Our Debt Has Chosen to Identify Itself as Good

I wonder what my bank would say if I asked them to have more patience with my ‘good’ debt?

Seriously, what drugs are Scott Morrison and this Liberal government on?

The Treasurer said it’s “wise” for governments to borrow when rates are low to lock in longer-term financing for investments which will provide major growth.

He said federal budgets in the past do not “make the distinction between good and bad debt”.

“All debt is lumped in together, whether it is for capital or recurrent purposes,” Treasurer Morrison said. 

For the benefit of those actually thinking that Morrison might have a point given that we’re in a ‘low interest economy’ (PS: it’s never a good sign when the Guardian thinks you’ve done something good), allow me to put things another way before I ask you to take one more step to your left…

What would you say if I told you that:

  • the annual interest repayments on the debt are $16.6 billion (and rising) and amount to the 5th largest expense in the budget (yes, you read that right; no, I’m not going to count the federal government giving the states their own GST back as a spending item like the government has; and yes, there’s a cool chart on this below);
  • the $16.6 billion spent on annual interest repayments is:
    • almost as much as what is being spent on assistance to states for public hospitals;
    • more than what is spent on disability support;
    • three times as much as what we’re spending on the navy, more than twice as much as we’re spending on the army – and comfortably more than both put together; and
    • more than what is spent (by the federal government) on public and private schools put together.

For some fun at home, have a go at making your own outrageous ‘where could the money have gone!?’ combo using the table below:

Untitled

AND (yes, I’m saving the best for last)…

  • in the 10 years since our federal government started borrowing money to egregiously fund the junk it has blown our money on (be sure to have a stiff drink or some sedatives on hand before you click that link), the total interest paid has amounted to about $105 billion (rising to well over $150 billion in the next four years alone). Or, in other words, about twice as much as the NBN, nearly twice as much as the increased welfare spending in the same time and five times as much as spent on federal road projects; and
  • the $105 billion spent (so far) on interest repayments is the biggest contributor to our federal debt?

Yes, that’s right: the biggest contributor to our $490 billion debt is the $105 billion of interest paid on it. By miles – and the gap is getting bigger by the day.

I’m sorry Mr Treasurer, I’m confused: is that good debt or bad debt?

(*%&#)!

Obviously, if the federal government had no debt, or very little debt, then it would have the luxury of choosing whether to acquire so called ‘good debt’. However, Rudd, Gillard and Swan sailed that ship away, built some fiber-ready school halls on it and set the thing on fire years ago. Since then, the Liberal government has done nothing of substance to retrieve the situation (there’s plenty that could have been cut from the budget without needing legislation passed in the Senate).

The fact is that we only have one kind of debt right now: catastrophic and negligently acquired debt.

As for the ‘low interest rate economy’ nonsense, remember that interest rates are volatile. Does anyone care to guess what they might be by the time we pay the debt back? Or what the average interest rate and total interest paid will have been over the repayment period? Did any of our insipid Press Club journalists bother to ask Morrison or Turnbull about this?

What trust has this government or Labor’s financial goons and grunts earned such that we should now suddenly trust them to start spending money on ‘good’ things and not boondoggles such as the NBN, the Education Revolution, battery farms or – my recent favourite – pumping water up a hill just to watch it trickle back down again (because any time you get the opportunity to blow at least $2 billion and literally take energy out of our electricity grid without a feasibility study, then you absolutely must do it before the chance passes you by).

And to think this is merely the entree to next week’s main course.

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58 Responses to Our Debt Has Chosen to Identify Itself as Good

  1. alexnoaholdmate

    Excellent post.

    More of this Marcus, please Sinc, and less of Lucius.

  2. E.

    Excellent post.

    Should be front page news.

  3. Roger

    Listen!

    The melancholy, long, withdrawing roar of potential greatness.

    [With apologies to Matthew Arnold.]

  4. The Quit Farmer

    I can think of only one response to this great article Oh shit.

