David Leyonhjelm on the Government’s balance sheet

The Commonwealth Government was $70 billion in the black at the end of the Howard era. It is now $265 billion in the red, equivalent to $11,000 for every single Australian. And as each new budget brings a deficit, we are going further and further into the red.

Governments should not be in the red. Government debt amounts to a decision on our behalf to have the next generation pay for today’s spending. Nor should governments be in the black to any significant extent. This would amount to providing an inheritance to the next generation. Governments ought to have a neutral balance sheet, leaving to individuals the decision on the size of any inheritance they leave their children.

To get out of the red, the Commonwealth Government needs to run budget surpluses each year until it regains a neutral balance sheet. Each area of government spending should be pared back, with welfare properly targeted to the poor and duplication between the Commonwealth and States in areas like health and education eliminated. And hard-nosed decisions about defence, such as the number of surface warships, are also needed.

The Commonwealth Government should also boost its balance sheet by ceasing the $100 billion of annual grants from the Commonwealth to the States. Each State’s balance sheet could readily withstand this hit in the short term, as they are significantly in the black. Over the longer term, the States can easily constrain their spending through measures such as introducing means testing for public hospitals and schools.

Both the Commonwealth and State governments could also improve their balance sheets through privatisation. Privatising a government-owned business does not generate immediate benefits, because the government relinquishes shares in the business at the same time that it gains cash — it’s a straight swap. However, over time, the benefits from the cash exceed the dividends that would have come from the business under government ownership. As is well known by all except committed socialists, the surest way to make a business suffer cost blowouts and underperform is to keep it in government ownership.

Australia Post, NBN Co and student loans are among the businesses that should be privatised. Last year Australia Post made a $350 million loss, but still paid its top 17 staff an average of $800,000 each. NBN Co made a $1 billion loss, but still plans to deliver broadband services where it is not commercially viable to do so. And if student loans were owned by private banks, they would be far more successful than the Government at compelling graduates to repay these loans when they go overseas.

Of course, such privatisations require an appropriate regulatory environment. While replacing a government monopoly with a private monopoly for which there is little or no competition will certainly assist the government’s balance sheet, it won’t necessarily benefit consumers.

State Governments should sell off thousands of square kilometres of land. This would allow environmentalists to put their money where their mouth is by bidding against developers for ownership of land they regard as important. It would leave forestry to the private sector and give concerned communities an opportunity to own their local areas, providing them with a direct stake in conserving native flora and fauna. At the moment environmentalists have no option but to rely on park rangers, whose idea of conservation is to simply lock the gate.
Privatisation would not prevent government from meddling in markets, but it would ensure that such meddling is transparent and subject to scrutiny.

Governments should also improve their balance sheets by stopping their pursuit of unnecessary risks. For instance, the Commonwealth Government provides a line of credit to the IMF to use as it sees fit, and guarantees bank deposits and State debts. The Government also has a policy of borrowing more than it needs to ensure there are always a lot of Commonwealth Government securities for financial markets to trade. This peculiar form of industry assistance leaves the Government with excess borrowed funds, which it uses to buy shares and other financial assets. If those assets lose value, taxpayers are the losers.

Fixing government balance sheets requires responsible, ongoing action with a clear vision of the objective. It is nothing that Australia could not achieve. What is needed is persuasive leaders with some political courage and a convincing narrative. Unfortunately, I can’t think of any like that.

David Leyonhjelm is a Senator for the Liberal Democrats

This entry was posted in Budget, Economics and economy, Guest Post, Rafe, Wasteful Spending. Bookmark the permalink.

49 Responses to David Leyonhjelm on the Government’s balance sheet

  1. Barry

    But pooftah marriage is more important.

    I wonder why he wastes the energy typing this.

  2. a reader

    But this is the problem Leyonhjelm has. Most of those ideas are completely unpalatable to the general population. It’s extremist liberalism and whilst most of us here would support a lot of those ideas, most people won’t. You could probably put forward a case for flogging off Australia Post. You’ve got buckleys of getting NBN gone-every politician except DL and Bob Day wants it. You’ve got absolutely no chance of suggesting to Australians that banks should get involved with student loans.

    If you want to advance liberalism you don’t waste time on these issues because you will never win them.

  3. Extreme liberalism?

    How can minimising the level of coercion a government uses against its citizens be considered extreme?

