For the best browsing experience on this site, we recommend you upgrade your browser
AboutSubscribe Your Editors Contact Us RSS

The Australian Government is Scrounging for Every Last Cent

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.

Regards,

Dan Denning
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

Dan Denning
Dan Denning is the Editor-in-Chief of The Daily Reckoning Australia and the author of 2005’s best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 as a small-cap analyst. From 2000 to 2005 he was the managing editor of Strategic Investment, where he recommended gold and warned of the US housing bubble. Dan has covered financial markets from Baltimore, Paris, London and, beginning in 2005, Melbourne Australia, where he is the Publisher of Port Phillip Publishing. To follow Dan's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.

8 Comments

  1. Ross says:

    I’m with Ambrose on this one….

    http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html

    It sounds too one trick xenophobe wonder Karl Denninger for my liking at first glance. It could also lock in hard asset owner privilege at an unsustainable social level given the new political circumstances.

  2. Ross says:

    After Rome fell we became neos. When Thomas got the Aristotle translations we became human again for a while … but then the neo’s came back with their isms.

    Here’s one for the times when the neo-Platonists and the intolerant Abrahamics still held sway:

    This freak held that “Villani’s reasoning for Rome’s decline was the schisms of the Church and rebellion against the papal institution”

    http://en.wikipedia.org/wiki/Giovanni_Villani

    But we go with Gibbon who held in his Decline and Fall of Rome that it was Abrahamic intolerance transmitted out of a soft cushioned tribune dominated centre that killed it.

    What did they do then? They locked it down City of God style with superstitious nonsense; every word was audited and twisted by the monks to meet the needs of the day which was ignorance for all but the few.

    Thomas and the Gutenberg press made headway for a while before Luther and the social Darwinists screwed it all up again.

  3. R says:

    Take your money out of the system. Buy Gold, silver, and place it next to a loaded shotgun in a safe. That way when the ATO comes to collect my gold, I can shoot them in the face with my shotgun!! Just kidding. They will never come for it, they an only ask nicely. They don’t know its there anyway. Gold and silver, best investment evar!

  4. Rob CA says:

    They will be stealing stolen $555 million and will replace it with a promise? There is no mention if the “lost” superannuation fund might have a death or disability benefit attached to it as many do. They take the money, you lose the benefit and then can’t make a claim because the premiums are no longer being serviced.

    So a young person saves a bit of superannuation after listening to their dear old Dad who says $2,000 today saved until 65 years old with the power of compounding interest will be a tidy sum. Young person does the right thing (ie. saves money), takes a year off to study (and run up a student loan) only to find out a year later that they have been robbed and also now have no insurance cover and that Dad is a fool when it comes to trusting the government. Lifetime lesson learned.

  5. TheForms says:

    To paraphrase Lysander Spooner: Government is like a highwayman. No worse, at least a robber knows that when he takes your money he is not really entitled to it. Further, the robber does not expect you to bow down before him as you empty your pockets.

  6. John Paul says:

    Forget the Gold & Silver, that won’t trade when the stuff REALLY hits the fan. Stock up on FOOD & maybe drink Whisky etc and make sure the guns are loaded. Doomsday Preppers rule!!

  7. Rod says:

    Just vote out your sitting member at the next election. If we all do it there will be a complete change, including the execrable Swan and the maleficent Gillard. If we do it twice we will get a better democracy. Kindly spread the word to your contacts. You will then get to keep your Super.

  8. Garry says:

    Swan’s display of sound economic management is nothing but a smoke and mirrors game – Has been since he took office. Though his ability to speak through wet concrete has improved – It had to, since not even he knows where all the money went. He inherited a $20b surplus, no net debt, and $70b in net assets – Now the surplus is all gone, and he’s spending $100b per year more than he was five years ago. When he gained office back in 2007 the gov’t spend was $270b a year, now it’s $370b. $10m here, $50m there – it all adds up. Trinkets to Swan though

    Since the low hanging fruit from the mining Magic Pudding has been taken off the Federal menu, and the states have rebelled with their own responses(royalties), we can bet on new and insidious ways to find some cash(inventive taxes). Another popular method the worlds greatest treasurer has employed for some years, is now coming to an end – ie: Sell Australia itself. That is, put our best food producing land on the block to the highest bidder(sell to foreign government’s even), which at the present is semi topical, news wise, but will prove to be the cause of his nervous breakdown when the media cross hairs get him in their sights. Indeed, it’s a land mine ready to take the legs from under him when the depth of his chicanery is revealed.

    Asset sales – that’s Wayne Swan’s business mantra. This is the Lucky Country, we still have plenty of assets to sell. However, his luck is fast running out, and people are beginning to say things about the worlds greatest treasurer.

    As for the opposition party being a superior political breed – Well no. Opportunities in the target rich environment for killing the incumbents have completely evaded them, so one might reasonably guess they will fall back on the god awful mess they inherited. Theirs is a no policy zone too

Leave a Comment