  5. Dr Fred Lenin

    That pratt. Orrison me tioned low interest rates encouraged pollies to borrow money to waste ,,on foreign “aid” ,welfare seeking “migrants” u,n,communist ” climate change ” and other msm pleasing rubbish .Hopefully Trump and Brexit will increase western productivity and creat a demand for expansionv capital thus raising rates world wide . This will reward peopke who have been thrifty and saved money and punish soendthrifts and cowbou[y borrowers ,it will also bring sanity to housing prices ,ans hopefully curtsil pollies and their owners from wasting money . How about financial penalties for spendthrift pollies and punlic “servants” wouldnt they hate to lose all their ill gotten gains ?

  6. stevem

    They were elected to be fiscally responsible – at least more so than Labor / Greens. They now find themselves unable (read unwilling) to reduce spending. They are equally unable (read unwilling) to raise revenue.
    They have therefore taken the only course open to the to reduce the deficit – change how it is calculated. They have clearly raided Hockey’s left over supply of cigars and Turnbull’s supply of mirrors for this one.

  7. Qley

    Excellent post.

    More of this Marcus, please Sinc, and less of Lucius.

    +1

  8. Tim Neilson

    They are equally unable (read unwilling) to raise revenue.
    Their super changes will raise some revenue. They’re always prepared to give their own supporter base a vicious headkicking in the (supposed) national interest.

  9. sabena

    One important point-interest rates may be low at present-but they will almost certainly rise.They will rise for two reasons-first they are not working as a matter of economic policy and second as government debt rises the indebtedness is less secure and the likelihood of a default rises(like Greece and others).

  10. Qley

    They now find themselves unable (read unwilling) to reduce spending

    A reduction in the rate of increase and theyll probably take it as a victory

  11. Bruce of Newcastle

    So we are only paying 100*16.6/490 = 3.4%.
    Each $50 billion deficit then adds another $1.7 billion to that.
    The four year forward estimates means we’re then paying 16.6+4*1.7= $23.4 billion a year.
    Four more years after that is $30.2 billion.
    Now increase interest rates to 7%.
    We’re then paying $62.1 billion in interest: the largest single item in the entire budget.
    Just 8 years away.
    Not beyond possibility, 7% is about average for the last 50 years.

  12. .

    the $16.6 billion spent on annual interest repayments is:
    almost as much as what is being spent on assistance to states for public hospitals;
    more than what is spent on disability support;
    three times as much as what we’re spending on the navy, more than twice as much as we’re spending on the army – and comfortably more than both put together; and
    more than what is spent (by the federal government) on public and private schools put together.

    We could literally – and I have worked this out in true nerd like fashion – buy tactical nukes, aircraft carriers, more fighters, tanks, SP artillery, airlift and several more divisions per year.

    If we spent what we did on debt in addition to the ordinary military spending, we could run about fourth/fifth place behind Britain/France/Israel.

    If we spent the debt on the military we have accumulated since 2008, we’d be second only to the US.

    Yet, with all that waste, we remain a client state of the US, bound to small-scale engagement in their wars, regardless of merit.

  13. Roger

    Pre-budget discussion between PM Maladroit & ScoMo:

    ScoMo: “PM, we need make cuts in the budget.”

    Maladroit: “Yes, but how are we going to pay for them, Scott?”

    ScoMo: “Aye, there’s the rub.”

  14. Rohan

    It’s official then. At some point they’re going to have to raid super. $2 trillion+ nest egg sitting there gathering dust, just waiting to be fleeced.

  15. Rabz

    $490 billion in debt. Just bloody wonderful.

    I wonder how long it will take for labor and the greenfilth to rack up the trillion?

    There are certain politicians who should, at the very least, be languishing for the remainder of their pointless lives in gaol over this.

    I’m looking at Rudd, Gillard, Swan, Wong and the Nuclear Milkman as the most egregious and obvious offenders.

  16. john constantine

    It is the nations net debt that matters.

    Net debt after the future fund is confiscated.

    Net debt after superannuation funds are confiscated.

    Net debt after socially unjust housing profits are confiscated.

    Net debt after socially unjust corporate profits are confiscated.

    Venezuela just took all the worthwhile stuff owned by foreigners, so doing that reduces net debt by heaps.

    [always the Zimbabwe method of printing trillion dollar banknotes, as the left know governments can’t go broke borrowing when they have the printing press.]

