11 May The 2017 Bouncing Budget
Our bouncing budget looks like this.
Naythan and Natalee own a small new-age business but its running at a loss. They approach their accountant but he refers them to their bank to increase their credit limit.
Even though their business is losing $10,000 pa, the bank agrees to lend them $75,000 as long as they put their caravan up as security. (Nayth and Nat sold their house a few years ago to pay off some other debts arising from the business).
Three years later they have used up all their credit because their business is now losing $20,000 pa. This time they bypass the accountant and go straight back to the bank begging for more but expecting nothing.
Incredibly, the bank increases their debt limit to $200,000 as long as they promise to pay it back. Jokingly, Naythan said his dog can go guarantor for the loan. The bank manager has a serious think about it, then nods slowly as if he’s uncovered a genius idea, and accepts Nathan’s offer.
(BTW…Naythan and Natalie don’t even own a dog because none are allowed at the caravan park).
N&N can’t believe their luck so they spend the first $10,000 on a three-day bender back at the caravan with all their friends. Its champagne and caviar at its unlimited and absolute best.
Five years later it feels like the caravan is submerged under water because the business is now losing $50,000 pa. But that doesn’t deter Nayth and Nat because they have big plans to make themselves feel better. Anything to avoid the truth.
They need a bounce.
By now their bank manager is living next door to them at the caravan park because he’s up to his eyeballs in debt too. This is perfect for Nayth and Nat because they can share their new ‘vision’ one night after work.
To kick things off, they want to put in their own private driveway at the caravan park. This will set them back about $100,000. (infrastructure)
They would also like to salary sacrifice $30,000 into their super so they can buy a million-dollar apartment. (first home buyers assistance)
Naythan would also like to fund his father’s disability costs for the rest of his days. Approx. cost $300,000, maybe more. (National Disability Insurance Scheme).
Conscious he and Natalee are losing $50,000 pa in their business, Naythan puts together a spreadsheet to show the bank manager they will be making a profit of $7,000 pa by 2021. This will be the first time in 14 years of trading they will be in the black (surplus).
The bank manager is impressed with all the figures and charts and he agrees to increase their credit limit to $600,000!
But the loan is conditional: Nayth and Nat must use their surplus of $7,000 pa to pay down their $600,000 loan. Maybe their grand children can finish paying it off for them.
The Flat Bounce
The joke I have just described to you is exactly the position our Federal Budget is in right now. By 2021, Treasurer Scott Morrison forecasts a surplus of $7b with an approximate debt level of $600b. If it wasn’t so serious it would be laughable.
And he can’t pass the buck either.
In his first term as Prime Minister, Kevin Rudd increased our debt limit to $75b (billion).
Then, when Tony Abbott came to power, the debt limit was increased to $200b.
Now, under the auspices of Malcolm Turnbull, we are about to increase our debt limit to a staggering $649b!
In short, debt has increased by an average of $36b pa under the Rudd/Gillard Governments to $60b pa under the current Government with no signs of it abating.
My point is this. Despite the promises that were made in Tuesday night’s budget, there will come a time when we simply cannot fund them. The shame of it is we need things like the NDIS but it will be impossible to fund due to an exploding debt ceiling. (BTW…the increased Medicare levy will fall way short of the money needed for the NDIS).
The promises made about housing affordability bordered on being offensive and I would love to be at Centrelink or wherever they administer the drug testing for those on the dole! In fact, the Govt. would probably make more money if they sold tickets to watch that circus versus the money they think they will save from cheats.
As for hitting the banks up with more fees, that will only add to our cost of living.
Tuesday nights budget was just a house of cards. And just like Naythan and Natalee, something must eventually give, it’s not sustainable.
Have a great week!
Back paddock – Happy Mother’s day for this weekend! I posted this poem for Mother’s day two years ago and it was very popular.
Today I left some dishes dirty,
The bed I made at 3.30.
The nappies soaked a little longer,
The odour grew a little stronger.
The crumbs I spilt the day before,
Are starring at me from the floor.
The fingerprints, they’re on the wall,
Will likely still be there, next fall.
The dirty streaks on the window panes,
Will still be there next time it rains.
“Shame on you old lazy-bones,” I say
“And just what have you done, today?”
I nursed a baby till he slept,
I held a toddler while he wept.
I played a game of hide and seek,
I squeezed a toy, so it would squeak.
I pulled a wagon, sang a song,
Taught a child right from wrong.
What did I do this whole day through?
Not much it shows, I guess its true…
Unless you think that what I’ve done
Might be important to someone
With bright blue eyes and soft blonde hair
If that is true, I’ve done my share.