Labor announced yesterday that it will not make changes to the stage three income tax cuts if it wins the upcoming federal election. It also abandoned the negative gearing and capital gains tax reforms taken to the past two federal elections. Shadow cabinet formally signed-off on these policy positions yesterday. Earlier this year, Labor also
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.
The NSW government will formally request the federal government reinstate the JobKeeper wage subsidy scheme, amid expectations that the COVID-19 lockdown of Greater Sydney will be extended for at least another month. The state government is also believed to have sought financial modelling on a number of scenarios, including extending the lockdown until 17 September:
The Parliamentary Budget Office (PBO) has reported that 157,650 employers saw their turnover increase between April and June 2020, when compared to the same period in 2019. These employers received a combined $4.6 billion in JobKeeper payments during this period, and Labor MP Andrew Leigh says the figures show how much of taxpayers’ money was
In the late 1990s, Australia privatised the system that helps the unemployed find work. The idea was that by paying employment service providers for each person they placed into a job, the process would become more efficient. Instead, a parasitic industry developed with around 40 privately run employment agencies earning millions in fees from the
A new report from the National Housing Finance and Investment Corporation (NHFIC) claims that the states have generated $60 billion in windfall stamp duties over the past 20 years. The NHFIC has found that the effective tax rate goes up if states and territories do not adjust stamp duty rates and thresholds to account for
Shadow communications minister Michelle Rowland has asked the Auditor-General to undertake an independent review into the bonus system at NBN Co. Labor’s government accountability spokeswoman Kimberley Kitching says an audit is badly needed, following revelations earlier in 2021 that NBN Co staff have been paid almost $80 million worth of bonuses during the COVID-19 pandemic.
The Australian’s James Kirby believes that changing attitudes makes now an ideal time to implement an inheritance tax: New academic work suggests Australians now have “a surprisingly high level of support for wealth transfer taxation”. “Most participants simply had no objection to wealth transfer taxation: Their support was based less on reasons why these taxes
May’s Victorian Budget implemented a new windfall gains tax for properties whose value is boosted by a council rezoning. This tax will apply to properties where the value is boosted by more than $100,000, with a 50% tax on windfalls above $500,000. The clearest indication that this windfall tax is good policy has come from
The federal and NSW governments have responded to the growing outbreak in Greater Sydney by agreeing to provide a combined $5.1 billion in COVID-19 disaster payments for businesses and individuals who have been affected by the lockdown. The funding commitment is based on expectations that the lockdown will be extended by at least four weeks. Prime
In the May 2021 Budget the Morrison Government broadened eligibility to the Pensions Loan Scheme (PLS): the government sponsored reverse mortgage scheme that allows retirees to borrow up to 150% of the aged pension rate against the equity in their home and is open to all retirees (not just pensioners) over the age of 60.
The Grattan Institute believes that the Morrison Government’s ‘car park rorts’ scandal is a symptom of a wider problem: that infrastructure projects tend to be rushed through without proper planning or scrutiny: “Australia’s state and federal governments have developed a costly habit of rushing major transport projects to market… invariably the taxpayer is left to
According to Robert Gottliebsen, National Party leader Barnaby Joyce should take control of the partially completed Melbourne to Brisbane inland rail project and make it a national priority. This project, says Gotti, will enable freight from Melbourne and Brisbane to arrive in Sydney via Parkes, and will get heavy trucks off the Hume Freeway so
The NSW Government’s 2021-22 budget papers forecast it will net $41.6 billion in property stamp duties in the forward estimates to 2024-25. But economists told The AFR that NSW will not be able to match the money it is tipped to make from stamp duties over the next four years if it proceeds with its
By William Bourke, President of the Sustainable Australia Party On 28 June, the fifth ‘Intergenerational Report’ (IGR) was finally released. After a long delay, Federal Treasurer Josh Frydenberg and the Treasury lay it all out. The problem is the IGR is based on one big lie. Treasurer Josh Frydenberg outlines how 30 years ago, for
