In last night’s Budget reply speech, opposition leader Anthony Albanese stated that a Labor Government would establish a National Integrity Commission (NIC) to investigate corruption across the federal bureaucracy: Over these 8 long years the Government has focussed on itself, too often treating taxpayers money as if it were the Liberal and National Parties money.
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.
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Housing policy was a key focus of the Budget reply speech of Labor leader Anthony Albanese. Albanese committed to establishing a Housing Australia Future Fund to build 30,000 affordable homes, as part of a $10 billion social housing package. The proposal would effectively give the Future Fund $10 billion, which would then use the earnings
One of the most striking omissions from Tuesday night’s federal budget was that it made zero mention of Australia’s per capita GDP outlook. As we know, per capita GDP is a far superior measure of welfare (albeit still highly flawed) than headline real GDP, since it adjusts for the impact of population growth. After all,
The May 2021 Budget papers show that the ranks of the federal public service will swell to 174,300 in 2021-22, with almost 5,400 new staff to be recruited during the coming financial year. Government agencies that are taking on additional staff include the Australian Commission for Law Enforcement Integrity, which will grow from 64 to
The federal government now expects the Budget to remain in deficit for at least a decade, while the nation’s net debt is slated to reach almost $1 trillion in coming years. However, Chris Richardson of Deloitte Access Economics says the government will have to begin the process of Budget repair much sooner. He contends that
It is clear from last night’s federal budget that the Australian Treasury has no idea on wages. For years we watched the Treasury make bullish predictions on wage growth, always forecasting a marked pick-up in wages over the forward estimates period: This bullishness came despite the federal government running one of the biggest immigration programs
There is nothing that a pollie likes more than temporary revenue recycled as permanent spending. Capital Economics with the note: Treasurer Josh Frydenberg revealed in today’s Budget that the government will spend nearly all of the windfall accruing from the stronger economic recovery. That will result in a permanently larger role of the state and a
Via the excellent George Tharenou: Budget: only $8bn budget improvement over 5 years; given $96bn stimulus The Australian Government Budget, relative to the MYEFO released in Dec-20, forecasts a far smaller than expected cumulative improvement over the 5 years to 24/25 of only $8bn. Positively, 20/21 is a material $37bn better at $161bn (UBSe: $148bn,
Tonight’s Federal Budget delivered by Treasurer Josh Frydenberg contained few surprises. As expected, there are forecast Budget deficits as far as they eye can see; albeit not as high as the October Budget predicted owing to the stronger than expected economic recovery and the iron ore mega-boom: The budget projects that the nation’s unemployment rate
An interesting piece today from John Kehoe at the AFR on how the RBA seized control of fiscal policy: A month ago, Treasurer Frydenberg was on track to deliver an austerity budget. But for months, the RBA and Treasury had been trying to turn him around. Historically low unemployment was their goal. Frydenberg shifted his
French company Naval Group is trying to keep secret the original price it quoted for Australia’s future submarine project, which is purported to cost around $90 billion. The Defence Department has confirmed it is paying Naval Group’s legal bills to help conceal its original price, a move that South Australian Senator Rex Patrick has described
With demand from first home buyers (FHBs) beginning to wane, Treasurer Josh Frydenberg flagged over the weekend that Tuesday’s federal budget will contain a range of new subsidies to improve ‘housing affordability’ under a so-called “family home guarantee package”. Under the changes reported in the Weekend Australian: A government-guaranteed home loan scheme will be offered
The Federal Chamber of Automotive Industries (FCAI) is pressuring the federal government to replace Australia’s convoluted vehicle registration, stamp duty, licence fees and fuel excise system with a single road-user charge that taxes drivers for every kilometre they drive: “An efficient road-user charging scheme can address all vehicle users regardless of the type of vehicle
By Gareth Aird, Head of Australian Economics at CBA Key Points: The 2021/22 Australian Budget is scheduled for release at 7.30pm (AEST) 11 May. The Budget bottom line will be greatly improved because of the much better performing economy and significantly higher commodity prices. Notwithstanding, more stimulus is expected to be announced, including an extension
Iron ore is off and running with spot above $200, paper still going higher overnight and steel out of control: How high we get now is anybody’s guess. Post-Q1 seasonal supply is yet to rebound: It should roar higher than 2020 in short order. Just as Chinese seasonal weakness hits in May/June owing to southern
