A lot of people are still feeding over the carcass of the coup: how it happened, when it started, who did what and when. The inevitable ‘Turnbull’s biggest challenge is to unite the party’ talk has also started. While these issues deserve some investigation and analysis, we really should be focusing on something far more important for Turnbull.
It’s all about the money
For several reasons, Turnbull’s biggest challenge lies in the federal budget, which has less structural integrity than a sandcastle. Given that he’s a multi-superhero-millionaire with real ‘business cred’, his pride and credibility, along with the small matter of our future prosperity, are firmly on the line.
This isn’t about money grubbing . It’s just that we all get better service from our government if they spend our money wisely. Right now, we can safely say that they’re way off. And if Mr Business can’t fix it, who can?
Let’s start with some simple numbers:
- Our federal debt is about $400 billion dollars (give or take a couple tens of billions – what’s $10-20 billion here or there between friends eh?).
- The 2015 federal budget has:
- Expected income of about $398 billion.
- Annual spending of about $434 billion.
- Assuming the budget pans out this way, this would add another $36 billion to the $400 billion of debt mentioned above.
- About $15 billion a year is being paid in interest on the above debt. The actual number is $15.6 billion – but how about we just wipe out $600 million to make ourselves feel a bit better? Either way, let’s keep this number in mind and move on.
Depending on who you believe, it will take at least another few years for the budget to get back to surplus and for the debt to start falling. In the meantime, try to think about all the things the government could be doing with that $15 billion it’s paying each year in interest. Trust me, this is much better than thinking about who that $15 billion is getting paid to.
So where does our money end up?
Without looking below, try to name the four biggest spending items in the federal budget in order. For extra points, try to guess how many billions are spent on each item.
Drum roll please…
For those keeping count, that’s right: the annual interest bill on our debt (remember that $15 billion?) is about 60% of our entire defence budget, about 50% of the education budget and over 20% of the health budget.
And yes, the welfare bill costs us more than health, education and defence put together – with a cool $27 billion to spare.
I won’t do your head in breaking things down further. If you want to know more go here for a really useful slice and dice of the budget.
Yes, this is a serious problem
This may seem condescending, but some debt that supports solid investment – and for which there is a realistic plan of paying back – is ok. A
futruckload of unmanageable debt is not. Revolutionary stuff, I know.
Some disingenuous fools will try to say that our federal debt isn’t that bad. Apparently, you’re not very smart if you look at the raw number (about $400 billion and rising these days) and say to yourself ‘wow, that’s a lot of money by any standard’.
Somehow, inflation explains that very big number and we shouldn’t strain our tiny brains thinking too much about it. It’s not like we’re Greece or anything. And c’mon, the debt is ‘only’ a fraction of our GDP after all. Just because the annual growth in our federal debt reads like an IPCC global warming prediction, it’s really nothing to worry about:
(PS: I’ve used a debt to GDP chart here so that we can all be more intelligent like our more ‘sophisticated’ friends at the Guardian).
Of course, of all the people who spout this guff, not one of them will actually tell you:
- where they think the debt will peak;
- what a maximum acceptable debt figure is and why;
- when or if they think we should ever pay the debt back; or
- what plan (if any) they would put in place to start paying the debt back.
This is all before even getting to the point of asking what we actually received in return for our $400 billion loan.
Apparently, it’s all good as long as long as you can point to some other countries worse off than you. Ambitious thinking isn’t it? Perhaps the plan is to wait until we become a third world country so that we can ask Bono to lobby our creditors and have it all written off?
Turnbull has to figure this out
If you think this will all somehow sort itself out, think again.
Abbott stopped some of the bleeding, but couldn’t make any real inroads into the situation. As he found, people don’t like ‘free’ money being taken away from them and there was no help to be found on the Senate cross bench.
Turnbull has to find a way to sort this out, because if he can’t, then his business cred and pride will have to get comfortable with our finances in the gutter.