    This is like calling a demand for tax cuts or free speech as “hardline”.

    No, sorry, the hardliners want more coercion, per the Soviet hardliners.

    Any excuses to stop government spending. We need to cut spending.

    The longer we wait, the more entitlements will go.

    Or we will end up with a mass of entitlements and decades of low growth. The result will be a small productive economy and everyone else stealing off everyone else. Our living standards will decline and property rights will be whittled down to a nub.

    Not wanting to end up like a basket case like Greece isn’t extreme, it is proof of a pulse and sanity.

    “Extreme liberalism” is as poor a meme as is “brutal austerity”. The level of spending plus any surpluses is the true level of taxation a nation forces itself to endure. By letting people keep more of their income, their brutalisation is lessened or avoided. A wise man once said no nation ever taxed itself into prosperity.

  4. Helen

    I read this with moderate interest until I got to something I have personal knowledge of: “park rangers, whose idea of conservation is to simply lock the gate.”
    Total nonsense.
    Leyonhjelm either doesn’t have a clue about what conservation activities go on in national parks and nature reserves, few of which have locked gates, or more likely he knows perfectly well and he is just doing the standard Shooters Party rhetoric.
    In either case, this undermines the credibility of anything else he says.
    My favourite shooting anecdote: Chatting to a farmer in the NSW Riverina, I asked if there was much pig shooting in the area. To my surprise he did an anti-shooting rave. I said surely they help keep the wild pigs under control? He said they wouldn’t know a wild pig from a bus – a few months ago some idiot shot my prize sow! Well, maybe an accident, in the dark? Accident be blowed; it was in a pigsty!

  5. BrettW

    Regarding Paragraph 4 so happy to learn Qld is in the “black”. Nothing to worry about after all. The $80 billion debt must have been a clerical error that has been sorted. I thought SA and WA in debt also but maybe I misunderstood the situation.

  6. BorisG

    How can minimising the level of coercion a government uses against its citizens be considered extreme?

    it is not extreme. But the public sees it as extreme. Politics is an art of possible.

  7. Helen I’m calling bullshit on you. If you shoot a farmer’s breeding animal they will have you sued or prosecuted. Rural crime is not tolerated in rural communities.

    How does one get close enough to a property to shoot a sow in a pen?

    You are sounding off with typical Greens party rhetoric. Carry on.

    We all know the highest number of feral animals border national parks and nature reserves, take Illundra reserve near Illabo/Bethungra for example.

  8. Brett – on average/aggregate I suppose. Starve the beast anyway.

  9. Stackja

    So how to get ALP to agree to all this?

  10. Nerblnob

    These are all reasonable suggestions.

    They might appear to be fringe politics but less so than Green/Left lunacy which seems to have a direct line to the media.

    Ljeyonhelm should keep battling away with this and his supporters outside parliament should try to get these sensible ideas out into the general public.

    Most Australians I know think of Ljeyonhelm , if they think of him at all, as a looney who is against gun control and therefore wants more massacres.

    I don’t know much about political practice but I do know business and you don’t counter negative propaganda by engaging with it but by continuing with positive propaganda.

  11. Zatara

    “the States can easily constrain their spending through measures such as introducing means testing for public hospitals and schools.”

    How very progressive.

    Maybe we could call it a Medicare Levy.

  12. Diogenes

    Maybe we could call it a Medicare Levy.

    I’ve often said, if people really truely want Gonski, pay for it with a levy, like Medicare, and have it added to all welfare payments with no compensation, then we should see the clamour abate.

    As an aside , we have had 3 years of Gonski money, and it has been a failure according to its enabling act. We are not rising inPISA tests,but falling .

  13. Baldrick

    Excellent. I do hope DL concentrates more on issues like this and freedom of speech, rather than fringe issues like homo-hoedowns.

  14. Tel

    Of course, such privatisations require an appropriate regulatory environment. While replacing a government monopoly with a private monopoly for which there is little or no competition will certainly assist the government’s balance sheet, it won’t necessarily benefit consumers.

    But then you have a business that is private in name only, which is the essence of corporatism.

    The state legislates a monopoly, and then dictates all aspects of how the business runs, while the private sector provides the capital and pretends to own and operate the business. If you are going to have public ownership, might as well be honest about it.

