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.

17

Albo again demands high speed ponzi rail

By Leith van Onselen Labor’s infrastructure spokesman, Anthony Albanese, has repeated his call for a High Speed Rail (HSR) linking Melbourne and Sydney: Australia must start planning for a high-speed rail network along the east coast, says Labor’s infrastructure spokesman Anthony Albanese. Mr Albanese on Monday introduced a private bill to establish a high speed

4

The “stupendous” consultancy spend milking taxpayers

By Leith van Onselen Over the past two years, various reports have emerged documenting the billions in taxpayer funds that have flowed to consultants, especially the Big Four accounting firms. In September 2016, Michael West reported how the Big Four accounting firms had taken corporate welfare to an extraordinary level, earning up at least $2.6

5

Some private health premiums could rise 12% next year

By Leith van Onselen Confidential Department of Health modelling has been released suggesting that private health insurance premiums could rise 12% next year if planned government changes go ahead. From The Canberra Times: The new system classifies insurance into four tiers – Basic, Bronze, Silver, and Gold – with much sharper clinical definitions of what

12

Labor pledges extra $14b for public schools

By Leith van Onselen Weeks after the federal government backflipped on the Gonski 2.0 needs-based school funding, increasing funding for non-government schools, the federal Labor Opposition has pledged an extra $14 billion for public schools over the next decade. From The AFR: The announcement, to be made by Opposition Leader Bill Shorten and Labor’s education

6

NSW Treasury spins WestConnex sale

By Leith van Onselen NSW Treasury deputy secretary, Phil Gardner, has spun the benefits of the $9.3 billion sale of 51% of WestConnex to Transurban. From The AFR: Mr Gardner told the inquiry into WestConnex that there would have been “extremely little appetite” from potential investors five to eight years ago to buy the motorway… The

2

Frydenbubble to rethink ‘draconian’ expat CGT policy

By Leith van Onselen The federal government announced in the 2017 Budget that it would remove a capital gains tax (CGT) exemption for 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 widely condemned by tax and legal experts

4

Vic Labor to pork barrel private schools

By Leith van Onselen Weeks after the federal government backflipped on the Gonski 2.0 needs-based school funding, increasing funding for non-government schools, the Victorian Labor Government has done likewise: The Labor government said on Monday it would give $400 million over four years to the private school sector. The sum more than triples the $120

7

ATO tax avoidance measures net $5.6 billion

By Leith van Onselen Good news. The Australian Taxation Office’s (ATO) has collected an extra $5.6 billion over the past two years through its multinational tax avoidance taskforce. From SBS News: A clamp down on tax avoidance by big corporations and wealthy individuals has allowed the Australian Taxation Office to rake in an extra $5.6

4

‘Draconian’ expat CGT policy under fire

By Leith van Onselen The federal government announced in the 2017 Budget that it would remove a capital gains tax (CGT) exemption for 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

16

Anger erupts over WestConnex disaster

By Leith van Onselen Last month, the $17 billion WestConnex toll road and tunnel in Sydney was dubbed the “biggest misuse of public funds for corporate gain in history” by transport analyst Christopher Standen from the University of Sydney. This hideously expensive project will see existing free public roads like the state-owned M4 (that has already been paid off)

4

How banks thanked taxpayers for their GFC bailout

The AFR operates in a permanent state of cognitive dissonance. On the one hand it is supposed be all for “markets”. On the other it is the number defender of private vested interests in the country. This is no more clear than in its panicked propaganda campaign in recent weeks supporting Australian bank exceptionalism during

58

Labor: Negative gearing reform is go, house price falls be damned

Via the ABC comes Opposition finance spokesman Jim Chalmers: “The housing market is softening in some of the major markets, but we don’t make this policy for one market or another or one set of market conditions or another. You make housing policy as a federal government over the medium to long term. One of

36

Labor’s negative gearing savings to fund pre-schools

By Leith van Onselen Labor has directly linked the Budget savings from its negative gearing and capital gains tax (CGT) reforms with its announced $10 billion package to boost preschool access for three and four-year-olds. From The Australian: From 2021, three-year-olds will get access to 600 hours of subsidised preschool, at a cost of $1.75bn over

