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02 January 2015
by John Kelly

What will Labor Inherit in 2016?

$1 billion dollars a week. That is what the LNP have been “borrowing” every week since they were elected in September 2013. At this rate, by September 2016 they will have “borrowed” in excess of $150 billion taking the national “debt” from $284 billion to $434 billion plus.

There’s a reason why the words, ‘borrowing’ and ‘debt’ are in inverted comas above. In reality, it isn’t debt at all and it is not borrowing and I can only guess how much Joe Hockey would like to say that publicly. In reality, it is the total amount of Commonwealth Government Securities on issue that have been purchased by various institutions and individuals, in Australian dollars, held here and around the world.

They are like shares, purchased as an investment in the future prosperity of Australia. They can be sold on the bond market if, for whatever reason, a buyer needed to redeem them. You and I can buy them whenever an issue is announced by the Australian Office of Financial Management.

Twice a year, the Commonwealth Government pays interest on these securities, just like a publicly listed corporation pays out a dividend. The interest payment is created out of thin air by the Reserve Bank of Australia, our Central Bank. They can do this because they are the only currency issuer of Australian dollars anywhere in the world and because the strength of the Australian economy is the buyers’ guarantee.

So, if you are asking yourself, or if your friends ask, what about Labor’s debt? This is how it should be explained. One thing is for certain. Joe Hockey would never be heard explaining it this way. But oh, how he would like to. How easy would it be to start calling it what it is and to stop worrying about the size of the deficit?

But he can’t. Because all his previous rhetoric about budget emergencies, of ballooning debt, of saddling our grandchildren with the cost of our excesses, of crippling the dreams and aspirations of future generations, will be seen for what it is; a lie, a deception, an untruth, told to instil fear into the hearts and minds of vulnerable people whose only understanding of economics is that of managing a business or a household budget.

Why did he do this? Why did he instil fear into our hearts and minds? Because he wanted to be Treasurer. And now he is and he is stuck with his own rhetoric. On the economics side, it doesn’t matter that Hockey has borrowed $1billion a week since September 2013. In fact, right now it is necessary because private sector investment is in decline. Spending is what currency issuing governments should do when the private sector is struggling. But that is incidental compared with the ambition of a politician.

But what of the Labor Party? Is it too much to expect them to step up to the plate and play the honesty card? To explain what the “debt” they have been condemned for, really is? The Labor Party, who have always put the people first, who have in the past, embarrassed the business community with their economic rationalism, their willingness to spend money into existence to create economic activity that gets people back to work building value adding projects; is this what they want to inherit?

Don’t expect the LNP, this present government, who pander to the will of institutions like the IPA to kick start an ailing economy. Their answer is to cut spending, to make life difficult for those who, given the opportunity, would restore a nation’s wealth. Their answer is to consolidate the existing wealth into the hands of the elite, super rich, the powerful and the influential.

Their answer is to wait, in the forlorn hope that at some time in the future, when the numbers of unemployed have reached a level so high it will encourage the upper echelons of wealth creation to act. Only then will they grab the nettle, demand a lowering of worker’s wages, a change in workers conditions that reflect John Howard’s ‘Work Choices’ and give business the green light to get things moving again. It’s called the ‘trickle-down effect’.

Is that what the Labor opposition is waiting for, too? Have they deserted their roots? Will they meekly accept the dishonesty of the ‘debt and deficit disaster’ mantra and hope that an unpopular government will be voted out, without them having to do or say anything? Do they really want to win government by default as did this government?

They should think ahead before they choose that path. Because when that happens they will inherit the same sort of economic conditions their predecessors did, except that it will be worse. Why? Because Joe Hockey will have continued “borrowing” unable to arrest the mounting “debt burden” that will be his downfall.

Hockey will soon, if not already, rightly be seen as a failure in economic management, a bed he made for himself when he coined the term “budget emergency”. Does Labor really want to inherit that? Do they want to be facing the same absurd false-debt scenario that will strangle their capacity to restore near full employment, improve our stand of living and be true to their mission to first serve the people?

Labor doesn’t want to find itself on the same old Merry-go-Round in 2016, it would do well to come clean now, with a gentle heart to heart chat with the Australian community and tell them how a nation’s economy really works.