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Bumping its head on the ceiling - the US Treasury and extraordinary measures.

The US Government debt ceiling is currently suspended, but will be re-instated on 8 February 2014 (Saturday). When the debt ceiling is reached, the US Treasury will once again face a situation where it has two conflicting objectives – to honour the US Government’s financial commitments, and to not issue new debt. A small number of ‘extraordinary measures’ can be used in the short term, but they aren’t sustainable solutions. The temporary ‘headroom’ they provide below the debt ceiling will likely only last until June at the latest, and possibly much less. Even the potential for default has an impact on borrowing costs, and the US Treasury said ‘A default would be unprecedented and has the potential to be catastrophic’.

On 16 October 2013 the United States Congress passed legislation to end the Government shutdown and temporarily remove the debt ceiling (the Continuing Appropriations Act, 2014). The debt ceiling is a legislative restriction that does not limit spending, but restricts the US Treasury’s ability to borrow (see this Flagpost for more background). On 8 February the debt ceiling will be re-instated at a higher level (to match the additional debt issued while the ceiling was suspended, but no higher). 

If Congress does not vote to raise the debt ceiling, the US Treasury will have two conflicting obligations – paying the bills, and not borrowing. In recent comments the US Treasury Secretary noted, ‘Even though the House and Senate approved a budget … they did not yet provide the borrowing authority to pay for the spending commitments they made’. 

In the short term, the US Treasury can resort to ‘extraordinary measures’. These are strategies (legal, and used previously when the debt ceiling was reached) that postpone default for a short period, but aren’t sustainable solutions. 

• The US Treasury can stop re-investing the earnings of specific government retirement funds. The US Treasury has the authority to not re-invest earnings from (or contributions to) two retirement funds - the 'G Fund', and the Civil Service Retirement and Disability Trust Fund. Once the debt ceiling is lifted the funds must be repaid in full, to restore them to the position they would have otherwise been in (including interest earnings). These measures are expected to provide about $170 billion in headroom under the debt ceiling.
• The US Treasury can use assets in the Exchange Settlement Fund (approximately $20 billion in headroom).
• The US Treasury Secretary also recently announced that the sale of State and Local Government Series (SLGS) securities would be suspended. These securities are issued by the US Treasury to help state and local governments comply with tax regulations; the suspension may cause some disruption for those organisations.
• Other measures have been used previously, including swapping US Treasury debt for debt issued by the Federal Financing Bank (which can issue up to US$15 billion of debt that is exempt from the debt limit). A range of factors mean that these measures are less useful in this situation. 

These extraordinary measures provide a short term solution to enable the US Treasury to continue paying its bills, although how long they will last is uncertain. In the long run the deficit run by the US Government (higher expenses than revenue) means that new debt needs to be issued. Material from the US Treasury, US Congressional Research Service, the US Congress Government Accountability Office, and the Bipartisan Policy Analyis Centre provides more detail on extraordinary measures used in previous situations when the debt ceiling was reached.
Chart data from: The US Treasury Monthly Statement of Public Debt.

The role of the Fair Work Commission in tackling workplace bullying

From 1 January 2014, the Fair Work Commission (FWC) has jurisdiction to hear complaints from workers covered by the Fair Work Act 2009 (FWA) who allege they are victims of workplace bullying.

Medicare at 30

Image: Department of Human Services

Medicare, Australia's universal health insurance scheme marks its 30th anniversary on 1 February 2014. For 30 years Australians have had free public hospital treatment and subsidised medical services; free if the doctor bulk bills. Medicare is part-funded by a 1.5% levy on income tax (which meets around half its cost) and general taxation. In 2012–13, spending on Medicare totalled $18.5 billion. This makes Medicare the third most expensive government program after the Age Pension and family payments.

Australia tops the charts... in tax deductions

Image source: Wikimedia Commons

In the International Monetary Fund (IMF)’s recently released ‘Reforming Tax Expenditures in Italy: What, Why, and How?’, Australia was found to forgo more revenue as a proportion of GDP than all other OECD nations.

