When it comes to cruelty against the unemployed, it’s hard to top the Morrison Government. Listen to lousy ScoMo today on a Newstart rise: “The government has no plans to do that,” he said. “We will continue to increase Newstart every six months as has always been the practice. “More importantly, for those who are
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.
Via Domain: Billions of dollars of congestion-easing infrastructure projects that could boost the economy and increase safety are stuck years down the track as the Reserve Bank of Australia calls on the Morrison government to do more. As Prime Minister Scott Morrison promises to pull forward some infrastructure projects, an analysis of the federal budget
The cost of healthcare is under scrutiny in the wake of revelations that a growing number of Australians are seeking early access to their superannuation to pay medical expenses. The Association of Superannuation Funds of Australia raised concerns about this trend in February, warning that it demonstrates the need for government funding to the healthcare
New Social Services Minister, Anne Ruston, has sparked outrage from Labor after she claimed on radio that the Aged Pension was “welfare” for people who can’t look after themselves. From The New Daily: “Pensioners do it tough. They deserve our respect, they get a pension as payback for what they have done in contributing to
The NSW Office of State Revenue has released stamp duty data to June, which reveals a massive $1.65 billion (24%) decline over the past year and a $2.3 billion (31%) decline since stamp duty receipts peaked in October 2017: The latest retracement in stamp duty receipts follows a sharp 23% decline in property transfers in
The University of Melbourne’s John Freebairn argues that reducing the tax rate for larger non-resident shareholders would stimulate economic growth and help to increase wages. From The Australian: Mr Freebairn said lower tax rates for large corporations would provide a “stimulus to the investor”, which would see “GDP grow” and that “some of that goes
The Grattan Institute has released a new working paper, entitled The history and purposes of private health insurance, which forecasts an ‘exodus’ of young and healthy people from the private health system leaving private health insurers struggling to cope with older, sicker patients. This leaves the industry in need of desperate reform: Australia’s private health
National Seniors Australia (NSA) has reacted angrily to the federal governments changes to the pension deeming rate, accusing the government of having its “hands in pensioners’ pockets at a time when they can least afford it”. From The Guardian: The National Seniors Australia chief advocate, Ian Henschke, said the Coalition’s $600m commitment was welcome, but
Over the weekend, the Morrison Government announced changes to deeming rates for the Aged Pension, which are expected to deliver pensioners an additional $600 million of funding over the next four years. Specifically, the deeming rate used to calculate how much a pensioner earns on their financial assets will decrease from 1.75% to 1% for
It’s always funny to read the RBA – which is partly responsible for Australia’s record household debt load – lamenting that high household debt is curbing spending. Via a new RBA research paper: We explore the relationship between owner-occupier mortgage debt and spending using detailed panel data on Australian households. We find evidence consistent with
Yesterday, Fairfax reported that around 600,000 retirees are about to receive fortnightly pension increases from reductions to the deeming rate – a move supported by Labor: Prime Minister Scott Morrison’s expenditure review committee will consider how to minimise the budget impact of changes to the deeming rate for pensioners, while acknowledging many are feeling short-changed
S&P Global Ratings upgraded Australia’s credit rating outlook to ‘stable’ in September 2018. S&P’s Anthony Walker says the federal government must retain its target of returning the Budget to surplus in 2019-20 in order to retain its triple-A credit rating. He has stressed the need for the government to have a strong public balance sheet
After unsuccessfully taking its negative gearing and capital gains tax (CGT) reforms to the past two elections, Labor is set to officially dump the policy from its platform. From The Australian: Anthony Albanese has given his biggest signal yet that he will dump Bill Shorten’s negative gearing and franking credits reforms, responding “No” when asked
Sections of Australia’s media have launched an all out attack on the passing of the Coalition’s income tax package by the Senate. The Monthly claims the tax cuts commits Australia to austerity and will worsen inequality: On the face of it, spending $158 billion over the next 10 years – which is what the Coalition
Treasurer Josh Frydenberg says the federal government will change the deeming rate for pensioners by the end of 2019, and that over 25 per cent of pension recipients will be better off as a result. Shadow social services minister Linda Burney says a change in the deeming rate is urgently needed, and that cutting it
