Australia's growing debt a 'ticking time bomb', says TD Securities...

[Trump]

Australia's growing debt a 'ticking time bomb', says TD Securities

Jens Meyer

Published: August 30, 2016 - 11:27AM


Australia's fiscal position is becoming increasingly untenable, even if current debt and deficit metrics remain low by global standards, TD Securities has warned in a strongly worded note to clients.

"The government is borrowing record amounts to consume, not invest - a ticking fiscal time bomb," the investment firm's chief Asia-Pacific macro strategist Annette Beacher said on Tuesday.

TD Securities expects $100 billion of new bonds to be issued every year over the next three years at least, as the inability to fix the budget due to populist stonewalling sparks an "explosion" of government bonds.

Her warning comes a week after Treasurer Scott Morrison raised a scenario where no budget savings were passed in parliament, warning that if combined with a further deterioration in economic parameters the fallout would be a trillion dollar debt burden over the next decade.

"As a trillion dollar debt amounts to around 56 per cent of GDP, goodbye AAA rating," said Ms Beacher, who has been covering the Australian economy for a quarter of a century and has worked in Treasury. "This scenario sounds implausible, but actually has a non-zero risk given reform paralysis and still-volatile commodity prices."

Ms Beacher said global investors usually reacted with disbelief to warnings that Australia could be at risk of losing its AAA rating, noting there were few other developed countries with a fiscal deficit of just 2.5 per cent GDP and net debt of less than 20 per cent of GDP.

But she said it was the direction that these metrics had taken in recent years that was of concern.

A particular worry for Ms Beacher is the structural jump in public expenditure and she blamed the former Abbott-Hockey government for missing an opportunity to rein in spending.

"In the 2014-15 budget, the newly elected ... government gave up on expenditure restraint and spending has been consistent with past recessions ever since," the Singapore-based currency and interest rates specialist noted. "How would this play out if a recession actually occurred?"

Even more problematic for her, the GDP measure of government spending shows an overwhelming skew towards consumption in recent years, with investment spending all-but non-existent once GFC-inspired projects were completed.

"The government is only borrowing to consume," she said.

Ms Beacher pointed to a recent warning by outgoing RBA chief Glenn Stevens who said: "The case for governments being prepared to borrow for the right investment assets – long-lived assets that yield an economic return – does not extend to borrowing to pay pensions, welfare and routine government expenses, other than under the most exceptional circumstances."

Ms Beacher also warned of complacency about Australia losing its coveted AAA rating, after Standard & Poor's in early July put the government on notice by attaching a negative outlook to the rating.

"Losing the AAA rating may not be the market mover that it once was, but in the event of another global economic, financial or geopolitical shock, experience proves that for peripheral countries like Australia, it could find itself further down the queue when it comes down to attracting global capital without a AAA rating," she said.

http://www.theage.com.au/business/th...30-gr48i3.html

[superyob]

But Labour and the greens will save us 160 million bucks by sinking the plebiscite that will lose badly for them. Just imagine how far that can go to restoring the many billions in debt they created and continue to allow to fester...

[Trump]

Partisan discussions as to who is to blame for the debt are futile. Both teams are equally guilty because the system allows them to spend like there's no tomorrow. At the moment, there are no curbs, checks or balances that can hold the pollies, but more importantly the bureaucracy, accountable and restrain their profligate spending.

[castellan]

Don't worry about it, as I have never come across hard left wing people who care to bother anything about debt much at all, they just say we are a rich nation don't you know.

Oh thanks ! how in lighting and progressive they are.

[Mercury Bullet]

Always labor and the greens that wrecked the budget...

I blame little Johnny and his outrageous middle class welfare that people are now addicted to and we can't get rid of.

My sister makes more from her family tax benefits than I make whilst putting food on your table for you to eat.

[78xcgxl]

Here comes all the Liberal voters blaming Labor for all the country's debt...... Watch this video and see which party runs a better economy.....


https://www.youtube.com/watch?featur...&v=BO6UcfJcUcs

[GO FURTHER]

Let's put this into some perspective so we can see just how serious " a trillion dollar debt burden over the next decade" as predicted by Ms Beacher is for us Australians....

