The Australian Government is Scrounging for Every Last Cent

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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 examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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8 Comments on "The Australian Government is Scrounging for Every Last Cent"

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Ross
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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.

Ross
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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… Read more »
R
Guest

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!

Rob CA
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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… Read more »
TheForms
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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.

John Paul
Guest

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!!

Rod
Guest

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.

Garry
Guest
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 –… Read more »
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