Trillion Dollar Baby?

What will it take to wake the media up to the fact that the way our government is spending it won’t be long before we are a $1 trillion net debt baby?.

Our current federal liabilities (p.121) stand at $1.002 trillion (which is pre COVID19). Have the media bothered to look at the state of the budget accounts? Or are they too busy lavishing praise on rescue packages which have a finite lifespan.

We pointed out yesterday that the “revenue” line could be decimated by the disruption – huge cuts should be anticipated in the collection of GST, income, company and excise taxes. Not to mention huge rebates to be paid to now unemployed workers. On an annualized basis the revenue line could get thumped 30-40% if this continues for 6 months.

So on the back of an envelope, it is not very hard to work out that with a current $511 billion revenue line looking to fall towards the early to mid $300 billion mark against a projected expense bill of $503 billion a deficit of $150bn will open up. Throw on c$150bn of COVID19 stimuli arriving by June 30th and we get a $300 billion budget deficit. Our net financial worth would grow from minus $518 billion to negative $818 billion.

Rolling into next year, it is ludicrous to think that hibernated businesses will have resumed as normal. This means that the following year’s tax revenue line will look as sick as the previous period. The government will be torn shredding the expense line as unemployment shoots higher so assuming minimal budget cuts, it could face another $200 billion deficit taking it north of $1 trillion net liabilities in a jiffy.

Let’s not forget what the states may face. Severely lower handouts from the federal government via GST receipts which will balloon deficits, a trend we’re already seeing.

The states currently rely on around 37-62% of their revenue from the federal government by way of grants. The balance comes through land/property taxes, motor vehicle registration, gambling and betting fees as well as insurance and environmental levies.

All of those revenues lines can dry up pretty quickly. 40% of state budgets are usually spent on staff. Take a look at these eye watering numbers.

NSW spends $34 billion on salaries across 327,000 employees.

Victoria spends $27 billion across 239,000 public servants.

Queensland uses 224,000 staff which costs $25 billion per annum.

WA’s state workforce is 143,000, costing $12.6 billion.

SA has 90,000 FT employees costing $8.5 billion.

Tasmania 27,000 setting taxpayers back $2.7 billion.

Just the states alone employ over 1.05 million people at a cost of $110 billion pa!! The territories will be relative rounding errors.

A lot of the states have healthy asset lines which are usually full of schools, hospitals, roads and land). These are highly illiquid.

Unfortunately, one of the golden rules often forgotten in accounting is that liabilities often remain immovable objects when asset values get crucified in economic downturns. When markets become illiquid, the value of government assets won’t come at prices marked in the books.

How well will flogging a few public hospitals go down politically to financially stressed constituents?? This is why gross debt is important.

The states have a combined $202 billion outstanding gross debt including leases.

Throw on another $150 billion for unfunded superannuation liabilities. Good luck hitting the “zero by 2035” targets some state have amidst imploding asset markets. It simply won’t happen. If only these liabilities were marked to market rather than suppressed by actuarial accounting. The WA budget paper (p.42) notes the 0.4% bump to the discount rate to lower the pension deficit figure. To be fair, they are far less outrageous than US state pension deficits.

How must the State Gov’t of Queensland be praying that Adani keeps plowing ahead? How Greyhound must regret terminating a contract to ferry construction workers to the mine? We doubt the incumbent government will have a climate change bent in the upcoming Oct 31 state election. See ya.

The trillion dollar federal debt ceiling seems like a formality especially as the chain reaction created by the states puts on more pressure for the federal government to inject rescue packages to prop up their reversal of fortune budgets. It is that trillion with a T headline that will get people’s attention.

In short, we ain’t seen nothing yet.

What Australia could learn from Marine Le Pen


I shook my head the other day when a Sydney school rolled over and accepted that male Muslim students could refuse to shake female teachers’ hands to safeguard their religious beliefs. Bill Leak’s follow up cartoon hit the nail on the head. How far will Australia go out of its way to sell its own values out? Talk about a one way street. Cultural sensitivity? Not in my book. This is solely at the feet of the victimhood brigade which is pushed at every opportunity to shame us. The reality is real victims never want to advertise their adversity.


