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

Is the NBN already a white elephant?

Back in April, the head of the Australian Competition and Consumer Commission (ACCC), Rod Sims, lamented that Australians were paying more for lacklustre broadband internet under the $50 billion National Broadband Network (NBN): “We are now observing prices of low-speed NBN plans offered to new customers that are at least $10 per month higher than

1

The rise and rise of the secondary job

The Guardian’s Greg Jericho has completed some excellent analysis of this week’s quarterly experimental employment data from the ABS, which shows that there are actually more than there are people employed because a record 6% of earners work multiple jobs: In the June quarter this year there were 14.53m jobs available in Australia. Of these,

6

Australia’s welfare blow-out debunked

For several years, media outlets like The Australian ran a campaign against the so-called ‘blowout’ in welfare spending, backing claims made by the Coalition Government that nearly half of the population receives more in welfare than they pay in tax. The Australian Institute of Health and Welfare (AIHW) 2019 welfare report has debunked this myth,

9

Coalition facing mounting pressure over Newstart

The Morrison Government continues to face mounting pressure to raise Newstart benefits for Australia’s unemployed. Yesterday, Monash researchers released a study showing that many Newstart recipients are suffering from poor health and often too sick to work or study: “It’s hard to work when you’re sick. We found large disparities between the health of people

16

MSM rolls up for Treasury versus RBA circus

A new distraction is upon Australian macro management. It’s the Recessionberg versus Lunatic RBA circus. There’s lots of stories on it but the AFR captures the big yawn: Economist Richard Holden says the tension between fiscal and monetary policy is “Australia’s big economic dilemma”. …“Monetary policy cannot deliver medium-term growth,” Lowe told central bankers at

25

Negative gearing reform lives!

Via the AFR: Over recent weeks [Shadow Treasurer Jim] Chalmers has been busy travelling the country consulting caucus colleagues as part of the policy process one described as a review but “not with a capital R”. …If there is one consistency in the responses it is that Labor cannot abandon the fairness principles which underscored

7

Blind leads stupid: Recessionberg vs Lunatic RBA

We have watched in horror since the election as the Property Council Government has set about a single-minded agenda to re-inflate the property bubble, which has included: driving for stimulus despite collapsing domestic demand to force interest rates lower; tax cuts and deposit insurance for principle to leverage; winding back Hayne Royal Commission changes at

20

Melbourne’s suburban rail loop the next monster white elephant

More details have emerged about the Victorian Government’s signature $50 billion, 90 kilometre suburban rail loop, which is scheduled to start construction in 2022: Premier Daniel Andrews confirmed the preferred route for the much anticipated 90km rail loop would run from Cheltenham to Werribee and connect every metropolitan train line in-between. New underground stations will

10

Immigration ponzi sends NSW Government broke

The Committee for Sydney has called on the NSW Government to provide more transport networks. Committee CEO, Gabriel Metcalf, believes Sydney has grown to the point that it needs a mass transport system like London’s, but that the Government does not have the money required to fund more infrastructure projects. It suggests the Government should

10

NBN farce extends and pretends

A week after it was revealed that Australians pay the highest broadband costs in the OECD and ranks 67 out of a wider list of 83 countries: Embattled NBNco has admitted that it is running way behind schedule in connecting homes to the NBN network: Half a million homes will have to wait longer to connect

18

NBN fail: Aussies pay highest broadband costs

Research from the Australian Parliamentary Library reveals that Australia has the least affordable entry-level access to broadband among developed OECD economies, and ranks 67 out of a wider list of 83 countries: NBN researcher and University of Sydney infrastructure lecturer, Tooran Alizadeh, has described the result as “disappointing, devastating, but not surprising” that Australian are

44

NDIS rorted and defrauded

Over many years, we’ve warned that the enormous pot of money on offer under the $22 billion National Disability Insurance Scheme (NDIS) would spawn a whole range of middle-men and providers seeking to cash in, leading to significant waste, or worse fraud. We’ve seen this before with the rorting of the private Vocational Education and

1

Pretend infrastructure boom booms!

