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
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.
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,
Former Productivity Commission chairman Peter Harris says the federal government should consider adopting key recommendations in the ‘Shifting The Dial’ report, which the Commission released in 2017. In particular, he has called for state governments to phase out stamp duties on property transactions in favour of a land tax, arguing that this would help to
By Leith van Onselen When it comes to cruelty against the unemployed, it’s hard to top the Morrison Government. As the Budget heads back towards surplus, and with the Government pledging tens-of-billions of dollars for tax cuts, it refuses to lift Australia’s Newstart Allowance, which is about to fall to 30% below the poverty line:
By Leith van Onselen Labor’s frontbench will meet on 24 June, amid growing pressure from within the party’s ranks to back the federal government’s full income tax package. Some Labor MPs are of the view that the party may need to accept that the Coalition’s election win has given it a mandate for its three-stage
By Leith van Onselen You would be hard pressed to find a bigger racket than Australian pharmacies. How many any other industries in Australia have had laws implemented that ban new entrants from opening within 1.5 kilometers of an existing business? How many other industries allow only registered professionals in the field to own and
With the net debt of Australia’s state governments set to rise sharply in coming years to finance infrastructure projects for Australia’s population ponzi, analysis shows they have almost $220 billion worth of assets that could be privatised. Accordingly, IFM Investors CEO, Brett Himbury, is calling for further asset sales to the nation’s superannuation funds. From
By Leith van Onselen Last month, the NBN reported that it “continues to bleed” cash as revenue targets remain elusive: In its third-quarter results, released on Monday, NBN Co announced revenues of $2 billion but a net loss of $3.4 billion for the nine months to March 31, bringing accumulated losses to $20.7 billion over
NSW’s Treasurer, Dominic Perrottet, has labelled federal-state financial relations “a mess” and demanded fundamental reform. From The SMH: The NSW government has appointed an expert panel to review federal financial relations from a state perspective. It will identify ways to improve the current system and make it more reliable. Mr Perrottet said the aim was
Not that you’d know it from the LNP cheer squad: The government is piling pressure on Anthony Albanese to pass its full tax cut agenda when parliament resumes in July, with Finance Minister Mathias Cormann declaring the Opposition Leader would be holding on to “the politics of envy’’ rejected at the election by not backing
Witness the businomics ideology go to work. At The Australian: Debt across Australia’s states will explode by more than $100 billion, as governments boost spending on infrastructure and public servants at the same time their budgets are being sideswiped by weak GST revenue, slowing economic growth and plunging stamp duty revenue. An analysis of this
By Leith van Onselen The NSW Budget was released yesterday, which downgraded the state’s stamp duty receipts by a further $232 million over the forward estimates, and marked a $10.6 billion plunge in stamp duty revenue since 2017. The below charts iuulstrate how NSW’s stamp duty projections have been downgraded over the past year. First,
Earlier this month, Auditor-Generals from Australia’s three largest states warned that Australia’s universities have become dangerously reliant on fees from international students, which have ballooned on the back of the massive rise in international student numbers, as shown below: As you can see, the number of international students studying in Australia has nearly doubled to
Leith is busy putting together his critique of the NSW Budget, which has added some terrifically ill-timed austerity to the NSW economy. In the meantime Moody’s has delivered this clangor in its assessment: Despite the housing market correction delivering a sharp decline in transfer duties, New South Wales’ 2020 budget highlights a continued strong operating
By Leith van Onselen Treasurer Josh Frydenberg has refused to provide Labor with modelling showing how much the Coalition’s tax cuts would benefit people earning over $180,000. From SBS News: The opposition, which is weighing up whether to support the full $158 billion package, wanted to know exactly how much of the package would benefit
