or the court jester. We need a real stock market, not a three-ring circus. But perhaps this is the modern version of Roman bread and circuses: food stamps and rising stock prices. We all know how that Empire ended.
Next week we'll show you what happened AFTER Rome fell. That's the 1,500 or so years that are important to investors today. That interlude holds some clues about the best way to keep your money safe when everyone's coming for it. It's not going to be easy.
In the meantime, we're going to finish off our coffee and review our presentation for the Gold Symposium later today. The world is on fire, as usual. We think we've figured out the endgame to the current crisis though. Stay tuned.
for The Daily Reckoning Australia
From the Archives...
China's GDP Growth Ponzi Scheme
19-10-2012 - Greg Canavan
An Australian Property Boom and Bust all at Once
18-10-2012 - Greg Canavan
The Fed's New Stooge
17-10-2012 - Bill Bonner
Discordian Religious Advice for the Investor
16-10-2012 - Nick Hubble
Electric Cars and Platinum Mines
15-10-2012 - Dan Denning
- The Fake Debate Between ‘Growth’ and ‘Austerity’
- Vulnerable to External Influences – The Economic State of Australia (Part II)
- One Word of Advice For Those Playing the Australian Boom
- End of the Australian Boom?
- Opportunities in Mining’s Takeover Game
About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.