Although tax expenditures result in the government forgoing revenue, they have not been widely scrutinized and cannot be comprehensively measured. As a method through which specific groups, sectors, regions and activities receive a ‘myriad of discounts in the tax code’, tax expenditures continually arise as the subject of debate.

High Speed Rail for Australia - a fast track to the future or just the same old pipe dream?






Image Source: Wikimedia Commons

High Speed Rail Planning Authority Bill 2013

High Speed Rail (HSR) has been talked about for many years in Australia but has never progressed beyond the study and report stage. However, on 9 December 2013, the Shadow Minister for Infrastructure and Transport, Anthony Albanese, introduced a private member’s bill — the High Speed Rail Planning Authority Bill 2013. The Bill proposes setting up a High Speed Rail Planning Authority which, as the second reading speech notes, is designed to provide critical ‘long-term Commonwealth leadership to progress the project’ and to ‘maintain the momentum generated by the recent strategic studies’. The other objective of the Bill is to secure the rail corridor, which will run through a variety of landscapes including city, suburban and rural, in order to prevent future encroachment on these areas.

Growth in Age Pension receipt: the elephant in the room of the welfare reform debate

Image source: Wikimedia Commons

The Minister for Social Services, Kevin Andrews, has recently expressed concern at the continued growth in the number of people in receipt of income support payments, and suggested that the welfare system is unsustainable. He has therefore commissioned Patrick McClure to undertake a review of the welfare system. Mr McClure’s previous review led to the Welfare to Work changes in 2006. However a closer investigation of the figures, released by the Department of Social Security, suggests that welfare receipt among those of working age is already declining, and hence the scope to make further large reductions may be limited. However Age Pension take up rates continue to increase.

Keeping our sharks....at a distance

Image Source: Grant Peters/Flickr

In the last three years there have been six fatal shark attacks on popular beaches in Western Australia. In response, the state government announced on 10 December 2013 a program to catch large sharks (great white, bull and tiger) near heavily used beaches off Perth and the state’s South West (from Capel to Margaret River). The government program deploys baited drum lines one kilometre offshore, but this has been opposed by conservation groups because of the incidental catch of non-target species and the fact that the great white shark is a threatened species.

Are the good burghers of Griffith poised to make history? – House of Representatives by-elections 1901–2014

Source: AEC

The Australian Electoral Commission has announced the candidates who have nominated to fill the vacancy caused by Kevin Rudd's resignation. Early voting has begun so it’s a good time to review some of the history of by-elections for the House of Representatives.

The Griffith by-election is due to be held on 8 February 2014, 1526 days since the previous by-election, a period exceeded only by Balaclava (Vic) and Macquarie (NSW) in 1951 (1946 days) and Fremantle (WA) in 1945 (1547 days).

The heat is on: BOM launches heatwave forecasting

BOM heatwave forecast

Just as a record-breaking heatwave was moving eastwards from Western Australia last week, the Bureau of Meteorology (BOM) launched a trial heatwave forecast service. The forecast shows, up to four days in advance, which areas of Australia can anticipate heatwaves. But are heatwave warnings even necessary for “a sunburnt country” with a history of long, hot summers?

The world’s youngest nation falters: keeping the peace in South Sudan

Source: United Nations

Two and a half years after gaining independence from Sudan, the newly formed nation of South Sudan has erupted into violence that could potentially lead to civil war.

Tensions among the ethnic Nuer and Dinka groups have recently escalated and there have been reports of widespread violence and killing across the country. Ongoing political disputes are at the root of the current unrest. Media reports indicate the former Vice President, Riek Machar (an ethnic Nuer who was dismissed in July 2013), attempted a coup against President Salva Kiir (an ethnic Dinka) and has allegedly taken control of key parts of the country.

High Court to decide if mutual trust and confidence is implied in employment contracts

The High Court has granted the Commonwealth Bank of Australia (the Bank) special leave to appeal the Full Federal Court’s decision in Commonwealth Bank of Australia v Barker[2013] FCAFC 83. The case will be significant as it will be the first time the High Court has considered if an implied term of mutual trust and confidence exists in employment contracts.