    Look at something like the NBN… it can never be private. If it was just dumped into private hands tomorrow it would immediately be liquidated because it doesn’t make a profit. In order to sell the NBN government would need to legislate guaranteed protection from competition, and the ALP had a go at that but the anti-competitive stuff never got fiercely enforced, as a consequence TPG, Optus, etc are actually competing against the NBN fairly well in all the populated areas… but NBN has this political mandate to provide uneconomical services in sparsely populated areas. The entire concept is screwed up… giving it a nominally private owner seems attractive in terms of flashing “free money” dollar signs for Canberra, but the concept is wrong so it still won’t work.

  15. AP

    In fairness, Howard didn’t even leave enough of a fund to cover the unfunded APS pension schemes. That’s not an inheritance. You didn’t actually say this, but it was inplied. So we’ve been ratcheting up the credit card for a long time now.

  16. AP

    Maybe we could call it a Medicare Levy.

    That’s a great idea. Levy it on income – this is the ultimate means test.

    Seriously, these means tests on everything are just a form of double taxation.

  17. Snoopy

    “On average/aggregate”. Is this a version of the New Federalism that the ALP drags out every few years?

  18. Helen

    Ah, Frank. So telling a funny story means I’m a Greens party rhetoricist ?
    I live in western NSW. The properties are big. It is very easy to get onto a property and steal or shoot without the owners knowing until after the event. Rural crime is hated, but the problem is catching the offenders. Yes, you can sue or prosecute someone but only if you know who they are and/or the police can catch them. There are dedicated police teams investigating rural theft, but it’s a big place and it can be very frustrating when people go to the police about persistent trespassers and the advice is ‘well, just you don’t shoot them’. There are increasing numbers of security fences and gates but plenty of ways to get around them especially if you have river or creek frontage. (Some years ago in conversation with a station owner on the Murray, the issue of trespassers came up; ‘ oh, in the holiday season we’ve estimated up to 5000 (not a typo!) people camp on the bank; it’s Ok is it’s very hot, they stay on the boats, but if it’s cooler they ride their trail bikes everywhere.)
    I know about feral animals – recently went to a workshop on wild dog control, which provided an overview on the distribution, movement of dogs, current control methods (which we got to practise.) The situation re edges of national parks etc. is complex, but the parks people have ongoing control programs mostly in partnership with adjacent landholders. I could go on, but space is limited here.
    However, I would be happy to provide advice on these issues to the Liberal Democrats, including basic info on the size of rural properties and the problems of monitoring and controlling access.

  19. Tator

    One of the big problems with government spending is that there are far too many people falling for the MMT Koolaid believing that Australia does not need to keep a balanced budget as Australia has a sovereign currency. Too many people believing Bill Mitchell and his ilk and not enough listening to Steve Kates, Doomlord, Judith, Henry et al.

  20. Tel

    Bill Mitchell hasn’t got a clue. MMT is fruit loop land.

    https://mises.org/library/upside-down-world-mmt

    Now let’s tweak the scenario one last time: Suppose that Tabitha lends $10,000 to Sam, who gives her an IOU promising $10,500 in 12 months. After the year passes, Sam walks up to Tabitha and sticks a gun in her belly, demanding $10,500 in cash. She hands it over to him, and then he gives it right back and tears up his IOU.

  21. JJF

    The issue is unfunded welfare liabilities – privatisation will not improve the balance sheet much at all. Plus all the really big assets have already been flogged off!!

    Include houses above $2 million in the pensions test

    No unemployment for more than 12 months with a lifetime maximum – no exceptions, excuses or other bullshit!!!

    No more disability support unless you are in a wheelchair!!!

    10 year exclusion for the pension if you have more than $500K in super and “spend” it all within 5 years of retiring.

  22. Yep Helen you’re full of shit. You’re a left wing troll and a fantasist. Fuck off.

  23. Snoopy
    #2138062, posted on September 5, 2016 at 7:56 am
    “On average/aggregate”. Is this a version of the New Federalism that the ALP drags out every few years?

    Snoopy you seem to have missed the part immediately above where Leyonhjelm said to take 100 bn away from the States.

    This is the sort of “innocent error” that you always make when DL writes an article. I’m beginning to think it is intentional.