  17. john constantine

    It is the looking forward unfunded liabilities that are set in concrete that should be added as well, this money is already spent, the accounts just haven’t fallen due yet.

    NDIS, shortencare will fundementally transform welfare payments.

    The crumbling infrastructure where trains can’t run in summer on old lines and rural roads are so bad that speed limits are being cut to 80 from 100 because repairs are unaffordable.

    Medicare for the demographic boomer bulge hitting the gold plated final stretch.

    Australia already owes a trillion [counting state debt piles and near term liabilities]

    The fundemental transformation of australia into a debtor nation, sold out to transnational globalism was the full intent of the filth, and they won.

  18. At some point they’re going to have to raid super. $2 trillion+ nest egg sitting there gathering dust, just waiting to be fleeced.

    Already done just not fully implemented yet – can’t go spooking the horses.

  19. stackja

    RGR could have borrowed from Khemlani!

  20. zyconoclast

    Truly Orwellian.
    I expect the treasurer to start saying things like ‘double plus good’ at the end of sentences so we know when to cheer.

  21. gbees

    I’m for jailing the incompetent fools who got us to this position. How is it that no one is held accountable for wrecking Australia’s finances?

  22. Philippa Martyr

    I choose to identify my personal debt as good as well.

    I don’t think it would really be in the nation’s best interests for me to pay it off.

  23. stackja

    gbees
    #2368300, posted on May 1, 2017 at 1:43 pm
    I’m for jailing the incompetent fools who got us to this position. How is it that no one is held accountable for wrecking Australia’s finances?

    Electorate keeps forgetting and forgiving the ALP.

  24. Dr Fred Lenin

    Good post Markus.tell me , is borrowing more money to pay the interest on the money we borrowed previously good debt or bad debt ? Is borrowing money at interest to give to foreign “aid” ,and imported welfare bludgers who hate us and will never fit in , good debt or bad debt ,

  25. Philippa Martyr

    I also identify as a size 10, 6 foot tall woman of immeasurable beauty.

    Bow down, mortals.

  26. alexnoaholdmate

    “I also identify as a size 10, 6 foot tall woman of immeasurable beauty.”

    Don’t be so hard on yourself, Philippa.

  27. gbees

    Ok – I’ve had a go at expense reductions. We need $110Bn in expense cuts to drop spending to $380Bn which would mean a $30Bn surplus at current interest rates.

    remove State Assistance – $60Bn (states to receive only their GST cut)
    remove support for Public Hospitals – $18Bn (this is a state responsibility not federal)
    remove Job seeker support – $11Bn (no support, get a job ASAP, you parents weren’t paid so neither are you)
    remove Child Care rebates – $7.5Bn (pay for it yourself, I had to. My wife gave up work to stay at home with the kids and we struggled for quite a while, you can too)
    scarp Private Health rebate – $6Bn
    That = $102.5Bn in cuts

    we need something done soon. Suggest some revenue options also (GST to 12.5%, Laffer Curve:- income tax flat tax 12.5%, corporate tax rate to 15%; have to do projections on these numbers yet)

    These are my suggestions.

  28. Stephen

    As Graham Kennedy might have said – “Faaarkk”
    I do not understand why the Libs in parliament at every broadcast are not attacking that economic moron Swan to remind the voters who initiated this tragic situation.

  29. Philippa Martyr

    “I also identify as a size 10, 6 foot tall woman of immeasurable beauty.”

    Don’t be so hard on yourself, Philippa.

    So true. I have the immeasurable beauty part already.

    As you were.

  30. H B Bear

    I do not understand why the Libs in parliament at every broadcast are not attacking that economic moron Swan to remind the voters who initiated this tragic situation.

    The Lieborals own this mess now. The time to blame Goose Springsteen has passed.

    What you are now seeing is UniParty policy, first seen at State level in WA under Emperor Barnett who handed over a bankrupt State to the Liars who will just keep spending anyway.

  31. Dr Faustus

    Nobody involved in finance will take Morrison’s comments as anything other than political spin – a desperate attempt to try to stick a fig leaf in front of a prick of a budget position.

    Suspicious minds identify this as a segue to the inevitable asset theft and tax hikes that the Government can’t avoid if it pretends to control the budget deficit without the political hemlock of reducing vote-herd expenditure. Table 3.1 shows exactly how locked-in spending is.

