What could possibly go wrong?
The Coalition has raised the prospect of a United States style move to block government attempts to lift the debt ceiling, raising the prospect of turmoil on financial markets.
While not saying outright the Coalition would block the increase to $300 billion proposed in the budget, shadow treasurer Joe Hockey told the press club yesterday enough was enough.
“Labor has now sought increases in the debt limit of the Commonwealth from $75 billion to $200 billion, to $250 billion and now $300 billion. On each occasion they promise not to exceed the limit. Well, enough is enough - we are going to keep them to their promises,” Mr Hockey said.
Australian Office of Financial Management chief Rob Nichol has asked for an increase in the limit to cover seasonal peaks in need for finance. While the government will be gin the financial year with less than $250 of debt on issue and the end the year with less than $250 it projects a peak during the year in May 2013 of $260 billion. Without an increase of the $250 ceiling and without some headroom for contingencies the Commonwealth runs the risk of being unable to meet its obligations.
Mr Hockey said yesterday the Coalition would move an amendment to the appropriations bills to excise the debt ceiling measure in order to bring on a separate debate.
Financial markets consultant Stephen Koukoulas, a former advisor to Prime Minister Gillard, warned things could get “ugly” if the debt ceiling was held down.
“Think back to what happened mid last year. Congress was going to block a required increase in the US debt ceiling. The US government was going to miss its bills. I don’t want to overstate it, but things got pretty ugly... Around 80 per cent of our bond market is held by foreigners. We can’t afford to alienate these people by playing silly buggers with the ceiling.”
Pleading the with the Coalition to leave the issue alone he said there were “a million and one things the opposition can argue about, and should argue about, but the debt ceiling is one of the few things in my views that should be depoliticised. The opposition can politicise anything else it wants.”
Mr Hockey also promised to inject outsiders into the top echelon of the Tax Office, adding four so-called Second Commissioners to the existing three. The would be part time and have “deep experience in the private sector”. All would be based outside Canberra and ideally some would be from regional Australia and small business.
Monash University professor Rick Krever, a former visiting academic at the Tax Office said he doubted the outsiders would make much difference. “They will discover as I did that most of the problems are with the tax laws, not the way they are administered. The tax laws are the responsibility of Treasury.”
In today's Sydney Morning Herald and Age
Stephen Koukoulas on this morning's RN Breakfast:
11 minutes, play or CLICK THEN CLICK AGAIN to download mp3
. Unpalatable as it is, we need a bond market
. Budget 2012-13: The surplus is just the start
. Henry's great tax forum speech