  24. Helen

    Frank: re ‘Yep Helen you’re full of shit. You’re a left wing troll and a fantasist. Fuck off.’
    ‘ A troll and a fantasist’ ? I only post on matters about which I have genuine personal experience. I avoid posting opinions, so you have no way of knowing what my personal or political views are. Why you would assume I am left wing / greenie when it’s clear I live in a rural area and associate with pastoralists and farmers? Since when would a greenie go and learn how to poison wild dogs (do you know how to use an ejector) ?
    You slagged me off and I didn’t respond in kind but did you the courtesy of a polite factual reply with no name-calling. And you call me a troll?
    (Of course, name calling and expletives can mean that you’ve just conceded that you have no rational argument).

  25. Helen

    PS Frank, your name hot-links to the Liberal Democrats website. Does this mean that you are a spokesman for the party and for David L.? If so, an apology might be in order so that your impoliteness does not damage the standing of the Senator or his party.

  26. You’re lying Helen. Pest control near national parks, nature reserves and so on is disgraceful and it costs primary producers millions of dollars.

    That is a fact. You have defended something that simply does not work and no farmer will agree with you about.

    You completely made up that story about a breeding sow being shot by hunters, and you even managed to smear DL by still associating him with the Shooter’s Party about 15 years too late. So yes, you are a troll.

    If a breeding sow got shot on a farm in a rural area it would make the local paper, at least as a concern for local residents or as part of a police appeal, or as a court case. What paper was this in? Or on the NSW police website? What year/date/month did this occur?

    No such story exists.

    You made up this crap so you didn’t have to argue the merits of reducing government spending.

    Piss off you socialist idiot.

  27. Cut the bully-boy tactics and name the town and date this shooting occured at, Helen.

  28. Stan

    National debt of $11,000 per person. What is the amount per actual taxpayer (ie, paying tax on a net basis)? This is the more realistic measure because we will be the ones paying for it.

  29. memoryvault

    This is the more realistic measure because we will be the ones paying for it.

    Not really, Stan. A more realistic measure would the amount per kid currently under 18, as they are the ones who will eventually be paying it. Or at least the 50% of them who will be net taxpayers.

  30. Senile Old Guy

    Helen I’m calling bullshit on you. If you shoot a farmer’s breeding animal they will have you sued or prosecuted. Rural crime is not tolerated in rural communities.

    If a breeding sow got shot on a farm in a rural area it would make the local paper, at least as a concern for local residents or as part of a police appeal, or as a court case.

    Would never happen, eh?

    Two purebred Riverine buffalo, part of the Northern Territory’s only dairy herd, have been shot and killed in their paddock. Shots were heard near a creek on the 650-hectare leased block near Batchelor yesterday. Killed was Luca, one of the herd’s breeding bulls, and a milking cow called Blue. Top End Buffalo director, Geoff Arthur, said police have been given the registration details of a four-wheel-drive vehicle seen near the creek at the time the rifle shots were heard.

  31. Senile Old Guy – you’ve proven me correct.

    It would turn up in the news.

    How the article you linked to proved that NP control methods work, that DL is a bad man or that we need to keep on spending to perdition is beyond my ken.

  32. Helen

    Ah Frank. I don’t make up stories. That was told to me by a farmer in the Riverina when I was actually visiting his property about 20 years ago. I had no reason to assume that he was inventing it. No, I haven’t checked with the police or the newspapers, I had no reason to do so because on the whole men on the land don’t make up stories – they are generally honest, down to earth and courteous. They rarely let slip a [email protected]#k in front of a woman and if they do, they apologise.
    I am happy to discuss the merits of reducing government spending – I have quite a few suggestions based on my experiences in the bush. However I’d rather discuss them without the expletives and name-calling.
    You did not answer my question as to whether you were a spokesman for the Liberal Democrats?
    To everyone else reading this, my apologies – I did not intend to rile Frank up and hijack the thread. But it is better that we know the character of people who support various parties. This is one of the advantages of the internet – people reveal their true selves by saying things on-line that they would never say to your face. I refuse to lie down quietly and ignore such attacks. In the long run courtesy wins over rudeness. (Although I’ve yet to understand why being polite so angers some people).

  33. Snoopy

    Dotty so all the states are in the black? Is that what you are saying?

  34. That was told to me by a farmer in the Riverina when I was actually visiting his property about 20 years ago.

    LOL. Sure you don’t make stuff up.

  35. Snoopy – you are not illiterate so read this slowly.

    1. Take 100 bn p.a. away from the States.
    2. Treat the mendicants on the same footing as the rest.
    3. On average they are in the black, so the ones in debt stuffed up and need to pick up their game.