While many of the excuses to allow students the right to refuse a handshake surrounded religious teachings, were it such a matter of theological imperative why wasn’t this emergency pushed decades ago? There is a simple answer to that. We live in an age of apologists. Now the left leaning liberals will take any opportunity to trash our supposed intolerance and try to make a point of how we win moral high ground by yielding everything. We are meant to feel guilty about our heritage.

It would be interesting to see whether local imams pushed the necessity of being able to refuse to shake a female teahcer’s hand 10, 20 or 30 years ago. If they didn’t then you know full well that this is nothing but taking advantage of our weakness.

So when Front Nationale leader Marine Le Pen went to meet the Grand Mufti in Lebanon there was furore that she cancelled the meeting because they were trying to force her to wear a hijab. Good on her. In a sense she was saying “ok, I respect your culture. However you must respect mine. If you can’t meet me on the grounds of discussing what’s in my head as opposed to what is on it we are wasting each other’s time!” I think that would have won her much admiration. Her polling in the first stage of the presidential election looks a done deal and the second looking much better odds. Finally a politician that shows her spine and refuses to pander to the politically correct mob. She is deeply proud of French culture.

We need only look at Switzerland for similar acts of common sense. USA Today reported 6 months ago that the Swiss authorities denied the citizenship applications of two Muslim schoolgirls who refused to swim in a pool with boys based on religious grounds. Authorities cited the students’ refusal to comply with school curricula like all the other children of various races, backgrounds, and religions. “Their refusal to assimilate to and respect the very culture they wanted to take them in and give them the privilege of citizenship was proof enough that they weren’t there to better Swiss society but to force its citizens to adopt their foreign beliefs.”

Step by step we are disrobing the fabric of our society. For all the noise we hear in the press about diversity making us stronger we pave a road which our current  political class seems happy to turn a blind eye to. I have never had an issue with any culture, race or religion openly show pride in where they came from provided it does not require everyone else to have to make sacrifices to help them adjust.

Granting a foreigner citizenship is not a right but a privilege. If I want to show the Japanese that I appreciate being granted permanent residency I don’t go around demanding I wear my shoes inside their houses and jump into onsen hot springs  before I wash my body. I respect their laws and customs. If I don’t like it I can always go home to live the way of my culture. Sadly my culture in Australia gets more foreign by the day because we fail to uphold our own pride for fear of being labeled bigots. It isn’t bigotry to be patriotic. We haven’t got quite to the stupidity of Canada which is looking to impose laws which criminalize Islamophobia. Why not other religions? It isn’t diversity making society greater when it is arbitrarily forced.

Full credit to the religious clerics who see how easy it is to score goals with a government prepared to rest the goalkeeper during the penalty shootout. That is our fault, not theirs.

Enough is enough. Thank you Madame for showing us that cultural enrichment is a two way street. Vive la France or was it VTFF.

Sorry President Trump but you’re dead wrong. It was not the worst call. It was actually the best for Australians


Is anyone really surprised at the outcome of the Trump-Turnbull call? It might have been better handled with a quick email by the sounds of things, assuming of course you believe WaPo’s synopsis. Of course the President was going to take umbrage at the deal to take in refugees from Australia made with Obama. One would have thought two former ‘captains of industry’ might be able to grasp the ‘art of the deal’ but who can blame Trump for having none of it given his clear intention to put “America First!”. However I must protest at the President calling it the worst call. For him maybe but for Australians who have had to deal with 16 months of total inaction with Turnbull at the helm the LNP has indeed made a far worse one by hanging up prematurely on Abbott. Perhaps Tony Abbott was not everyone’s cup of tea but he was no slouch in getting things done, even unpopular decisions. Sure he made some mistakes but he was always well intentioned. Isn’t that a welcome change to most politicians today (Turnbull included) whose main objective in life is to remain in power and will compromise anything to retain it.  Why would a voting public wish to trade a doer for an appeaser? The LNP is still in denial. So weakened are they that the response to Abbott’s speech to young Liberals was next to non-existent.Yet instead of waking up and restoring the one person who could reunite the party they mull the idea of maybe Julie Bishop filling the void, a person a large proportion of LNP voters would regard as the total antithesis of what they want their party to represent.

