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.
Another day, another JobKeeper rort. This time, the ABC has shifted focus to two foreign-owned firms – Specsavers and Luxottica South Pacific – that posted massive profits on the back of the Australian taxpayer. Specsavers’ Australian revenue fell by just 1% in 2021, while its profit rose by $78 million to $150 million. This was
The OECD has released its 2021 Australian Economic Survey, which calls for widespread tax reforms to reduce the overreliance on personal income taxes: Tax reform is needed. Australia’s heavy reliance on taxation of personal incomes adds to the vulnerability of public finances to an ageing population. Fortunately, there is a clear path for tax reforms
The OECD has released its 2021 Australian Economic Survey, which highlights that Australia’s unemployment payments are pitifully low and should be raised: Recently, the working-age unemployment benefit was raised by AUD50 per fortnight. However, the benefit for a single person in the first month of unemployment in Australia, at just 29% of the average wage,
The AFR’s Joe Aston has continued his full fledged assault against the Morrison Government’s JobKeeper waste, which saw more than 150,000 companies that weren’t in trouble – many of them actually thriving – receive $13 billion worth of subsidies from taxpayers. On 12 September, Aston highlighted Treasurer Josh Frydenberg’s hypocrisy and contradictions in defending these
The unprecedented rebound in the New South Wales property market has driven stamp duty receipts to an all-time high, according to data from Office of State Revenue. In the year to July 2021, stamp duty receipts surged 54% to a record high $8.4 billion: Part of the lift in stamp duty receipts is attributable to
Thanks to the rebound in Australian inflation courtesy of the ‘base effect’: Australia’s welfare recipients will soon receive solid increases in payments: From next week, the maximum single age pension rate will rise by $14.80 to $967.50 a fortnight, while age pensioner couples will receive an extra $22.40 combined, taking their fortnightly payment to $1458.60.
The National Tertiary Education Union (NTEU) estimates that the University of Melbourne’s wage underpayment bill could ultimately top $15 million. More than 1,000 casual academics have received a combined $9.5 million in backpay, and vice-chancellor Duncan Maskell has apologised for the incident. However, Annette Herrera of the NTEU says Maskell’s apology will “ring hollow” unless
Assistant Treasurer Michael Sukkar has labelled calls to disclose big business recipients of JobKeeper “outrageous”: Assistant Treasurer Michael Sukkar says inserting a clawback provision in the JobKeeper program would have “risked Australian jobs”, as he declares Labor’s attempt to reveal recipients of the wage subsidy “outrageous”. An ongoing scrap between Labor and the Coalition emerged
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The AFR’s Michael Roddan pulled up an interesting quote from Josh Frydenberg in 2011 attacking the Labor Government’s GFC stimulus for having “fostered a culture of expectation with their lavish handouts from pink batts to school halls, from computers in schools to set-top boxes”. Fast forward a decade and Josh Frydenberg as Treasurer is vehemently
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Retail giant Harvey Norman today posted a record profit for the 2021 Financial Year: Profit before tax climbed 78.8 per cent to a record $1.18 billion, with its Australian franchising operations segment delivering a record result of $628.2 million, up 80.2 per cent. EBITDA climbed 54.2 per cent to $1.45 billion and EBIT rose 71
The Australian Industry Group (AIG) has issued a media release claiming that it would set a “misguided and dangerous precedent” to disclose JobKeeper payments to large Australian companies: “Proposals before Federal Parliament to publish the names of some businesses that were eligible for JobKeeper but who in retrospect are thought to be undeserving are misguided,
The Morrison Government’s staunch refusal to disclose the larger companies that received JobKeeper, nor to make profitable companies repay those subsidies, does not sit well with the Australian electorate. A new poll shows that two-thirds of Australians want JobKeeper subsidies to be repaid by companies that profited from the scheme: An exclusive poll for The
Crossbench senator Rex Patrick has defended his push for the federal government to release a list of all companies with turnover of more than $10m that received JobKeeper payments. Patrick says that none of the information being sought is private, and he contends that taxpayers have the right to know how their money had been
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The AFR’s Joe Aston has done a terrific job exposing the hypocrisy of Peter Switzer, who has attacked unemployed ‘bludgers’ receiving COVID support payments while companies he partly owns collected $292,500 in JobKeeper despite pulling in fat profits: Switzer argued [in his article] that the Morrison government’s $750 weekly support payments are both a disincentive
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The Grattan Institute’s Transport and Cities Program Director, Marion Terrill, has lashed the Dan Andrews Victorian Government’s botched West Gate Tunnel Project. She also suggests that Victoria is the national leader in infrastructure waste and mismanegement: “The West Gate Tunnel project has blown out by a further $3.3 billion, and we taxpayers are being asked
The AFR’s Joe Aston has done a terrific job exposing the Morrison Government’s fiscal hawks for being deafly silent on the widespread rorting of the JobKeeper program by businesses, estimated at $25 billion: The Liberal Dries have been absolutely nowhere on this, presumably bored by budget emergencies and expenditure restraint, only the very point of
Documents obtained via freedom of information laws show that the federal government has recovered some $5.3 million worth of ‘outcome payments’ to privatised employment services providers since 2015. The payments are made to employment services providers for placing clients into jobs or education courses and more than 5,000 wrongful claims have been recovered since the
The Greens are confident of getting enough votes for a Senate inquiry into the federal government’s $4 billion Urban Congestion Fund (UCF) and its controversial $600 million car park funding program. The car park funding program has been the subject of a scathing report by the Auditor-General, while there have been allegations of “pork barrelling”
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