8

More delays, cost blow-outs, for Sydney Light Rail

By Leith van Onselen In the wake of the massive cost blow-outs and delays hitting both the Parramatta Light Rail Project and the Eastern Suburbs Light Rail Project, the former head of Infrastructure NSW, Paul Broad, in June described the Eastern Suburbs Light Rail Project as a waste of money and a vanity project that should have never been

5

Expats urge rethink of ‘draconian’ CGT plan

By Leith van Onselen Tax experts are concerned about the federal government’s proposal to abolish the capital gains tax (CGT) exemption for expatriates who sell their main residence in Australia. They have warned that the proposed reforms could potentially apply retrospectively from 1985, when CGT was introduced. Shadow treasurer Chris Bowen has also expressed concern

7

NDIS to leave most disabled people behind

By Leith van Onselen I labelled the $22 billion National Disability Insurance Scheme (NDIS) a “bureaucratic nightmare” citing my family’s own personal experience with our 10-year old autistic son. Despite being diagnosed in the “severe range” of autism spectrum disorder, unable to converse or read, and attending a special school, my son was denied funding for

2

States reject Coalition’s GST pork barrelling

By Leith van Onselen The Morrison Government’s proposed changes to the formula for distributing GST revenue was rejected yesterday by the majority of state treasurers. While the reforms received support from Western Australia’s Treasurer Ben Wyatt, the other state treasurers warned that the federal government must guarantee that no state or territory will be worse

7

Digital tax moves closer

By Leith van Onselen Last year, the federal government implemented a Diverted Profits Tax (DPT), affectionately dubbed the “Google Tax”, which armed the Australian Taxation Office (ATO) with stronger powers to fight multinational tax avoidance. The DPT was budgeted to raise around $100 million in revenue a year from 2018-19. Now, the Morrison Government is

10

Coalition grey bribes to lock empty nesters in family homes

By Leith van Onselen May’s Federal Budget contained various measures aimed at keeping older Australians in their homes, including: billions of dollars in funding for thousands of extra home-care packages; extending the Pensioner Work Bonus scheme, giving older Australians the ability to earn more money without affecting their benefits; and extending the Pension Loans Scheme

2

BCA attacks oversupplied demand-driven uni system

By Leith van Onselen Business Council of Australia (BCA) chief executive, Jennifer Westacott, has attacked Australia’s demand driven university system, causing retaliation from lobby group, Universities Australia. From The Australian: Too many young people are making poor choices about their studies, choosing courses without the prospect of working in the field or earning salaries commensurate

12

Christopher Pyne’s $25bn salary now a national security risk

Via The Australian today: Australian Strategic Policy ­Institute senior analyst Marcus Hellyer has called for the Audit Office to investigate the rollout of the $50 billion project and ­whether delays in crucial contract negotiations between Defence, French submarine manufacturer Naval Group and weapons system integrator Lockheed Martin will ­result in extended delays in delivering the

16

NDIS hoses away $600 million on middle-men

By Leith van Onselen As predicted, new figures show that the National Disability Insurance Agency’s (NDIA) expenditure on consultants, labour hire firms and outsourced service delivery in 2017-18 totalled about $600 million. From The Australian: The $600m torrent of cash in 2017-18 is in addition to the $4.9 billion spent on direct support for disabled

7

Just ignore Geoff Wilson, Mr Bowen

The egregious vested interest campaign against Labor imputation credit reforms is getting way too much airplay at the AFR: Federal Labor has rubbished a petition being circulated by fund manager Geoff Wilson protesting plans to scrap cash payments for excess franking credits, after 10 opposition MPs, including policy architect and shadow treasurer Chris Bowen, received

17

Another light rail white elephant is born

By Leith van Onselen This site has gone to great effort exposing the pitfalls of the ACT Light Rail Project. We’ve also scrutinised both the Parramatta Light Rail Project and the Eastern Suburbs Light Rail Project in Sydney, which are facing massive cost blow-outs and delays. Now we’ve got another to add to the list, with the