Let us be honest. Australia has been America’s ally for a long time, especially bonded in blood during WW2. Since then Australia has the enviable record of being the first country to answer America’s call to arms since. Korea, Vietnam, Iraq, Afghanistan etc. Australia has the same pastry as America although our filling maybe meat vs America’s apple. Is Australia’s stance with America irreparably damaged? Not in any sense. Although perhaps the leader of the free world sees exactly through what the polls are telling Turnbull here. While I hesitate to call One Nation’s Pauline Hanson a Trump, she is the closest we have and the polls reflect that given they are now 10% of the preference. If LNP Senator Cory Bernardi secedes with the Australian Conservatives, Turnbull would have no choice but to resign given the fact he failed to reunite a party he divided but promised he could mend.

Of course Trump’s style of politics is unconventional to say the least. However his popularity is far higher than the mainstream media makes out. In a sense he is just the CEO of 330mn employees who are actually his shareholders. In 4 years they can sack him if they so choose. However like I wrote earlier about small business confidence, the likelihood of massive cuts to regulation has been a call to arms for the little corner shop to see the future, something that had been lacking for almost two decades. Don’t dismiss hard numbers. The polls can be skewed anyway you like but self-regulating small businesses live and die by confidence. That has now been restored. I’ve banged on excessively about how ‘confidence’ has been the one lacking ingredient in global markets that central banks and inept governments have had no solutions. People and businesses invest because they see a cycle, not because interest rates are low.

Full credit to Theresa May. The Brexit vote is yet another signal of ‘confidence’ or lack of same in the EU. Of course the soft option was to remain in the EU. That is the problem with the world today. So many are too fixated on being comfortable. Does leaving the EU pose risks? Yes, but equally more opportunity. They’ll have their own laws and currency and not have to be dictated to by a supranational state. The EU is fighting so many fires, especially this year and the U.K. is not the only state looking to exit – Greece, Italy, The Netherlands and while not likely soon, Germany. It works fine in theory but mixing vastly differently cultures, languages and lifestyles was always going to be an insurmountable hurdle. Now the economy is in the dumps we see the EU for what it is – desperate.

Which brings us back to the question of worst call. Turnbull has dithered for 16 months while Australia’s economic position weakens. Make no mistake, Australia’s economy is heading for the rocks. With 2 of the top 6 most expensive global housing markets with price/income ratios way above anything elsewhere, Turnbull throws out the one liners but agility is something we aren’t. While Turnbull may possess a softspot for Obama, sadly he is no longer President. He needs to deal with the future with a negotiator who has little time for platitudes. Turnbull needs to resign. Sadly his Prime Ministership was all about ego and nothing about wanting to make Australia great again. How embarrassing to be yet again the laughing stock of the free world. Make no mistake, no fewer than 5 of my American friends in Tokyo have alerted me to “who is this Turnbull?”. I get the invisibility thing but at the same time I take that as they have exactly the same wish to make our bonds tight as ever as we actually share far more in common than what the media with its regular rants completely overlook.

So perhaps President Trump, may I say for Australia it might have been the best call. The wake up call to get on board and start doing things that aren’t popular but ultimately for the greater good. Good bye Mr Turnbull….”hello, hello…is there anyone there?”

#Make Australia Great Again


Make Australia Great Again. Yes, I buy that slogan. Politics in Australia has plunged such low depths that we need to drain Lake Burley Griffin and plug the fountain that espouses empty rhetoric. I honestly thought it would be hard for PM Turnbull to top the incompetence of the Rudd/Gillard years but his time will be remembered for what he didn’t do than what Rudd/Gillard mismanaged to. Inaction, constant blowing with the breeze, ordering Royal Commissions without all the facts in the hope it might buy him a smidge of popular support he so desperately craves. In his almost 16 months in office he has done nothing worthy of mention and his ‘style’ of politics so brazenly boasted and promised back in September 2015 have not even remotely been delivered. Most conservative Lib voters knew this would happen yet wondered how so many Liberal MPs allowed Turnbull to bury their judgment all based on lousy polls which have proven to be inaccurate. Abbott still would have won by a larger margin than Turnbull last election. I await insults at this statement.