By Jesse Hermans, cross-posted from Prosper Australia Until recently, no government had a “cogent plan” to deal with impending combustion of Commonwealth fuel excise revenue. But now Victorian Treasurer Tim Pallas has risen to the challenge both to future proof Victoria’s road charging regime, and make Zero and Low Emissions Vehicles (ZLEVs) a more affordable choice for
Sources cited by The Australian have indicated that next week’s Federal Budget is likely to include a one-year extension of the low and middle income tax offset (LMITO), which is worth up to $1080. However, the government is said to have ruled out bringing forward the third stage of its personal income tax cuts, which
Last week, the Morrison Government flagged that next week’s federal budget would boost childcare funding by $1.7 billion over three years, representing a 6% lift on current expenditure levels. The policy will have two main components: Dropping the annual cap of $10,560 per child for families earning over $189,390, which is perceived as a major
Streaming video giant Netflix paid just $553,705 in tax in Australia in 2020, although the amount paid was up on the previous two years ($485,371 in 2019 and $341,793 paid in 2018). The small amount of tax paid comes despite estimates that Netflix generated in excess of $1 billion in revenue from its Australian subscribers
Last September, the Australian National Audit Office (ANAO) released a report slamming the federal Department of Infrastructure (DOI) for purchasing land related to the Western Sydney Airport from a billionaire family for 10 times its market value in what ANAO called a “significant and unusual transaction” that “did not exercise appropriate due diligence” and “fell short
NSW Premier, Gladys Berejiklian, has flagged another round of privatisation via ‘asset recycling’ to help fund a new regional fast rail network. According to Fairfax: “The asset recycling agenda is definitely renewed for us”, Premier Berejiklian said. “When talking about asset recycling we’re serious, instead of owning something that might not be very creative and
The Australian Bureau of Statistics (ABS) yesterday released its International Trade Price Indexes for the March quarter of 2021, which revealed that export prices rose by 11.2% over the quarter and by 8.6% through the year. The increase in export prices was driven by an 18.2% quarterly rise in metalliferous ores and metal scrap prices
The Grattan Institute has released a useful blog post explaining why we shouldn’t concern ourselves with the increase in federal government debt: A report released this week by the independent Parliamentary Budget Office (PBO) affirms that there is no need to be concerned about whether our debt levels are sustainable over the medium-term. The PBO does not
Earlier this week, Business Council of Australia (BCA) CEO, Jennifer Westacott, urged the federal government to bring forward its Stage 3 tax cuts, which are currently scheduled to take effect from 1 July 2024. New research from The Australia Institute (TAI) shows why this would be a retrograde move that would worsen inequality: In July
Treasurer Josh Frydenberg has signalled that further reducing the unemployment rate will be a priority in the federal government’s Budget on 11 May. He will state in pre-Budget speech on 29 April that both the Treasury and the Reserve Bank are now of the view that growth in wages and inflation will require the official
Last year, the Department of Defence told a Senate estimates hearing that Australia’s new submarine fleet would cost $89.7 billion – a 12% increase on the previous estimate of $80 billion in November 2019. Defence also told Senate estimates that work on the first of 12 submarines would not begin for several years, and that
The Australian Bureau of Statistics (ABS) has released tax revenue data for the 2019-20 financial year, which reveals that Australia’s total tax take decreased by $8.0 billion (1.4%) to $552.0 billion: The decline in tax revenue was experienced across all levels of government; although the main drivers of the fall were: Company income tax was
New South Wales Treasurer Dominic Perrottet has flagged plans to replace stamp duty on property purchases with an annual land tax. Tax experts taking part in a panel at a Blueprint Institute lunch have urged the federal government to back NSW by offering it and other states and territories financial incentives to scrap stamp duty:
The third stage of the federal government’s income tax cuts package is slated to take effect from 1 July 2024. But Business Council of Australia (BCA) CEO Jennifer Westacott says the government should consider bringing forward the tax cuts in order to boost the economy and create jobs in the wake of the COVID-19 pandemic:
There’s revolution brewing at the ABC. A fightback against the fake left editorial viewpoint that played a major role in destroying Australian worker’s living standards in the last cycle via its defence of unbridled immigration. In the last few months, ABC’s Ian Verrender has led on the issue. Now Gareth Hutchence has joined in: Morrison