Back in March I published an article entitled “The $34b corporate welfare payment nobody talks about”, which examined the Morrison Government’s $34 billion Cashflow Boost – a gigantic corporate welfare scheme launched at the beginning of the Coronavirus pandemic that has received little scrutiny or media attention: To date there has rightfully been lots of
The Auditor-General has issued a damning report on the federal government’s administration of the $660 million Commuter Car Park Projects fund. Set up in 2018 as part of the Urban Congestion Fund, the project was intended to construct car parks near urban railway stations. However, the Auditor-General found that none of the 47 car park
Last month, the Victorian Budget implemented a new windfall gains tax for properties whose value is boosted by a council rezoning. This tax will apply to properties where the value is boosted by more than $100,000, with a 50% tax on windfalls above $500,000. Yesterday, NSW Planning Minister Rob Stokes introduced legislation for a new
The New South Wales Government will deliver its 2021 Budget tomorrow. The Government had forecast in its half-yearly Budget review in February that stamp duty revenue for 2020-21 would total $8.372 billion. However, the government now expects such revenue to total $9.379 billion, due to Sydney’s soaring residential property market – delivering a financial windfall
A year ago, the Victorian government advised that the $6.7 billion West Gate Tunnel project would not be completed in 2022 as originally intended, instead pushing the project back to 2023 over a dispute around the disposal of contaminated soil. Prior to this, it was revealed that the Victorian Government ignored expert advice on the
The contract to build Australia’s new submarine fleet is expected to be on the agenda when Prime Minister Scott Morrison holds talks with French President Emmanuel Macron in Paris. Independent senator Rex Patrick – who served 11 years as a navy submariner and worked in the defence industry for two decades – has called for
As we know, the NSW Government has announced plans to replace stamp duty with an annual land tax by. On Friday it released a report detailing the reforms. Under the reforms, buyers would be given an alternative to paying stamp duty via: Owner-occupiers: a fixed $400 up-front fee plus an annual 0.3% tax on the
NSW has recently flagged plans to replace stamp duty with an annual land tax. But NSW Treasurer Dominic Perrottet contends it will be “tough fiscally” to pursue stamp duty and broader GST reform without the help of the federal government: “It makes sense for them to support [it]. Things can be politically challenging but they don’t
Shock horror! Fairfax is reporting that higher income earners pay the most tax, with Australia’s “Budget reliance on high and middle income earners” reportedly growing: The report draws on data from the Australian Tax Office (ATO) showing that nearly 14.7 million individuals paid a combined $213 billion worth of income tax during the 2018-19 financial
The Group of Seven (G7) finance ministers have committed to a deal that would see a minimum global corporate tax rate of at least 15%, which could result in hundreds of billions of dollars flowing into government coffers. US Treasury Secretary Janet Yellen said it would mean an end to what she referred to as
For a long time, S&P was the last of the semi-credible ratings agencies as it kept the pressure on Australia’s AAA rating because of its contingent liabilities in the banking system. It did so by insisting that the budget return to surplus across the cycle so that net debt did not surpass roughly 30% of
Federal Treasurer Josh Frydenberg has ruled out reinstating the JobKeeper wage subsidy scheme for Victorian workers following the extension of Melbourne’s lockdown. However, Frydenberg says he would consider any request from Victoria for financial support, although this would most likely be conditional on a matching contribution from the state government. The state government has already
An AFR analysis of wage data from the Australian Bureau of Statistics (ABS) shows that Victoria has the highest public sector wages among the states and territories. The figures show that full-time adult weekly cash earnings for Victoria’s public sector workers was $2,083 in November 2020 ($108,316 per year), which is $333 per week more
According to The AFR, Labor is reportedly considering adopting a Medicare-style levy on workers to fund aged care. This is in response to the Royal Commission into Aged Care Quality and Safety recommending the adoption of a levy to help fund the sector. I staunchly oppose raising the Medicare Levy to fund aged care for
While Melbourne’s CBD experiences a slow death, Melbourne City Council (MCC) has awarded itself fat pay increases to its army of bureaucrats, according to its draft budget: MCC’s wages bill will jump by more than $18 million this year. Ratepayers will pay about $180.2 million for employee costs in 2021-22, up around 11% on the