The problem with so many politicians today is that they stand for nothing. That probably could be said throughout the ages. However many of today’s political breed merely want to appear good rather than do anything to make a difference. The serve up a platter of platitudes. The list is long – Obama, Trudeau, Cameron,  Merkel, Hollande, Juncker, Turnbull, Andrews, Weatherill, Palaszczuk, Barr etc. The sad thing about Tony Abbott’s demise was he actually stood for something. He wasn’t without fault (who isn’t) and he wasn’t everyone’s cup of tea but I met the man in person and found him to be the genuine article.  There was no veneer. He was approachable. Foreign countries like Japan loved him (and couldn’t understand why he was turfed). He honestly had people’s best interests at heart. In that sense he wasn’t a politician at all. His service to the community such as volunteer fire fighting were actions over words yet the sneering mainstream media  had to take every opportunity to pot shot a dedicated party man for having several $50 bills in his wallet. Surely he should have been burnt at the stake for such a crime!

Hashtag politics to social media is rife. I wish ALL politicians would stop using it. I think it clouds judgement. A ‘like‘ or ‘share‘ on Twitter or Facebook means nothing in the grand scheme of things. It isn’t an endorsement and I’m sure many hitting ‘like‘ probably haven’t read much beyond the headline. Politicians should just get on with what they’ve been elected to do. If I had my way, social media for politicians would be banned.  Helping constituents is all about the long game. Not a knee jerk response to a Twitter feed.

I look at Brexit and question why certain politicians are taking it upon themselves to override the wishes of their constituents. The whole idea that many are regretting voting “leave” is utterly bogus. Yet the same mainstream media is begging for people to believe their biased discourse that a skewed survey of 2,000 people speak for 17,000,000. Is it any wonder NY Times is offering subscriptions at 60% off. People are tired of reading and listening to the out of touch.

Sadly, Turnbull has divided the Liberal Party, probably beyond repair. Their internal discord is only too evident. He has consistently thrown his loyal ministers under the bus if the public sentiment seems to criticize the action.

It makes sense for Bernardi to split. Record numbers of conservative voters (including me) elected to nominate other parties because they couldn’t consciously fathom their party could stoop to the shambolic antics of Labor. I’d voted Lib all my life except this election. It wasn’t a protest vote – it was that the Libs no longer represented my beliefs. Over half the party had sold out as mercenaries. What is sad is that if they were true mercenaries you’d ask for your money back such is their lack of will to fight for common sense. They are now obviously so caught up in their own folly they believe that sticking their heads in the sand will make the problem vanish. Fat chance.

Despite Turnbull scraping home in the election gone by, if he was a CEO in the business world he would be forced (or if he had the grace, offer) to resign to the board for such a woeful outcome. He knows it too. Yet becoming PM was more about him than serving the nation. Therefore if the Liberal Party remains motionless on the sidelines and fail to boot Turnbull they’ll lose the next election even with a Labor Party that is hardly flavor of the month. If Bernardi gives traditional conservative voters a place to go and Gina Rinehart backs him then I think it has a lot of legs. Australian politicians remain too fixated on small issues when the danger of recession looms large. The more the press gang up on Bernardi the more we’ll know how petrified they are of his chances. Maybe they need look at the NY Times which has seen revenue tumble 50% in the last 12 years with EBITDA plunging 2/3rds.

I want an end to the lost decade in Australia. Many Australians are sick of Politocs. Faith and trust in politicians plunges to new lows. Populist parties which ‘listen’ to the concerns of the people can’t help but gain – people don’t want more government, more regulation, less control and being lectured to about their concerns. Australian culture was founded on grit and toil. It isn’t about trading it for some apparent greater good bannered under the divisive practice of diversity. Make Australia Great  Again.