Australia's current debt position - December 2013 update

Here we present a snapshot of Australia’s current debt position and how it has changed since the previously published articles on Australia’s debt position. This update provides the latest available data on Australia’s level of debt for both the public and private sectors in gross and net terms, and compares it with previously published data. For definitions of gross and net debt the reader is referred to the Library’s earlier Flagpost titled Australia’s current debt position from April 2011.

Lost in translation: resettling locally engaged Afghan staff

Image source: Department of Defence

Recent media reports indicate that the Taliban have killed an Afghan man who had worked as an interpreter for the Australian Defence Force (ADF) in Afghanistan. With the bulk of ADF personnel being withdrawn from Uruzgan, this provides a reminder of the dangers to Afghan nationals who have worked for Australian government agencies as locally engaged staff and again raises the question of what the Government is doing to assist.

Ballistic missile defence and Australia

Image source: Wikimedia commons

During the Australia-US Ministerial Consultations (AUSMIN) in Washington DC on 20 November, ballistic missile defence (BMD) was again raised as a specific area of potential further cooperation, having also been discussed at the preceding three meetings. The concept of BMD is not new, with initial research and development by the US Army beginning as early as 1945. Since then, Australia has increasingly become well-positioned to actively support the US-led BMD program, in concert with other regional allies such as Japan and South Korea. This article summarises what BMD is, and the prospects for Australia’s future contribution to the program.

Federal Circuit Court refuses to hear ‘union slush fund’ dispute

Union reserve funds are not illegal, but that has not stopped them from becoming controversial in the context of recently uncovered instances of serious misuse these funds. Sheehan v Australian Municipal Administrative, Clerical and Services Union & Ors [2013] FCCA 2137 is a Federal Circuit Court decision that sheds light on union members’ standing to bring actions for alleged misconduct by officials. It is cases such as this one which have attracted media attention and seen most union reserve funds pejoratively labelled ‘slush funds’.

Oil and water: natural resources and Timor-Leste’s development challenges

Image source: Department of Foreign Affairs and Trade

Ongoing international arbitration proceedings arising from allegations of Australian espionage during the 2004 negotiations over the Certain Maritime Arrangements in the Timor Sea (CMATS) Treaty with Timor-Leste have highlighted the latter’s dependence on petroleum revenues to finance its future development. Less well-known are the concerns that have been raised about the long-term sustainability of these revenues and what this means for Timor-Leste’s broader development and stability challenges.

Uncertain future: Australian aid to Afghanistan



Image source: Author's own

Australia’s Official Development Assistance (ODA) to Afghanistan has increased substantially over the past few years from $82.1 million in 2009–10 to a peak of $198.4 million in 2011–12. Afghanistan was the fourth largest recipient of Australian ODA in 2012–13 (after Indonesia, PNG and the Solomons) with an expected expenditure of about $182.8 million. This includes ODA-eligible expenditure by other government departments, including Immigration and Citizenship ($6.9 million), Defence ($9.2 million) and Attorney-General’s–Australian Federal Police ($17.7 million).

Experience of violence in Australia

Image Source: Dark and Stormy by Adam Selwood, on Flickr

On the 11th of December 2013, the Australian Bureau of Statistics released the results of its 2012 Personal Safety Survey (PSS). This much anticipated survey on the safety of Australians aged 18 years and over is the second release of the PSS, with the first being released in 2005. The PSS collects information about the nature and extent of violence experienced by men and women since the age of 15 and includes their experiences of violence in the 12 months prior to the survey. Information has been collected on: domestic violence by a current or previous partner; lifetime experiences of stalking; physical and sexual abuse and the general feeling of safety.

High Court decides the ACT’s same-sex marriage law is invalid

Image source: Wikimedia Commons

Today, 12 December 2013, the High Court decided unanimously that the ACT’s Marriage Equality (Same Sex) Act 2013 cannot operate concurrently with the federal Marriage Act 1961. The Court held that the federal Parliament has power under the Australian Constitution to legislate with respect to same sex marriage, and that under the Constitution and federal law as it now stands, whether same sex marriage should be provided for by law is a matter for the federal Parliament.