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.

6

ScoMo’s failed SME ‘corona loan’ scheme receives fake makeover

A few months back, the Morrison Government expanded its ‘corona loan’ scheme designed to get cheap government-backed money into the hands of struggling small to medium-sized enterprises (SME): Small employers will be given greater access to a $40 billion loan scheme to help them through the recession when the federal government overhauls its flagship JobKeeper

19

Snowy Hydro 2.0 turns $10b white elephant

18 months ago, we asked whether the Snowy Hydro 2.0 – a pet project of former Prime Minister Malcolm Turnbull – was an expensive “white elephant”: More power storage is a good idea. But whether this project is a good way to achieve it remains debatable. The ABC produced an excellent analysis of the pros

23

Shane Oliver: Australia can’t grow its way out of debt

AMP chief economist, Shane Oliver, has released research examining whether Australia’s “eye-popping” public debt can be paid-off via strong economic growth, as occurred in the post-War years. Oliver’s conclusion is that repeating the post-War experience is highly unlikely, meaning Australia will likely be saddled with a high debt load for decades to come. Key Points:

20

Gottiboff: Death taxes would sap first home buyer confidence

Historically low interest rates and government incentives are prompting more first-home buyers (FHBs) to enter the housing market. However, according to Robert Gottliebsen, renewed talk of reintroducing death taxes will sap the confidence of FHBs: After lying dormant for many years, death taxes are suddenly re-entering the speculative arena. And so to treasurer Josh Frydenberg

14

The long, painful death of TAFE

A recent report from the Centre for Future Work showed that enrolments in apprenticeships and traineeships have collapsed since 2012, and projected a further 30% drop in new apprenticeships (with 130,000 fewer positions) resulting from the COVID-19 pandemic to 2023: The report also showed that government Vocational Education and Training (VET) spending has languished far

31

Dumb and Dumber head into the Mistake of 2021

The mistake of 1937 is a very useful historical guide for policymakers wrestling with an economic depression. Via the ECB: The economic conditions can be summarized as follows: 1) There are signs that the depression is finally over. 2) Interest rates have been close to zero for years but are now finally expected to rise.

36

Coalition to launch new ProfitKeeper program

Earlier this month, we reported how the Morrison Government’s JobKeeper subsidy has been an absolute boon for Australian business owners, juicing company dividends and profits. This was reflected in the latest national accounts for the June quarter, which showed that employee wages & salaries fell by 3.3% over the quarter while company profits soared by

33

Youth took the virus pain. Old get the virus gain

The Morrison Government is reportedly gearing up for ‘astounding’ expenditure in the upcoming federal budget, centred around bringing forward $14 billion of tax cuts: The Morrison government is preparing to unleash an “astounding” amount of spending in next month’s budget to drag the country out of its first recession in 29 years with the nation

160

ScoMo the Impaler about to disembowel economy

Cruelty is a ScoMo specialty. Whether it’s abandoning burning Australians, forcing media shots out of those that hate him to show how compassionate he is, dragging the chain on lifesaving COVID measures, or rescuing Australians stuck overseas amid a once per century shock, there is something missing in this bloke. And today our psychopathic PM

40

Get set for Depressionberg’s EconomySmasher

Josh Depressionberg’s EconomySmasher policy is almost here, at The Fake Left: Cuts to jobkeeper wage subsidies will take $9.9bn out of the economy by Christmas, with a $1.52bn reduction in fortnightly support from late September, according to the McKell Institute. The release of the report on the future of the Morrison government’s signature economic policy

59

Saul Eslake calls for 9% inheritance tax

Independent economist Saul Eslake has produced a ‘blueprint’ for a potential national tax reform agenda. The 48-page report was commissioned by the Australia Institute and, among other things, proposes the introduction of a 9% tax on deceased estates that are worth more than $1 million. Death taxes were abolished in Australia more than four decades

68

How virtue signaling botched Melbourne’s hotel quarantine

Recall that United Security – a tiny security firm with only 89 permanent employees that wasn’t on the Victorian Government’s preferred supplier list – was granted the biggest ($44 million) contract to mismanage Melbourne’s hotel quarantine program: The security company paid $44 million to guard Victoria’s quarantine hotels says it does not know why it

