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.

1

Dan’s dodgy West Gate Tunnel besieged by scandal

The controversies surrounding the Victorian Labor Government’s $6.7 billion West Gate Tunnel continue to pile up. By way of background, the project was inked in late-2017 when Premier Daniel Andrews signed a shady deal with Transurban to build the project, which would see Transurban contribute $4.4 billion towards the cost in exchange motorists paying $15

34

Video streaming services present NBN timebomb

18 months ago, NBN chief Bill Morrow blamed online gamers for creating congestion on the National Broadband Network (NBN) network: NBN Co is “evaluating” slowing down or limiting downloads for users during peak times in order to overcome these fixed wireless congestion problems. At a parliamentary hearing in Sydney this afternoon, NBN Co chief executive

69

It’s time to abolish costly parental visas

In its 2016 Migrant Intake into Australia report, the Productivity Commission (PC) estimated that the circa 9,000 elderly permanent parental visas granted every year cost Australian taxpayers between $2.6 and $3.2 billion in present value terms, or between $335 000 and $410 000 per elderly adult, with the cost rising over time as numbers increase.

14

Frydenberg molests confidence fairy

After dropping a roofy in her drink, amateur Treasurer Josh Recessionberg has had his way with the confidence fairy, writing at The Australian: With that [trade] deal concluded and concerns about a “no-deal” Brexit having diminished, the IMF updated its global economic outlook yesterday and pointed to tentative signs of improved market sentiment. …The IMF

11

Preasure builds on SmoCo for “generous investment allowance”

Australian Industry Group (AIG) chief, Innes Willox, has called on the Morrison Government to implement a Labor-style investment allowance to spur business investment: …we propose the introduction of a generous investment allowance to bring forward and increase business investment. It would allow businesses to deduct for tax purposes a larger proportion of their expenditure on

10

Sydney Light Rail: A $2.9b slow tram to nowhere

Sydney’s $2.9 billion Eastern Suburbs Light Rail Project is a textbook example of Australia’s infrastructure failure. In 2018, the former head of Infrastructure NSW, Paul Broad, in described the project as a waste of money and a vanity project that should have never been started. This was immediately followed by a secret report prepared by

21

Private health insurers panic as young Aussies exit

George Savvides, former head of Medibank, warns that the mass exodus of younger Australians from private health insurance will drive-up premiums and place much more pressure on the public health system in the future: George Savvides, Medibank’s chief executive for 14 years until 2016, has warned an exodus of young people from the private system

9

NDIS “bogged down in red tape and bureaucracy”

Following last year’s federal election, the Morrison Government commissioned a review of the National Disability Insurance Service (NDIS) and the way it is managed by the National Disability Insurance Agency (NDIA). This report has now been released publicly and includes 29 recommendations on how to improve the program — including extending the life of funding

8

Private health insurers demand more subsidies

With the percentage of Australians between the ages of 20 to 39 with private health insurance falling from 40% to 34% over the past five years, and older Australians claiming more than ever, Private Healthcare Australia (PHA) has demanded the private health insurance rebate to be restored to 30% once the federal Budget has returned

13

ScoMo’s “congestion busting” infrastructure busts

In last year’s federal budget, the Morrison Government promised to “bust congestion” via a $100 billion infrastructure program over 10 years, alongside a $4 billion Urban Congestion Fund to support projects at a State level to fix pinch points and improve traffic flow. It has been revealed that just three of 114 government-promised road projects

0

Morgan Stanley: Ain’t no fiscal stimulus coming

Via Morgan Stanley: “With reduced budget forecasts and increased bushfire spending, the Government would need to move well into deficit to provide a meaningful income tax stimulus at the May Budget.” “We have not detected a shift in messaging consistent with this, and so think a smaller scale stimulus consistent with broadly balanced budgets is

10

NDIS a bureaucratic monster

The Courier-Mail has released a report claiming that 1200 Australians have died while waiting for National Disability Insurance Scheme (NDIS) support, bogged down in bureaucracy: MORE than 1200 Australians have died while waiting for an NDIS package in just three years – tragically including 65 children… The shocking number of deaths occurred as families waited

7

Audit Office torpedos $80 billion submarine pork

The Australian National Audit Office (ANAO) has released a report into Australia’s $80 billion future submarines project – “the largest Defence procurement in Australia’s history” – which warns that the decision not to go with an off-the-shelf design has materially raised procurement risks: The decision not to acquire a military‐off‐the-shelf submarine platform, and instead engage