If we look at the USA with their incredible debt which is now approximately $19.3 Trillion and equate that per capita, then this means the USA national debt is equal to each person ( approx 324 million population) owing US$58,641.

If we take AUD$1 Trillion debt and covert that to US dollars at say the current 75 cents, then per capita, thats US$750 Billion, then each Australian (approx 24 million population) owes US$31,250.

So in ten years we could approach half the debt per capita of the USA.
However, in another 10 - 20 years after that, if our debt was to increase, and even allowing for the growth in the Australian population, we could possibly be looking at national debt amounts close to what the USA has, for our kids and grand children.

[Adamz Ghia]

Throughout our short history the Labor Party have been great reformers, Medicare, HECS/ HELP, bank deregulation, the floating of the dollar, our education system, all a credit to Labor. But they cannot manage the money. The Liberals have traditionally been better at that side of things, so I don't blame one or the other as the country needs both parties to be successful. But the last 10 years has seen both sides turn feral and as a country we're poorer for it. Howard, love him or hate him, was the last decent politician we had, these days they're all a mould of Kevin Rudd, all about the 24 hour news cycle.

[superyob]

Queensland, under Joh, had free hospitals long before Medicare as well but I'm not sure how it was funded...

[mcflux]

Oh don't you worry about that

[MattSAU2XR8]

Not sure if anyone else has considered this, but if the budget continues to blow out then it seems the only sensible option is to pay more tax, not necessarily a lot more, but at least a little more.

Present deal seems to be that:

1. Income tax goes up to about 37 % plus medicare, and there is GST on most items

2. Spending greatly exceeds income (tax revenue) since we have (compared to most other countries) very good infrastructure, hospitals and healthcare, policing, education, and social welfare.

3. To make up the shortfall the government borrows money from overseas, or issues bonds which are bought presumably by overseas parties, or sells off infrastructure (which must result in the overseas buyer extracting money from our country, since why else would they buy it)

4. As the government borrows more money and sells more things the interest bill for borrowings and rental bill for infrastructure gets bigger each year

5. When we all eventually retire the government will have much less money available to pay our pensions, or for our healthcare or accommodation, since they are spending money on interest and we are renting our own infrastructure back.

6. It is almost impossible for the government to say no to any spending, eg.
- New and expensive cancer treatments or prosthetic joints
- More police or paramedics or military
- More university and TAFE and other training places
- More maternity allowance money
- More childcare allowances

There would seem to only be two logical ways to avoid an ever expanding budget blowout and these are:

1. Consider increasing tax rates (income and GST) sufficiently that each year more money is collected than is spent on services, so that debt can be cleared, and then tax wound back if it is cleared. Arguably a fair price for having most things provided by the government...?

2. Consider decreasing services, acknowledging that this means decreasing healthcare, policing, education, welfare spending. And also means less pay for people working in these industries, and hence less tax paid by them...

Neither is particularly palatable, but this is what happens when successive governments spend more money than they collect. As a country we are not collectively smart enough to vote for more more taxes so the debt will continue to increase indefinitely

[castellan]

Australia should of been in a position by now to lend money to other nations and not borrow one cent from other nations and it's the same with the USA, something is very wrong we are being played for fools or we are idiots.

If a person started off getting a trade and stayed in debt his whole life that person by rights would be a fool or an idiot, would he not ? or something is wrong, he has been a victim of criminal acts set up that work against him. I have seen the tricks that are played as there are many, so I shouldn't wonder it's the same with nations being played with as well.

When my grand dad come to this a country, he only let my mum stay here because the nation had potential, but said the people are nice and a good people, but they are mainly simple minded foolish idiots and a whole lot of other things he said, but his own country's younger generation became foolish as well and fell into the traps set out for them as well.

The USA is truly bankrupt now in fact and it has no hope in paying it off, so what's it going to do ? let China take it's place over the USA dollar, I don't think so, they will never let that happen or you will see WW3 ! that's why the NWO is pushed for, it's a new game play.
One world government lead by the so called Jews and there Nazi god called Moloch will look after it all and enslave you all under there madness and total greed.