    The sudden emergence of ‘good’ and ‘bad’ debt (and the implication that government explicitly hypothecates between the two when it finances its deficits) is Morrison’s tragic attempt to create an ex nihilo argument that allows him to simultaneously argue:

    Mr Speaker, I make no apology that the budget provides for [a rail link to Barnaby’s electorate, Pyne Class submarines, etc] – because, Mr Speaker, that is Good Debt

    Mr Speaker, I make no apology that the budget provides for [the increase in the top marginal tax rate to 55%, the introduction of death duties on estates valued at more than $2 million] – because, Mr Speaker, this will be used to eliminate Bad Debt

    Shallow, flabby, and (as usual) argued without any support or conviction. But Prime Minister Shorten will love the concept.

  32. Sparkx

    Philippa, are you channeling Juliar Gillard?

  33. Robber Baron

    The problem with Cats on this site is that they do not see things through the eyes of Malcolm the Magnificent. His view from his Point Piper mansion is magnificent. Debt and the running of government is for the servants and little people.

    Marcus has provided a magnificent summary of what the government has gifted the taxpayer. It is depressing reading. But Malcolm’s pressing issue is his legacy. He wants homo marriage, muzzo immigration and open borders and green Gaia slavery. Debt really doesn’t matter does it?

  34. WolfmanOz

    A depressing but outstanding post !

  35. Baldrick

    We’re in trouble if governments are the sole arbiters of identifying good and bad debt.

  36. Trader Perth

    Why not sell Tasmania to China?…I’m being serious here because its been done before. Alaska was sold off by Russia, Missouri was sold off by the French to pay down debt. And lets be honest, would we really miss Tasmania and those Tasmanians? Hell…lets sell off S.A. too, we get to keep the good bits of Oz and sell off those bits that are bleeding us dry.

  37. The Vengeful Ghost of Fiona Watson's Moggie

    Excellent post Marcus, well done.

  38. Lordazrael

    Technically what he said was true. Where it goes off the rails is the Npv calc with costs underestimated and revenues over estimated

  39. Trader Perth

    If we sell Tasmania for $30,000 per acre or $12,000 per hectare we could clear Federal Govt. debt.

  40. Trader Perth

    Maybe no one in Canberra interested in my idea because gay marriage is more important…

  41. Beachside

    My, how the mighty have fallen.

    Morro the fiscal magician – sleight of hand trickster, smoke and mirrors all round book cooker.

    Morro is but a mere shadow of his former glorious self.

    He’s been royally Turnbulled!

    We’re next 😟

  42. Zulu Kilo Two Alpha

    Why not sell Tasmania to China?…I’m being serious here because its been done before. Alaska was sold off by Russia, Missouri was sold off by the French to pay down debt. And lets be honest, would we really miss Tasmania and those Tasmanians? Hell…lets sell off S.A. too, we get to keep the good bits of Oz and sell off those bits that are bleeding us dry.

    Why not sell both South Australia and Tasmania back to the British Crown, to serve as penal colonies?

  43. Trader Perth

    Welcome aboard Zulu….

  44. Snoopy

    (there’s plenty that could have been cut from the budget without needing legislation passed in the Senate).

    Can someone quantify this?

  45. Libby Zee

    (there’s plenty that could have been cut from the budget without needing legislation passed in the Senate).

    Can someone quantify this?

    Probably not. I looks like Marcus has detracted from an otherwise very good post by adding that throwaway line.

  46. Squirrel

    “our federal government’s debt ($490 billion) is greater than its annual revenue ($411 billion)”

    A VERY important point to make. The usual slimy presentation of this ugly truth is to express it as a percentage of national income – which probably seems perfectly reasonable to public sector types who think that all private wealth and income (except their own) is theft.

  47. notaluvvie

    In the Westminster system it’s not Mr Treasurer, it’s simply: Treasurer. Same applies for Prime Minister, ie no Mr or Madam or other rubbish..

  48. Tel

    If we sell Tasmania for $30,000 per acre or $12,000 per hectare we could clear Federal Govt. debt.

    Shorten would have that debt back again in three years.