16

Land baron gets rich off gullible Victorian taxpayers

‘Game of Mates’ is clearly running strong within the Victorian Government, with a property developer making huge ‘planning gain’ windfalls at the expense of Victorian taxpayers. From the Herald-Sun: The delays come as Supreme Court documents reveal another blow for the government over the troubled West Gate project. Documents obtained by the Herald Sun show

1

Moody’s: Bushfires to hit government budgets

Moody’s says in a new report that Australia’s (Aaa stable) general and state governments can absorb the near-term credit impact from the ongoing bushfires, although they are “likely to result in rising and recurring costs that will test the government’s capacity to mitigate these costs”: The near-term credit implications for the sovereign and the states

9

Backlash swells against Sydney bus privatisation

11,000 Sydneysiders have signed a petition opposing the privatisation of the city’s remaining bus network, which would break a pre-election commitment ruling out any additional privatisations: Hundreds of people have rallied outside NSW Premier Gladys Berejiklian’s office to oppose plans to privatise Sydney’s remaining state-owned bus services. Union members and commuters were among those who

13

Spin engulfs Melbourne’s $50b rail megaponzi

The Sunday Herald-Sun published an extraordinary propaganda article spruiking the State Government’s 90 kilometre suburban rail loop, which it labelled a “game changer”: Melbourne’s new suburban rail loop will operate up to 40m underground and could run driverless trains… A gun team of 150 experts from Australia and overseas has been assembled to get the

41

Wealthy home owners devour Aged Pension welfare

Late last year, The Australian’s Adam Creighton labelled the Aged Pension “an economically costly inheritance preservation scheme” given its largesse towards wealthy home owning retirees. This claim came about after it was revealed by Creighton that elderly Australians living in $1m-plus homes are claiming $6.3 billion in pension payments: Retirees living in $1m-plus homes are

60

Victoria sinks $2m on machine guns for police

In today’s Aussie WTF (which should really be the new URL for MB): More than 700 police will be trained to use high-powered semi-automatic rifles, with frontline officers expected to take immediate action to confront terror attacks and active armed offenders. Deputy Commissioner Shane Patton said on Wednesday that police will buy 300 AR-15 30-shot

6

Australian Government forecasts wages wipeout for 2020/21

As I analysed the recent MYEFO projections, one thing stood out: Here’s the economic outlook: GDP for this year might be OK but it’s odds-on too bullish. But 2020/21 is deluded and so are the outer years. It is tradition to forecast Futureboom! to bailout today’s stupidity. But it doesn’t ususally accompany a forecast commodities bust which

11

Business lobbies demand surpulus

There’s no stopping a business lobby moron: Australian Industry Group chief executive Innes Willox said the budget could afford fiscal stimulus “should the economy fail to pick up steam in the next few months”. “If there is further slowing of domestic activity, measures to stimulate business investment, address the difficulties small businesses are having accessing

4

S&P cheers on Recessionberg

In a magnificent outpouring of guff today at the AFR, L-plate Tresurer Josh Frydenberg puts all stimulus hopes to bed: As we go forward, we will continue to maintain a disciplined and responsible approach to managing the nation’s finances. We will not be panicked into reckless spending. With the budget back under control, our fiscal

4

MYEFO brings the austerity

Oh yeh, they’re nuts alright, via The Australian: The budget has been hit with a writedown of more than $30 billion in government revenue due to the weaker global outlook and an expected downgrade in domestic economic growth to around 2.25 per cent. But the government will ­remain on track to deliver surplus budgets over

1

Property rebound lifts VIC stamp duty projections

It’s raining mid-year Budget Updates with Victoria’s also released today: The general government sector operating surplus is estimated to be $618 million in 2019-20, with annual operating surpluses averaging $3.3 billion a year across the forward estimates. Compared with the 2019-20 Budget, the net result from transactions has been revised down by an average of

1

Stamp duty bounce saves NSW Budget

The NSW government has announced a 2019-20 budget surplus of $702 million in its mid-year economic review, down from a forecast a surplus of $1.016 billion in the June budget. The government expects surpluses to average $1.9 billion over the next four years, with stamp duty revenue being boosted by a rebound in Sydney’s housing

6

New Zealand humiliates Recessionberg with big infrastructure spend

Via Stuff: The Government will invest an extra $12b in infrastructure over the next four years, including $6.8b on transport. Finance Minister Grant Robertson unveiled the spending at the Half-Yearly Economic and Fiscal Update (HYEFU) on Wednesday afternoon, saying it was the right time to take advantage of low interest rates and “future-proof” New Zealand