The federal government announced in the 2017 Budget that it would remove a capital gains tax (CGT) exemption for around 100,000 expatriate Australians who sell their main residence while overseas. While the measure was projected to raise $581 million over the forward estimates, it has been condemned by tax and legal experts as being “unjustifiably
Yesterday was good day for the Aussie economy, via The Australian: Australians will be handed an immediate $15 billion in tax cuts in a bid to boost the economy, drive retail sales and create new jobs, after parliament last night rubber-stamped Scott Morrison’s signature $158 billion tax relief package. The combined effect of instant tax
Via The Australian: Senator Griff said discussions with the government on measures to reduce gas prices, which the minor party had called for in order to support the entire tax cuts package, were “progressing very well”. An east coast gas reserve is one policy being considered, as well as a modification to the Australian Domestic
Via the Grattan: Federal Parliament should pass the Government’s Stage 1 tax cuts immediately but should defer consideration of the controversial Stage 3 cuts, according to a new Grattan Institute working paper. Budget blues: why the Stage 3 income tax cuts should wait finds passage of the Stage 1 cuts would give the economy a much-needed boost at
Amusingly empty, at the AFR: Scott Morrison says the government’s income tax cuts could pass both houses of Parliament by as early as Thursday but it will be just the start of what is “a chocked program” of legislation between now and the end of the year. Speaking to The Australian Financial Review on the
At the AFR it is all beer and skittles for Josh Frydenberg: Department of Finance monthly budget figures show the underlying cash deficit for the 11 months to May 31 in the current financial year had narrowed to $115 million down from $4.9 billion in April and $2.25 billion lower than the 2018-19 revised budget
Via Domain comes some “exclusive” fake news: More than two thirds of the final stage of the Coalition’s $158 billion income tax cut package will flow to workers earning under $180,000, new figures show, as the Morrison government moves within striking distance of its first policy victory since the election. The Coalition has refused to hand over costings
From The ABC comes news that the Big Four Australian banks have axed thousands of jobs, with automation to cause further job losses: Banks are thousands of staff off peak levels… In 2008, the Commonwealth Bank employed 39,621 full-time equivalent employees, a number that rose to 46,000 four years ago, before falling back to 43,771
There are fears the federal budget could take a $20 billion hit after an Australian National Audit Office (ANAO) report warned that a $19.5 billion government loan extended to NBN Co might not be repaid because of doubts the NBN will meet financial projections. From The AFR: [ANAO] classified the chances that the NBN’s financial
Great excitement at COMMSEC: Engineering: Engineering construction work done fell for the third straight quarter, easing by 4.9 per cent in real (inflation-adjusted) terms in the March quarter. And work done is down 13.5 per cent on a year ago. Infrastructure boom: Excluding the resource sector (coal, oil, pipelines etc.) work yet to be
John Hearsch, president of rail advocacy organisation Rail Futures, believes Sydney’s second airport at Badgerys Creek could once and for all kill the proposal to build a high speed rail (HSR) line linking the major East Coast capitals. From News.com.au: “In my view, the decision to go ahead with Badgerys Creek Airport has, in practical
From Richard Denniss at the AFR: Imagine if the Reserve Bank of Australia (RBA) conducted monetary policy the way the Morrison government conducted fiscal policy. Step one: publish optimistic forecasts of GDP and wage growth to create “confidence”. Step two: set interest rates five years down the track, based on those optimistic forecasts. Step three:
So says the RBA: Dr Lowe also said major infrastructure funding should be run like monetary policy – at arm’s length from the government – so that voters trust it is fit for purpose. “If we don’t get it right then the public doesn’t trust the politicians,” he said at the Crawford leadership forum in Canberra
By Leith van Onselen The NSW Office of State Revenue has released stamp duty data to May, which reveals a massive $1.6 billion (23%) decline over the past year and a $2.1 billion (29%) decline since stamp duty receipts peaked in October 2017: The latest retracement in stamp duty receipts follows a sharp 22% decline
Via Albo: What we have determined this morning to do is to propose a negotiating position to the Government which would bring forward tax cuts faster for those who need it and importantly those who will spend it to stimulate demand in the economy.” We have determined the following position: Stage one – of course,