THE FINANCIAL IMMORALITY OF PRESENT AUSTRALIAN GENERATIONS
THE FINANCIAL IMMORALITY OF PRESENT AUSTRALIAN GENERATIONS
THE MIAT POSITION:
First some definitions:
“Australia Inc” – the whole Australian community trading as a small independent country solely responsible for its own financial affairs in a highly competitive world.
“Immoral” – when there is no attempt to curb self-indulgence, when others bear the consequences.
The actual financial results for Australia Inc. for the year ending 31 December 2015 show it spent $350.7 billion buying Goods and Services from foreign countries but only earned $317.1 billion from its exports of Goods and Services. This resulted in a trading loss of $33.6 billion. Australia Inc also earned $50.7 billion from Interest and Dividends from foreign countries but paid out $89.8 billion to them, resulting in a further loss of $39.0 billion. Therefore the total loss for the 12 months was $72.6 billion from these plus Other costs to bring the total to $75.074 billion.
Because Australia Inc has always traded at a loss, this last year’s loss has to be added to previous losses with the result that at 31 December 2015 the total net debt owed to foreigners was just over $1 trillion at $1,006 billion. ( figures are from the ABS Cat 5302.0 released on 1 March 2016)
These deficits and indebtedness are in addition to Australia’s domestic deficits and indebtedness, but of course international indebtedness increases by the amounts that the Australian Government borrows from foreigners to fund operational expenses and capital equipment such as military hardware.
To put the year’s $75 billion loss into perspective, Australia’s Mineral and Ore exports for the year, being the largest Goods category, were $72.4 billion. So Australia Inc needs another export bonanza of the same size as the current biggest export category just to get close to break even. None are on the horizon.
Australia funds these losses by borrowing from and selling assets to foreigners. The assets include major companies, infrastructure, property and farms. Now over 90% of products in Australian supermarkets are either foreign made or made in Australia by foreign owned companies. Most of the key exports are controlled by foreign companies. A Brazilian company is the largest meat processor in Australia. Brazil is Australia’s major beef competitor.
During the 5 years to December 2015 Australia’s population grew by 7% and the indebtedness to the rest-of-the-world grew by 48%. This rate of indebtedness increase is clearly unsustainable – yet there is no planned change to the rate of immigration or to the taxation incentives which encourage investment into non-productive assets such as property instead of into import replacement and/or exports. Australia Income tax laws penalise foreign earned income in comparison to domestic earned income – another dumb reality! Australia allows its exchange rate to be manipulated by other countries to their advantage: China fixes its rates, Japan and other countries use negative interest rates to lower currencies while the Australian dollar is forced higher, thus aggravating the deficits/losses.
While some of Australia’s foreign debt is directly to smaller enterprises which if they can’t repay will leave the lender out of pocket, most of the borrowings are by our Governments and their enterprises, banks and financial institutions and large public companies. So this foreign debt is real and has to be serviced, fortunately at present, by low rates of interest, but nevertheless at inevitable increasing cost to future generations.
By any standards this is highly immoral – for Boomers and current generations to enjoy the benefits while leaving children and grandchildren to bear the unavoidable burden of servicing the indebtedness.
Please send any comments, corrections and contributions to:
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Harry Wallace |
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