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.

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What does the “Labor” Party stand for? Absolutely nuthin’

Labor announced yesterday that it will not make changes to the stage three income tax cuts if it wins the upcoming federal election. It also abandoned the negative gearing and capital gains tax reforms taken to the past two federal elections. Shadow cabinet formally signed-off on these policy positions yesterday. Earlier this year, Labor also

9

Coalition under extreme pressure to reinstate JobKeeper

The NSW government will formally request the federal government reinstate the JobKeeper wage subsidy scheme, amid expectations that the COVID-19 lockdown of Greater Sydney will be extended for at least another month. The state government is also believed to have sought financial modelling on a number of scenarios, including extending the lockdown until 17 September:

47

JobKeeper rorters ignored as unemployed forced to repay welfare

The Parliamentary Budget Office (PBO) has reported that 157,650 employers saw their turnover increase between April and June 2020, when compared to the same period in 2019. These employers received a combined $4.6 billion in JobKeeper payments during this period, and Labor MP Andrew Leigh says the figures show how much of taxpayers’ money was

9

Privatised job agencies get rich off unemployed suffering

In the late 1990s, Australia privatised the system that helps the unemployed find work. The idea was that by paying employment service providers for each person they placed into a job, the process would become more efficient. Instead, a parasitic industry developed with around 40 privately run employment agencies earning millions in fees from the

4

Labor takes aim at NBN Co’s exorbitant remuneration

Shadow communications minister Michelle Rowland has asked the Auditor-General to undertake an independent review into the bonus system at NBN Co. Labor’s government accountability spokeswoman Kimberley Kitching says an audit is badly needed, following revelations earlier in 2021 that NBN Co staff have been paid almost $80 million worth of bonuses during the COVID-19 pandemic.

45

It’s time for an inheritance tax

The Australian’s James Kirby believes that changing attitudes makes now an ideal time to implement an inheritance tax: New academic work suggests Australians now have “a surprisingly high level of support for wealth transfer taxation”. “Most participants simply had no objection to wealth transfer taxation: Their support was based less on reasons why these taxes

15

I’m shocked! Shocked! Developers hate Victoria’s zoning windfall tax

May’s Victorian Budget implemented a new windfall gains tax for properties whose value is boosted by a council rezoning. This tax will apply to properties where the value is boosted by more than $100,000, with a 50% tax on windfalls above $500,000. The clearest indication that this windfall tax is good policy has come from

36

JobKeeper 2.0 the right policy for Sydney

The federal and NSW governments have responded to the growing outbreak in Greater Sydney by agreeing to provide a combined $5.1 billion in COVID-19 disaster payments for businesses and individuals who have been affected by the lockdown. The funding commitment is based on expectations that the lockdown will be extended by at least four weeks. Prime

5

Car parks rorts symptom of a wider problem

The Grattan Institute believes that the Morrison Government’s ‘car park rorts’ scandal is a symptom of a wider problem: that infrastructure projects tend to be rushed through without proper planning or scrutiny:  “Australia’s state and federal governments have developed a costly habit of rushing major transport projects to market… invariably the taxpayer is left to

12

Cashflow Boost: $34b corporate welfare nobody talks about

Back in March I published an article entitled “The $34b corporate welfare payment nobody talks about”, which examined the Morrison Government’s $34 billion Cashflow Boost – a gigantic corporate welfare scheme launched at the beginning of the Coronavirus pandemic that has received little scrutiny or media attention: To date there has rightfully been lots of

10

Auditor blasts Morrison’s car park ‘rorts’

The Auditor-General has issued a damning report on the federal government’s administration of the $660 million Commuter Car Park Projects fund. Set up in 2018 as part of the Urban Congestion Fund, the project was intended to construct car parks near urban railway stations. However, the Auditor-General found that none of the 47 car park

3

NSW budget whacks developers with $600m value uplift tax

Last month, the Victorian Budget implemented a new windfall gains tax for properties whose value is boosted by a council rezoning. This tax will apply to properties where the value is boosted by more than $100,000, with a 50% tax on windfalls above $500,000. Yesterday, NSW Planning Minister Rob Stokes introduced legislation for a new

3

Last hurrah for NSW stamp duty boom

The New South Wales Government will deliver its 2021 Budget tomorrow. The Government had forecast in its half-yearly Budget review in February that stamp duty revenue for 2020-21 would total $8.372 billion. However, the government now expects such revenue to total $9.379 billion, due to Sydney’s soaring residential property market – delivering a financial windfall

10

Morrison Government must incentivise state tax reform

NSW has recently flagged plans to replace stamp duty with an annual land tax. But NSW Treasurer Dominic Perrottet contends it will be “tough fiscally” to pursue stamp duty and broader GST reform without the help of the federal government: “It makes sense for them to support [it]. Things can be politically challenging but they don’t

31

It’s called a progressive tax system for a reason

Shock horror! Fairfax is reporting that higher income earners pay the most tax, with Australia’s “Budget reliance on high and middle income earners” reportedly growing: The report draws on data from the Australian Tax Office (ATO) showing that nearly 14.7 million individuals paid a combined $213 billion worth of income tax during the 2018-19 financial

9

Frydenberg: Victoria must go halves on COVID bailout

Federal Treasurer Josh Frydenberg has ruled out reinstating the JobKeeper wage subsidy scheme for Victorian workers following the extension of Melbourne’s lockdown. However, Frydenberg says he would consider any request from Victoria for financial support, although this would most likely be conditional on a matching contribution from the state government. The state government has already