Wednesday, March 27, 2013

Julia Gillard to leave Australians in $165 billion dollars worth of debt this term alone

GILLARD Government debt levels are forecast to blow out by 60 per cent to $165 billion in this term alone - equal to more than $14,000 for every working Australian.

Analysis of Budget documents reveals that between the 2010 election and Federal Treasury's update in October last year, the 2012-13 net debt estimate rose $54 billion to $144 billion.

With Wayne Swan having junked the Government's commitment to a surplus this financial year, Bank of America Merrill Lynch now forecasts Treasury will raise the estimate by a further $21 billion in the May budget.

"The government is starting to develop some form when it comes to over-estimating the improvement in its budget balance," Bank of America Merrill Lynch chief economist Saul Eslake said yesterday.

Ahead of the budget, the Coalition is honing in on a number even larger than net debt - the total value of bonds and other securities issued by the Government, or gross debt, which has ballooned from $151 billion at the 2010 poll to $267 billion now. In the last budget the Government raised the gross "debt ceiling" from $250 billion to $300 billion.

Opposition Leader Tony Abbott believes Mr Swan will increase it again in May.

Mr Abbott told News Limited yesterday: "If Labor is determined to increase the cap on gross debt above $300 billion, if they cannot show a credible and speedy path back to surplus, if they cannot show a plan to start seriously paying off the debt, it will add further weight to our planned No Confidence motion in the Gillard Government."

Mr Swan's spokesman said the Government had no plans to raise the gross debt limit. Merrills' Mr Eslake said the increase that had already occurred was "troubling".

"If the trends that look increasingly obvious aren't addressed at some point we might cross that threshold from safe territory to dangerous territory very, very quickly," he said.

Monash University Professor of Business and Economics Jakob Madsen said the gross debt rise was "disturbing".  "It's a dangerous trend and it's at the wrong time. It's completely unnecessary to hand out left, right and centre and the way they do it is not very clever," Professor Madsen said.

Business Council of Australia CEO Jennifer Westacott said spending had grown "out of step" with revenue.  "If that doesn't change we are going to have serious public debt problem," Ms Westacott said.

Mr Eslake, Professor Madsen and Ms Westacott all said Australia did not currently have a debt crisis.  But, Ms Westacott said, "we do have a budget management crisis".

In that context, the Coalition is intensifying pressure on the cross-benchers, seeking support for a No Confidence motion.

Independent MP Rob Oakeshott invited Mr Abbott to call him or come to his electorate if he wanted to discuss a no confidence motion.  "Let's have a bike ride, or a surf," he said.

However, Mr Oakeshott added that he was opposed to a no confidence motion in budget week. It would reflect badly on Australia internationally, he said. Between the 2011-12 Mid Year Economic and Fiscal Outlook and the 2012-13 Myefo, Treasury's estimate for this financial year's interest payments on government net debt soared by 20 per cent from $5.9 billion to $7.1 billion.

The Merrills forecast suggest a further increase in interest payments of as much as $1.1 billion.

Government net debt of $165 billion equates to $14,238 for each of Australia's 11.6 million workers, up from $8001 per worker at the last election, an increase of $6237.

Mr Swan's spokesman said Australia's net debt levels were "dramatically lower" than those of every single major advanced economy: "Our current net debt is 10 per cent of Gross Domestic Product, compared to around 80 per cent for the US and UK and around 35 per cent for Canada.

"The Government will reduce net debt in a sustainable way that ensures our economy remains one of the strongest in the world and protects Australian jobs and economic growth," the spokesman said.

To repay the debt, cuts were required "almost everywhere", Professor Madsen said, and the GST rate could need to be raised.

Mr Eslake said not only would spending have to be reined in, but the current $111 billion a year in tax concessions could have to be wound back.

Ms Westacott advocated reducing the current number of government agencies from 932 and making "health dollars work harder".


Labor's class war is not so classy

THERE is nothing so dangerous as somebody with nothing to lose.  And so the nation should have a lot to fear from the Gillard government in its current kamikaze state.

All but the most deluded Labor MPs know that the party is heading for a landslide defeat of epic proportions.  It is the political equivalent of being hit by an asteroid.

Wayne Swan has one more budget before he and his colleagues are consigned to electoral oblivion. Already he has been forced to abandon his much vaunted surplus because of his botched mining tax - first going for a blatant cash grab to distract attention from the dumped ETS in 2010 and then swinging back so far the other way that the mining tax mach II has effectively failed to raise any revenue whatsoever.

And so having tried and failed to raid the cookie jar of the resources boom, the Treasurer has now turned his attention to Australians' superannuation savings. You can almost see the dollar signs in his eyes.

The fact that this move is even being contemplated is emblematic of all that is wrong with the Labor government and tells us why it has seen a mass exodus ahead of its inevitable plunge to the ocean floor.

Firstly, as rebel statesman Simon Crean told the Financial Review, it is a trashing of Labor's own legacy. The party that created Australia's landmark compulsory superannuation contribution scheme - the Snowy Hydro of its day - is now picking it apart one thread at a time.

