Australian budget

The Australian Budget has a history of running small deficits and surpluses with occasional blowouts. Contemporary history has seen General Government net debt to GDP approach 20% under Labor in 1995 and the Coalition in 2017. In between, a Coalition government under Prime Minister John Howard and Treasurer Peter Costello ran surpluses sufficient to pay net debt down to zero during Australia’s mining boom.

Ratings agencies have adjusted the sovereign credit rating over time to reflect this ebbing and flowing of debt. In 1975, Standard and Poors rated Australia AAA. By 1989 the rating had dropped two notches to AA. It was subsequently upgraded again to AAA as the Howard Government operated consecutive surpluses.

The major vulnerability for the Australian Budget is the external imbalance in an economy that runs persistent current account deficits. Because Australian banks borrow so much money in international markets largely to fund domestic mortgages they are constantly at risk of international liquidity shocks.

The Australian Budget steps in with public guarantees to the banking system when this happens. Thus, although the Australian Budget has relatively low debt-to-GDP metrics, credit rating agencies demand that they remain that way to preserve the AAA rating as a backstop to bank borrowing.

Australian politics insists that Australia sustain budget surpluses ostensibly because it is equated with good economic management. In truth, the surplus is simply a figment of the property bubble at the heart of the Australian economy that requires the support of the tax-payer to persist. The Australian Budget is the key stone in the Australian credit arch.

In recent years the Australian Budget has deteriorated as the structure of the economy has left is denuded of growth sources. As the mining booms passed and the enormous household debt (186% of GDP) stalled consumption and investment, fiscal deficits became a key component in GDP growth.

As well, the disintegration of Australian political integrity associated with the end of the mining boom period doomed the Budget to successive regimes of neglect.

This very obviously undermined its role in the above system exposing Australia to deeper adjustments during future periods of global stress.

MacroBusiness covers all apposite data and wider analysis of these issues daily.

8

Falling home ownership creates ageing time bomb

By Leith van Onselen The Grattan Institute’s John Daley last week gave a presentation to the Council of The Ageing conference on Housing for Senior Australians, whereby he noted that senior Australians generally face less housing pressures than younger Australians, but that the situation is likely to deteriorate from the 2030s due to falling home

23

The politico-housing complex devours itself

The MSM bank protection racket is in full swing, at the AFR: London-based investors have warned National Australia Bank chief executive Andrew Thorburn that they consider Australia a less stable and less consistent economy for investment after the South Australian budget hit the big four banks and Macquarie with a surprise $370 million tax. Speaking

11

Labor vows to undo Gonski 2.0

By Leith van Onselen Just days after the Australian Senate cross-bench voted with the Government to pass its $23.5 billion ‘Gonski 2.0″ needs-based schools funding bill, the Labor Party has vowed to restore the prior Gonski model should it win the next federal election. From The Guardian: Tanya Plibersek has promised Labor will restore every

21

Academic goose squawks on bank tax

From Dick Holden professor of economics at UNSW Sydney Business School via AFR: We are now through the looking glass on company taxation. We have industry-specific taxes based simply on which companies are profitable and what focus groups think about those companies. This is terrible tax policy. Though all taxes are distortionary, the primary goal of sound

5

Gonski onski as Senate passes bill

By Leith van Onselen It’s now official. The Senate last night voted 34-31 in favour of the Turnbull Government’s schools funding package. It follows two days of parliamentary debate over the package, which the Government agreed to increase from $18.5 billion to $23.5 billion in order to gain the support of Senate crossbenchers. The first

8

Replacing stamp duties with land taxes would lower house prices

By Leith van Onselen Retired economics professor, Peter Abelson, is the latest to call for stamp duties to be replaced by land taxes, arguing that such a reform could assist housing affordability. From Adam Creighton: Large increases in housing supply would have only a “small” impact on Sydney house prices, according to analysis commissioned by

7

Gonski 2.0 set to pass after Coalition finds a way

By Leith van Onselen The Turnbull Government has achieved another win, gaining the support of the 10-member Senate cross-bench for its Gonski-2.0 needs-based funding school model. From The Canberra Times: An extra $24 billion is set to flow into the nation’s schools over the next decade under a landmark deal struck between the Turnbull government

