Just over a week ago Joe Hockey told everyone to embark on a Christmas shopping binge. The treasurer said there was no need to worry about the federal budget.
While the mid-year budget review due in December will “illustrate graphically” the fiscal problems the coalition government inherited from Labor, Hockey said the May budget would offer the solution.
Retailers will certainly be hoping shoppers heed the treasurer’s advice, after another difficult year for the sector when consumers focussed more on saving rather than spending.
Consumer confidence figures released this week suggested Australians were feeling more optimistic and might be more inclined to open their purse strings.
Analysis by Roy Morgan Research for the Australian Retailers Association forecasts $42.1 billion is likely to go through the tills during the Christmas shopping season, which traditionally starts mid-November.
This would represent a 3.3 per cent sales rise on the same period in 2012.
However, other data – showing wages growth at its slowest pace in over 13 years – suggests consumers will remain picky and search for value for money.
The consumer confidence survey from Westpac and the Melbourne Institute additionally asked respondents about the Christmans spending plans.
While over half said they would spend the same as last year, just over 35 per cent intended to spend less. Only 14 per cent expected to spend more.
Westpac economist Matthew Hassan said ongoing fears about job security could more than offset a generally more upbeat consumer mood.
Still, the political language of the first sitting week of the new parliament this week would also be unlikely to encourage Christmas shoppers.
Threats of a US-style government shut-down, if the coalition can’t get its legislation through to lift the national debt ceiling by $200 billion to $500 billion, hardly delivers festive cheer.
Hockey even warned the government could be forced to stop welfare payments and close Medicare if the current $300 billion debt ceiling is breached next month.
The legislation easily passed the lower house where the government has a comfortable majority.
But Labor and the Australian Greens used their numbers in the Senate to amend the bill to a $400 billion cap, arguing the government hadn’t given sufficient justification for such a big increase.
They want Hockey to immediately release the mid-year budget review.
But Hockey is standing firm.
He rejected the amendment and will hold off on releasing the mid-year economic and fiscal outlook – which updates economic, fiscal and debt forecasts – until mid-December.
He wants to see the September quarter economic growth numbers, due in early December, first.
Hockey also argues the former Labor government’s own figures show a $400 billion ceiling isn’t enough.
An economic statement released by former Labor treasurer Chris Bowen before the September 7 election pointed to a peak in commonwealth debt at $370 billion in 2015/16.
Additional advice from the Australian Office of Financial Management (AOFM) said it would be prudent to have a buffer of $40-$60 billion above the forecast debt peak.
A further vote in the Senate on the $500 billion bill is now in limbo until the upper house sits again on December 2 – just 10 days before the current limit is hit.
There was some $285 billion worth of commonwealth government bonds outstanding as at Friday morning.
The AOFM carries out about $800 million worth of bond tenders twice a week and a $9.3 billion government bond expiring in mid-December will have to be paid-out.
So there is some urgency to deal with the ceiling issue.
TD Securities head of Asia Pacific research Annette Beacher is surprised that it has come to this, given that previous incremental ceiling increases – from $75 billion to $300 billion under Labor – passed without fuss.
RBC Capital Market head of strategy Su-Lin Ong believes there’s still a chance the Greens can be persuaded by the government to support the higher $500 billion ceiling.
“They have highlighted Treasury secretary Martin Parkinson’s appearance before Senate estimates next week as key in their assessment of what is an appropriate level for the debt ceiling,” she said.
Whatever happens, it’s a drop in the ocean compared to the debt problems in the US and other parts of the world.
International Monetary Fund data released last month showed that in 2014 gross debt in Australia was heading to 29.1 per cent of gross domestic product – well below a global average of 109.2 per cent.
In the euro area it will be 96.1 per cent, the United States 107.3 per cent and in Japan a staggering 242.3 per cent.
So it’s not the end of the world – as the local political rhetoric would have it – but it is an unnecessary row to be having in a less than certain economic environment.