The second problem is that, by targeting the contributions of higher income earners and then working down to whatever threshhold it needs to make ends meet - as the government is tipped to do - it sends a clear message that is is still fixated by the undergraduate "class war" mentality that has both failed to recapture its working class base while at the same time estranging middle-class and aspirational voters.

But then again, who cares? Not only will Ms Gillard lose government in September but Mr Swan will likely lose his seat. Their political careers are over and the flailing and backflipping all over Labor's core policy beliefs mean they do not even have a legacy to preserve.

In short, they have nothing to lose by raiding what's left of the Treasury coffers with the zeal of wanted bushrangers. Indeed, there will no doubt be a school of thought within the party that they should bleed the war chest dry so as to starve Tony Abbott of funds in his first years in office.

On that note we can offer them at least this consolation: So generous, vague and uncosted are the Opposition Leader's promises thus far - not least his pie in the sky maternity leave proposal - that he will have quite enough trouble funding them without Labor torching the village on the way out.

And so we urge the government to put the national interest ahead of its own political interests in framing next month's budget. Think of the long-term future of our country.

Yes, Labor is to be defeated but it can still be defeated with dignity and have history remember that it at least did one thing right.


Is the degree outdated?

Most school leavers take the next step and go to university to obtain a degree. But with changing workplaces and the increasing speed of technology - to what degree do you need a degree?

Earlier this month, Universities Australia released a report from "The Australian Workforce Productivity Agency" warning that the industry demand for people with higher education is set to sky rocket with growth rates of between 3 and 4 per cent every year till 2025.

Yet with so much evolution in the work place and the technologies that are running them, should a degree still be a definitive requirement or has it become more industry specific?

Ten years ago more than 50% of Australians wouldn't have been able to read this article online due to Internet access constraints. Twenty years ago, stories like this were typed on electric typewriters and faxed to editors, while 30 years ago the yellow pages was the number one source to find the phone numbers for people to interview. Times have changed... drastically.

There are still plenty of people in the work force who would have completed their university studies 20 - 30 years ago, a time before tablets, Google and smart phones, a time when you got a bad back from lugging around the fourth edition of a 10 kg textbook or writing your thesis from facts you found in your Encyclopaedia Britannica that took up an entire wall of your house.

According to many employers or if you check out the latest job listings, it's clear, a degree is still a big desire, even though they could have come fresh off the printing press when a mullet was something on your head, not on your plate and a mouse was something that ate cheese.

Of course if your life long dream is to be a scientist or a vet or a lawyer, higher education is not just necessary it's imperative to ensure you learn the knowledge required to execute these types of positions.

But for many other industries where "hard skills" are required to get the job done is university always the right way to go?

Lincoln Crawley, the Managing Director of Manpower Group Australia, New Zealand as well as the President of RSCA (Recruitment and Consultant Services Association) says in the Australian job market a degree is still an advantage.

"This is a complex issue, what is appealing to prospective employers is that a degree gives the impression of a desire for continuous learning" says Crawley.

So if Crawley was presented with two candidates with similar abilities however one has a degree and the other doesn't who usually gets the job? "If two candidates are all things being relatively equal, then it should be the propensity to do the role and add value to the work place that wins the position not the pieces of paper," he says.

At the time this article was written, a number of universities and Universities Australia were approached to comment on this issue from a Tertiary standpoint, but given the current revolving door of Ministers (Chris Bowen's replacement will be the fifth in 15 months) and the aftermath of the spill, no one was available to comment.

Do those extra letters after your name really get you those extra dollars in your pay packet? Does a degree place you in a position of power and strength in the job market or can it just another form of workplace discrimination?

Most people see the advantage of further education and the pursuit of constant learning, but not everybody believes you always need a piece of paper to prove it.


Gravy for Canberra water boss

ACTEW misled its shareholders, the government and the ACT's taxpayers over managing director Mark Sullivan's $855,000 annual salary, Chief Minister Katy Gallagher says.

A letter from the water utility's chairman, John Mackay, to the government in September 2011 assures the company's two shareholders, the Chief Minister and Treasurer, that Mr Sullivan's pay packet was $621,000.

But the managing director was paid $855,000 that year, a figure the Chief Minister says is not appropriate to manage a government-owned water monopoly.

Mr Sullivan is Australia's highest paid water executive by a margin of more than $200,000. An investigation is also under way into how Treasury and Chief Minister's department bureaucrats failed to alert their political bosses to the under-reporting of the salary for more than four months after they became aware of the discrepancy.

Mr Mackay said he based his letter to the Chief Minister on the same flawed figures that made their way into the annual report and that he and his colleague acted promptly when the mistake came to light.

"It was an honest mistake, we weren't trying to hide anything, there was no conspiracy," the chairman said on Tuesday. "The accounts people went and got a number, jammed it in a report and it was wrong. I am absolutely sure that from a company law sense, we did what we had to do."

Ms Gallagher and Treasurer Andrew Barr have been criticised after it was revealed last week that Mr Sullivan's wage had been under-reported by nearly a quarter of a million dollars in a key company publication and that the two shareholders did not know how much the executive was paid.


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