9

Shock horror! Companies want lower taxes

Accounting software company MYOB has asked companies what they would most like to see in the federal government’s October budget to support business. Unsurprisingly, lower taxes was the leading response with 31% of respondents wanting a reduction in the corporate tax rate: Let’s hope the federal government doesn’t share the same view. Because cutting company

30

Finally, Paul Keating talks aged care sense

A few years back, Paul Keating recommended slugging Australian workers with another levy to cover ‘geriatric’ care for people aged 80-plus: Former prime minister Paul Keating has called for a national insurance scheme to help people pay for healthcare, accommodation and other living expenses if they outlive their superannuation savings… “We have no policy here

7

JobSeeker cut to wipe $31bn off economic growth

A report from Deloitte Access Economics, commissioned by the Australian Council of Social Service (ACOSS), has concluded that scrapping the coronavirus supplement for JobSeeker recipients would cost 145,000 jobs over two years and reduce GDP growth by $31.3 billion. Moreover, regional areas would be hardest hit. The supplement is slated to be reduced from $550

15

Victorian Government expands business stimulus payments

Yesterday, the Victorian Government announced a $3 billion stimulus package for Victorian businesses. This was targeted primarily at the hospitality, retail, accommodation and tourism operators: Over $1.1 billion in cash grants will support small and medium sized businesses that are most affected by coronavirus restrictions including… Around 75,000 eligible businesses with payrolls up to $10

15

Thousands rorting JobKeeper ignored by ATO

Thousands of businesses accused of rorting JobKeeper have reportedly been ignored by the Australian Taxation Office (ATO), which has yet to issue even one penalty: The $70 billion JobKeeper wage subsidy program has potentially been rorted by thousands of businesses but not one has been penalised despite more than 8000 tip-offs to the tax office

16

CEDA demands $10b welfare payments to temporary migrants

Business lobby, the Committee for Economic Development of Australia (CEDA), has long been a shill for the ‘Big Australia’ mass immigration policy, frequently releasing illogical and contradictory ‘research’ supporting the cause. Today, CEDA has released a paper demanding that Australian taxpayers provide JobKeeper and JobSeeker payments to temporary visa holders in order to make Australian

8

JobKeeper turns executive BonusKeeper

Earlier this week, we reported how the Morrison Government’s JobKeeper subsidy has been an absolute boon for Australian business owners, juicing company dividends and profits. This was reflected in last week’s national accounts for the June quarter, which showed that employee wages & salaries fell by 3.3% in the June quarter while company profits soared

28

Victoria’s next crisis is economic and budget collapse

Via Stephen Mayne at Crikey: If Scott Morrison and Josh Frydenberg really want to pressure Dan Andrews to lift Victoria’s lockdown early, they’ve got a very big card they could play: financial support. The Victorian budget and balance sheet is in more strife than any other Australian government because the pandemic has forced it to

12

Morrison Government a key player in ‘gig’ economy

According to the ABC, the federal government’s use of contractors, consultants and labour-hire firms has exploded under the Coalition: Today, Defence employs about 17,400 public servants. However, its outsourced civilian workforce is far larger than that — documents published under freedom of information (FOI) law show it has about 28,600 contractors. These extra employees often

6

Australia’s ‘free market’ privatises profit, socialises losses

Aussie taxpayers are set to be slugged billions of dollars to pay for workers’ entitlements once government support is unwound and businesses fail: The federal government has extended insolvency protections until the end of the year and committed to paying wage subsidy scheme JobKeeper until March 2021 to help businesses stay afloat during the worst

3

Retail boss talks stimulus sense

Last week, Australia’s largest business and employer groups demanded the Morrison Government bring forward income tax cuts and business tax incentives to stimulate the economy. However, Australian Retailers Association (ARA) CEO, Paul Zahra, believes tax cuts would be ineffective and has urged the Government to instead permanently lift JobSeeker: Mr Zahra joined Australian Council of

5

Depressionberg’s infrastructure black hole opens

Ever since tennis pro, Josh Depressionberg, was picked by a process of dart-throwing as the new Australian treasurer, MB has warned that his great economic plan was spectacularly ill-conceived. That plan was to run down public investment to forced interest rates lower and trigger a new round of house price inflation plus consumption supported with