    You live in Queensland so I feel sorry for you.

  36. I am happy to discuss the merits of reducing government spending – I have quite a few suggestions based on my experiences in the bush.

    You’re not even prepared to admit that control of feral animals in reserves and national parks is a failure. You just don’t want to see the gravy train cut off. No farmer will agree with you that feral animal control in parks and reserves works at all, particularly those whose properties border such places.

    What farmers and rural journalists actually think about the waste that is animal control in parks and reserves:

    http://www.theland.com.au/story/3906784/deadly-wild-dogs-resting-easy/

  37. More “money well spent”:

    http://www.abc.net.au/news/2016-02-02/dingoes-to-be-used-as-pest-control-in-victoria/7132952

    Amazing the excuses that crop up from “conservatives” when it comes to cutting spending.

  38. That was told to me by a farmer in the Riverina when I was actually visiting his property about 20 years ago.

    Yet you refused to disclose the nearest town to this alleged crime.

    The Riverina, variously defined, is about the size of Tasmania or even larger.

    Any excuse to not cut public spending!

  39. Notice how this hippy leftist rolled up when we were skewering “brutal austerity”! They can’t help it!

    Sad!

  40. 1234

    Absolute tosh from the Senator. If you are prepared to accept the argument that the debt is a burden for the next generation, then you need to acknowledge that the burden of running a surplus today would be carried on the backs of the unemployed. Running a surplus or balanced budget is not cost free. What is clear is that neither the good Senator nor Morrison give a damn for those doing it tough today compared to the importance they place on prosecuting their narrow minded and destructive ideological agenda.

  41. Huh? How do the unemployed pay (income) taxes? Since when has spending more money ever given them jobs?

    What taxes do they pay on money not spent!?

    Obama’s stimulus fail stands testament to this not working, Barro found the Keynesian multiplier averaged out to 0.8.

    If you want more private sector employment, you cut government spending.

    This is why an average PM like Howard got unemployment down under 4% – not because of increasing spending – Keating tried that in 1995 and it backfired, caused a mini-recession and caused him to lose office.

  42. 1234

    Bullshit, Howard did it by increasing household debt (spending) so that it is now the highest in the world. And the dumb luck of the mining boom.

  43. Tator

    Numbers,
    How did Howard increase household debt??
    Did he hold a gun to their heads and make them take out bigger mortgages? Nothing of the sort.
    What legislation did Howard implement to increase household debt?? Which policy was it?? Cmon show us what you are really made of??
    Don’t use the old lefty complaint that the CGT discount and negative gearing caused the price of housing to soar when the ALP state governments were warehousing land and passing infrastructure costs onto consumers rather than taxes paying for them as they did prior to 2000. Restricting the land supply and tacking on what is now over $80k in infrastructure charges and taxes onto vacant land being developed lifted the price of a new house to the extent that they became price equivalent of established homes which drove those prices upwards. This destroyed the old paradigm of first home buyers building cheaply in the outer suburbs and once they built up enough equity and a high enough salary, moving inwards to the inner suburbs.

  44. AP

    Frank Walker from National Tiles
    #2138286, posted on September 5, 2016 at 12:07 pm
    More “money well spent”:

    http://www.abc.net.au/news/2016-02-02/dingoes-to-be-used-as-pest-control-in-victoria/7132952

    Amazing the excuses that crop up from “conservatives” when it comes to cutting spending.

    dingoes eating rabbits = good
    Greyhounds eating rabbits = scandal.

  45. 1234
    #2138652, posted on September 5, 2016 at 6:21 pm
    Bullshit, Howard did it by increasing household debt (spending) so that it is now the highest in the world. And the dumb luck of the mining boom.

    1234 you are a simpleton. Our banks didn’t collapse. They didn’t give out shit loans (as the US government FORCED banks in the US to do so)…

    They could lend and grow their lending portfolio and credit limits & remain and grow in profitability as real incomes rose, at the same time at the participation rate, household wealth and falling unemployment.

  46. 1234

    The point is not whether Howard did it purposely, it happened. Inreased household debt = increased household spending.

  47. tgs

    Fucking lol.

    So Howard reduxed unemployment by increasing household debt but he didn’t actually directly increase household debt it just happened at the same time…

    Keep swinging, slugger.

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