[b0son]

The real problem is that if you look at personal wealth versus tax burden (total tax burden, not just income tax), the top 20% are not paying their fair share. If the top 20% have 80% of the wealth, they should have 80% of the tax burden. This is not the case by any stretch.

[superyob]

Axe middle class welfare/entitlement/greed. The amount of people with their hands out for 'free' money is absurd. There is absolutely no reason to raise taxes...

[Dash_XR]

On the bright side we're better off then most other places. Japan's dept is at 200%, U.S. has been in trade deficit since the 70's, Venezuela has resorted to eating zoo animals or starve to death just to name a few.

Least our interest rate is still above 0.

[blackf6]

What is debt?

[malazn mafia]

Originally Posted by blackf6

What is debt?

Fickle imaginary numbers on a piece of paper or stored in a computer system, which most likely can be wiped with a thing called Bankruptcy. I fail to understand how money, economics and humans tie together. To me, money is physical objects, cold hard cash, gold, jewels etc. Everything else, such as shares, bank accounts, real estate, is all but just virtual, and imaginary and could be here one minute and gone at the click of a mouse, or down the shredder.

[Dash_XR]

Cash can become just as worthless as shares, at least shares can bounce back where as cash is constantly loosing it's value as they print more.

[malazn mafia]

Originally Posted by Dash_XR

Cash can become just as worthless as shares, at least shares can bounce back where as cash is constantly loosing it's value as they print more.

Well yes, true. Cross cold hard cash off the list. Precious metals and jewels must be where real money is at.

[Dash_XR]

Nah not enough available to be currency, electronic money is next. Good luck never paying full price again when that happen.

I wish I had of bought a few thousand Bitcoin when they were worth nothing.

[Franco Cozzo]

The more worrying thing is personal debt, whats our personal/credit card debt sitting at?

[bathurst-racer]

Originally Posted by Dash_XR

Cash can become just as worthless as shares, at least shares can bounce back where as cash is constantly loosing it's value as they print more.

Who is"they" and is "they" printing more money ?
I wouldn't be too worried about middle class greed as the world wide political agenda is about wipeing out the middle class ie the climate change lie.

[Doreturnonfoot]

And what assets will the banks have? a pile of papers in forms of mortgages on overvalued land.

[futura97]

Originally Posted by Dash_XR

Nah not enough available to be currency, electronic money is next. Good luck never paying full price again when that happen.

I wish I had of bought a few thousand Bitcoin when they were worth nothing.

[thread mining...]

Bet you REALLY wish you had bought those few thousand Bitcoins now. $40-60 MILLION would be a very nice pay day!

[Junkyard-Dog]

The solution is pretty obvious - install me as dictator and I will sort things out...

[roKWiz]

I think we are all to blame, living above our means to buy anything outright without debt and credit.
Three houses we don't own, 4 cars we don't own, caravans, holidays the credit card pays for and bashing govco every time something doesn't go our way might have something to do with it, not to mention all the middle men involved in everything we buy and sell these days.

If I don't have the cash to buy something (outright) I don't buy it.! simples.

[Mercury Bullet]

Same here mate, only time I ever went into debt was to buy my house and I've owned that for years now.

Funny how car yards get upset when I tell them I'll be paying in cash. They attempt to convince you that you NEED finance.

I don't need any stinking finance thanks. If I can't afford it I don't buy it, again....simples.

[au350hp]

The Aust Govt is a total embarrassment. Corruption & jobs for the boys has been rife for decades. Every major contract bleeds the state dry & makes privateers rich, even when they don't deliver. These idiots are PUBLIC SERVANTS, but they are like pigs at feeding time carrying on like rock stars. Since when has been in public service been something to aspire too? Since the wages out strip the private sector along with the rort's & conditions. Yet we all sit by and put up with it all. The Australian public are the losers and yet all refuse to do anything but complain. Politics is a joke these days with nothing separating any party. EGO & GREED IS THE PREREQUISITE FOR LEADERSHIP.