  49. Tel

    Strictly speaking the Commonwealth does not have the constitutional power to sell the land out from under a state.

    That probably wouldn’t prevent them doing it you understand, I’m just putting in the token protest as a formality.

  50. marcus

    (there’s plenty that could have been cut from the budget without needing legislation passed in the Senate).

    Can someone quantify this?

    Probably not. I looks like Marcus has detracted from an otherwise very good post by adding that throwaway line.

    Hi Snoopy/Libby – I heard on Sky the other day that it was roughly $100 billion. I looked everywhere on the net for a link to provide, but could not find anything. Therefore, while my line holds true, I did not have enough to add in the figure (which I consider needs backing up by a reliable source).

    Personally, I would have threatened the entire parliament and public service with a complete cut down of perks unless/until I got what I wanted by way of budget reform. For example, you wouldn’t have needed legislation to introduce a government and public service-wide economy class air travel policy and $100 per night limit on hotel rooms.

    Cutting the ABC’s budget in half would have also been a piece of cake too.

    And so forth…

  51. JC

    The Treasurer said it’s “wise” for governments to borrow when rates are low to lock in longer-term financing for investments which will provide major growth.

    He said federal budgets in the past do not “make the distinction between good and bad debt”.

    “All debt is lumped in together, whether it is for capital or recurrent purposes,” Treasurer Morrison said.

    Strictly speaking Morrison does have a point. It would be good to see the debt segregated and shown in separate categories.

    How about a proposal I’ve seen before. How about putting all Liar’s Party accumulated debt and present it to the public?

  52. marcus

    Snoopy/Libby – I FOUND IT!!!

    It wasn’t Sky at all – it was David Leyonhelm on this very site:

    There would inevitably be plenty of reasons the Government could manufacture for not applying a bottom-up approach with its upcoming budget, and for not seeking to abolish unjustified programs. The Government often blames the Senate for blocking spending cuts, and it is true that $340 billion of the annual Commonwealth Government spend is based on legislation passed by previous parliaments. So if cuts are to be made to that spending, Senate approval is required. But $100 billion of the annual Commonwealth Government spend is not underpinned by legislation. So cuts to this spending can be achieved in the budget bills, which are routinely passed by the Senate. No additional legislation needs to pass.

    http://catallaxyfiles.com/2017/04/27/david-leyonhjelm-alternative-budget-2017-18/

    This has been annoying me all day! Thank you both for giving me that last kick to go on and find it – I’ll add in the link 🙂

    PS: the figure still needs to be backed up, but at least I can now show I wasn’t pulling the line out of my rear.

  53. John A

    Robber Baron #2368399, posted on May 1, 2017, at 3:24 pm

    The problem with Cats on this site is that they do not see things through the eyes of Malcolm the Magnificent. His view from his Point Piper mansion is magnificent. Debt and the running of government is for the servants and little people.

    Marcus has provided a magnificent summary of what the government has gifted the taxpayer. It is depressing reading. But Malcolm’s pressing issue is his legacy. He wants homo marriage, muzzo immigration and open borders and green Gaia slavery. Debt really doesn’t matter does it?

    Well, then, we had best ensure that his political execution happens sooner rather than later, right?

  54. Libby Zee

    Snoopy/Libby – I FOUND IT!!!

    It wasn’t Sky at all – it was David Leyonhelm on this very site

    Thank you, Marcus.

  55. Two years ago, many Catalaxxians were belly aching about the Labour Party running up debt and buying votes.
    Then Liberals would come in, pay down the debt, Labour would laugh their guts out, and get voted back in again.
    Many wanted the debt to be segregated out and left for the next Labour government.
    Well, you’ve got your wish and now you’re complaining?

    “The danger to America is not Barack Obama, but a citizenry capable of entrusting a man like him with the presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America. Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools, such as those who made him their president.”

    Just delete O’Bama and insert “Liberal Party.”

  56. Rabz

    Debt really doesn’t matter does it?

    Especially when a shedload more of it will nicely “fund” the items he wants as his legacy.

  57. True Aussie

    Serious question, who does the Australian government owe a debt to and what happens if they simply refuse to pay the interest and/or loan back?

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