21

Pressure builds on Labor to back Gonski 2.0

By Leith van Onselen Earlier this month it was the Grattan Institute that urged Australia’s politicians to back the Coalition’s Gonski 2.0 needs-based school funding package, with Grattan contending that the lion’s share of the extra $22 billion that Labor promised to spend at the 2016 election would represent wasteful investment that would not deliver

3

NSW Budget rides Sydney housing bubble to the stars

By Leith van Onselen The NSW Budget for 2017-18 has been released, and as expected, it revealed a big Budget surplus of $4.5 billion in 2016-17, thanks to the booming property market, with smaller surpluses expected over the forward estimates: The 2016-17 budget result is expected to be $4.5 billion, $0.8 billion higher than in

24

Weak Turnbull capitulates on Gonski school funding

By Leith van Onselen The spineless PM has capitulated again, this time on school funding. From The Canberra Times: The Turnbull government has buckled to demands from conservative MPs to delay the introduction of less-generous funding arrangements for Catholic schools, after insisting it would wipe out the “special deals” created by the previous Labor government.

11

Greens’ ‘tampon tax’ attack pulls wrong strings

By Leith van Onselen In what seems to have become an annual event, the Australian Greens attempted last night to get the GST amended so that it would no longer be applied to women’s sanitary products, like tampons. From The Canberra Times: Queensland Greens Senator Larissa Waters attempted to scrap the “tampon tax” as part

15

Next up for immigration destruction: school standards

By Leith van Onselen Over the weekend, The SMH reported that Sydney’s that the mass overcrowding afflicting Sydney’s primary schools is about to cascade into the city’s high schools: The overcrowding crisis in Sydney’s primary schools is about to hit high schools, as the baby bonus generation starts secondary school and the growth in apartment

20

Gonski 2.0 correct to divert funds from Catholic to public schools

By Leith van Onselen Fairfax has released ‘secret’ modelling showing how the Turnbull Government’s revamped “Gonski 2.0” needs-based school funding plan would “rip” money from Catholic schools to give to public schools: The Department of Education data shows the country’s public schools would receive a $4 billion windfall over the next decade if the Turnbull

3

Albo: Coalition’s infrastructure ‘boom’ is a con job

By Leith van Onselen Labor’s infrastructure spokesman, Anthony Albanese, has today ripped into the Turnbull Government’s so-called ‘boom’ in infrastructure investment. From The Australian: In the recent budget the Turnbull government went to extraordinary lengths to recast its position on infrastructure after years of cuts and inaction… But the Coalition’s big infrastructure shift is entirely

9

As federal debt passes $500b, why won’t RBA kill the CLF?

By Leith van Onselen Fairfax has posted an interesting article on the blow-out in Federal Government debt, which is about to pass $500 billion: The Turnbull government will break through the country’s former debt ceiling this week, breaching the $500 billion mark as it doubles the credit card bill it inherited from Labor. On Tuesday,

0

Sydney population ponzi demands massive schools investment

By Leith van Onselen The immigration-driven population boom in Sydney – which has added 830,000 people (20%) to Sydney’s population over the past 12 years and is projected to increase Sydney’s population by 87,000 people a year (1.74 million in total) over the next 20 years – is the gift that keeps on giving. Back

13

Elite unis should take a hard look in the mirror

By Leith van Onselen The prestigious Group of Eight (Go8) universities have launched a stinging attack on the Turnbull Government’s “fatally flawed” university funding reforms. From The Canberra Times: The Turnbull government has introduced legislation to increase university fees by 7.5 per cent, slash the HECS repayment threshold to $42,000 and cut teaching grants through

12

Lift in pension age to miss baby boomers

By Leith van Onselen Social Services Minister, Christian Porter, has confirmed that the Coalition is still seeking to lift the age for accessing the Aged Pension from 67 to 70, but that the changes would conveniently miss the large, rich and powerful baby boomer generation. From SBS News [My emphasis]: Social Services Minister Christian Porter

1

Labor bastardises its own Gonski reforms

By Leith van Onselen The Turbull Government and Labor continue to bicker over the funding of schools, and whose spending plans are closer to the original intent of the Gonski needs-based funding model. Analysis suggests that the Coalition’s funding package is essentially what Gonski had in mind, with Peter Goss of the Grattan Institute contending