Australia’s pretend infrastructure boom to the moon!  At the AFR: “It looks like the boom is going to be a bit more protracted than we previously thought,” said Nigel Hatcher, director at Macromonitor, which specialises in economic forecasts for the construction industry. Transport construction activity around Australia is expected to hit a record $42 billion

13

Drowning Recessionberg grabs Labor policy life saver

Basically everybody can see that Josh Recessionberg is an idiot. The AFR can: Corporate Australia doesn’t need advice on capital allocation from the Treasurer. Josh Frydenberg has no skin in the game of capital allocation, unlike board directors who need to explain to their shareholders once a year – rather than every three years for a politician

8

ATO slugs Shell with $755m tax avoidance bill

Earlier this year, it was revealed that the Australian Taxation Office (ATO) had collected an extra $7.7 billion in unpaid tax liabilities since July 2016 via its tax avoidance taskforce, with 44 multinationals changing their business models in order to meet their Australian tax liabilities. Today, The Guardian reports that the ATO’s multinational tax avoidance

13

Recessionberg: I am an idiot

From Josh Recessionberg at The Australian: Josh Frydenberg will issue a rallying call to company bosses to ­invest more in new technologies — rather than returning excess cash to shareholders — in a bid to kickstart flagging productivity and boost wages by $3000 a year. In a wide-ranging address to the Business Council of Australia,

14

Actuaries Institute declares war on young

The Actuaries Institute has published a discussion paper examining a range of options for overhauling Australia’s retirement income system, which includes as its central recommendation including the family home in the pension assets test, but conveniently not for the baby boomer generation. From The Australian: Actuarial expert David Knox, former regulator Anthony Asher and public

23

Australia should consider an inheritance tax

The Grattan Institute’s Owain Emslie and Danielle Wood have done a great job examining inheritances in Australia, which flow overwhelmingly to older Australians and the wealthy, thus helping to cement wealth along class lines: A sample of estates from Victoria’s probate office suggests the median estate in Victoria is worth about $500,000. That’s likely to

51

“Generational bargain is at breaking point”

More from Kate Griffiths and Danielle Wood at the Grattan Institute. Via the ABC: Each generation of Australians has enjoyed a better standard of living than the one that came before it. But today’s young Australians are in danger of falling behind. A new Grattan Institute report, Generation gap: ensuring a fair go for younger Australians, reveals

43

Grattan: War on youth intensifying

Via Grattan: Today’s young Australians are in danger of being the first generation in memory to have lower living standards than their parents’ generation. Older Australians today spend more and have higher incomes and greater wealth than older Australians three decades ago. But living standards have improved far less for younger Australians. The wealth of households

15

Now for some fake “trust in government” reform

The ScoMo Government is a masterful fake. It is currently pretending to cut immigration, pretending to reform banking, pretending to build infrastructure, pretending to be a good economic manager, pretending to care about weak wages, pretending to care about energy prices, pretending to care about anything and everything other than rising house prices. This we

10

Recessionberg demands QE

No QE says monetary curmudgeon Stephen Grenville: QE1 was a powerful instrument in rescuing key financial markets which had frozen, but this experience has no relevance for Australia in the foreseeable future. When the current monetary system was put in place in Australia in the 1980s, ‘free markets’ were the lodestone of policy. The RBA

8

Left and right unite in calls for an investment allowance

Earlier this week, the Business Council of Australia (BCA) called on the federal government to introduce an broad-based investment allowance to help stimulate the economy. Now, the BCA has received support from the Australia Institute. Ben Oquist, the executive director of the progressive think tank, says an investment allowance is preferable to a general cut

7

Gladys launches high speed ponzi rail vision

Late last year, NSW Premier Gladys Berejiklian proposed four routes for high speed rail (HSR) into Sydney: A high speed rail project Premier Gladys Berejiklian has committed to start work on if she wins the state election could cost $100 billion… “A reasonable figure would be $100 billion in Australian dollars to build it,” [Committee