Awesome stuff from CA: Ten million taxpayers will have to wait for July 1 tax cuts, with Centre Alliance declaring the legislation is not “urgent” and is unlikely to pass when Parliament returns. The prediction effectively torpedoes hopes that the $1080 tax cuts the Prime Minister promised during the election will quickly pass Parliament –
By Leith van Onselen The Australia Institute (TAI) has released new research showing that men will receive the lion’s share of the Coalition’s higher-income tax cuts: The final stage of the Morrison Government’s unlegislated income tax plan, stage 3(a) favours males by a ratio of almost two to one, according to a new distributional analysis
Ross Gittins wants to see Keynesian stimulus: … any fiscal stimulus is very short run, so as to support the economy before monetary stimulus fully kicks in, thereby minimising the harm done. Remind you of anything? The package of budgetary measures – the cash splashes and shovel-ready capital works – designed mainly by Treasury’s Dr
By Leith van Onselen Victorian Premier, Dan Andrews, has tacitly admitted that the state is unable to build infrastructure fast enough to keep pace with manic immigration-driven population growth. From The AFR: “We are pretty well at full-tilt with sand, gravel and concrete,” Mr Andrews told The Australian Financial Review’s National Infrastructure Summit in Melbourne
By Leith van Onselen MB has argued repeatedly in favour of legalising marijuana on the following grounds: It would bring marijuana into line with alcohol and tobacco, which are both legal and regulated despite being more dangerous to health; It would guarantee purity of supply; It would reduce profits to organised crime; and It would provide
By Leith van Onselen As the NSW Government’s infrastructure building program approaches $100 billion, and Sydney’s population grows out of control, NSW Premier Gladys Berejiklian has subtly the federal government pay its fair share. From The SMH: Ms Berejiklian made a subtle push for greater financial commitments from Canberra, citing the state’s $90 billion in
Via The Australian: Finance Minister Mathias Cormann has ruled out doing deals with crossbench senators to win their support for the Coalition’s $158 billion personal income tax cuts, intensifying pressure on Labor to back the plan. The blanket refusal by the government’s Senate leader to negotiate special deals or buckle to demands from Pauline Hanson
In February 2014, a BBC Panorama investigation exposed systemic student visa fraud, which included secret filming of government-approved English-language exams and showed candidates having their tests being fraudulently completed by “fake sitters”. A subsequent investigation by the British Home Office led to 50,000 English language tests taken by international students being declared invalid, 34,000 international student
By Leith van Onselen Academic researchers, Rachel Ong and Gavin Wood, warns that the number of mature age Australians carrying mortgage debt into retirement is soaring, endangering Australia’s retirement system. From The Conversation: Microdata from the Bureau of Statistics survey of income and housing shows an increase in the proportion of homeowners owing money on mortgages across every
By Leith van Onselen In 2018, then Treasurer Scott Morrison made headlines when he claimed Tony Abbott’s proposal to cut Australia’s permanent migrant intake by 80,000 to 110,000 would cost the Federal Budget “$4 billion to $5 billion over the next four years”, arguing “the economy (would not be) growing at the same level and
By Leith van Onselen For years MB has explained why it does not support the proposed $120 billion High Speed Rail (HSR) line linking the major eastern cities of Brisbane, Sydney, Canberra and Melbourne, due to: The exorbitant cost associated with building and operating the rail line; Lack of population density to support the project;
By Leith van Onselen Another report has come to light about how Victorians are being gouged by hidden infrastructure costs: Victorians are paying billions of dollars to a private consortium for a major road [Peninsula Link] that was contracted to be built for just $651 million nine years ago… Treasurer Tim Pallas was roads minister
By Leith van Onselen The Australia Institute (TAI) has released new research estimating that the final stage of the Morrison Government’s unlegislated income tax plan, stage 3(a) will, over the five years after it is introduced in 2024-25, deliver a $33 billion benefit to those earning more than $180,000: Key findings: Those earning more than
There is no private sector growth left, which was nicely pointed out by Greg Jericho: Over the past year government consumption and investment contributed 1.4% points towards total GDP growth of 1.7%. That effectively means government spending accounted of 79% of GDP growth in the past year – a level only marginally below what happened