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.


Falling homeownership a threat to retirement system

With home ownership rates falling, especially among younger and poorer cohorts, CoreLogic’s head of Australian research, Eliza Owen, has raised concern that the retirement system is unprepared for a future where a large proportion of Australians rent: “[If you consider] policies that preserved high values of homes in order to secure Australian wealth, you have to


JobKeeper cash splash: ASX winners

Analysis of corporate disclosures published in The Australian shows that more than 400 listed companies in many sectors received $3.7 billion in JobKeeper payments: The extent of the payments reached into every part of the economy with names such as gas producer Beach Energy ($7.6m), jobs website Seek ($17.2m), gambling machine manufacturer Aristocrat Leisure ($16.1m),


How Malcom Turnbull completely butchered the NBN

The Guardian has published “secret figures” revealing how the Coalition’s cut-down NBN tech was three times more expensive than forecast and ended up costing almost as much as the full-fibre plan: The previously redacted 2013 figures detailing the estimated cost of the Coalition’s alternative model – relying on trouble-plagued pay-TV cables and fibre-to-the-node technology –


Victoria’s ICU system “so close to a crisis, it’s not funny”

A week ago, The Age published an article  claiming Victoria’s hospital system is “buckling under the strain of coronavirus”: Figures in the department’s annual report and others point to a health system under severe stress, with patients waiting months – and sometimes years – for vital services… Australian Medical Association state president Roderick McRae predicted pressure


Perrottet demands federal help to abolish stamp duty

NSW Premier Dominic Perrottet has admitted that his plan to replace stamp duty with land taxes is dead without the federal government providing funding assistance to facilitate reform: Mr Perrottet said federal tax policy settings punished states that tried to overhaul their own arrangements. Existing arrangements would “completely penalise” NSW residents if his government embarked


NSW Treasurer walks back from stamp duty reform

NSW Premier Dominic Perrottet had argued strongly for stamp duty to be replaced by a broad-based land tax in his previous role as the state’s treasurer. Perrottet reaffirmed his commitment to tax reform in his first press conference after replacing former premier Gladys Berejiklian. However, Treasurer Matt Kean has distanced himself from the proposal, instead


Over half of JobKeeper paid to firms that failed turnover test

Parliamentary Budget Office (PBO) analysis has found JobKeeper payments worth $38 billion went to businesses that did not suffer sustained downturns below threshold levels. This was from a sample of $72 billion of JobKeeper spending examined by the PBO, meaning 53% of taxpayer subsidies were paid to firms that did not meet turnover thresholds. Of


Victorian hospitals are “buckling under the strain of coronavirus”

The Age has published a detailed report on how Victoria’s hospital system is “buckling under the strain of coronavirus”: Figures in the department’s annual report and others point to a health system under severe stress, with patients waiting months – and sometimes years – for vital services… Australian Medical Association state president Roderick McRae predicted


Stop blaming a ‘lack of supply’ for Australia’s housing woes

Ex-RBA head of research turned chief economist at the Centre for Independent Studies, Peter Tulip, has penned an article in Fairfax blaming a lack of supply for Australia’s housing affordability woes: Many submissions to the federal housing inquiry now underway argue for removal of tax concessions like negative gearing and the capital gains discount. This


Is this another Coalition grants rort?

The Auditor-General has released a report which shows that the federal government spent $60.2 billion via its GrantsConnect program between December 2017 and June 2021. A total of 108,206 grants were allocated over this period, and 42% were awarded via a non-competitive tender process. The report also shows that 27% of grants that were earmarked


The JobKeeper cover up is worse than the crime

The latest JobKeeper rort floating around the media relates to elite private schools, which somehow managed to score millions of dollars of JobKeeper dollars without ever ‘shutting down’ and recording big operating surpluses: Seven hundred Australian private schools shared more than $750m in JobKeeper, despite most posting multimillion-dollar surpluses, new data shows. One school, St


NSW launches piss weak public housing plan

According to The AFR, The NSW Government has “pumped” another $183 million into social housing to accelerate development of more than 1400 new homes as part of its COVID-19 economic recovery strategy: “The package boosts construction, accelerates over 1400 new social and affordable homes and supports an extra 990 households through rent assistance, including in


Australian universities are the kings of wage theft

The pandemic has brought to light the university sector’s ‘dirty little secret’; namely, its reliance on staff with insecure work contracts. Around 70% of the sector’s staff are on such contracts, either part-time or casual, while the underpayment of staff is widespread. The Fair Work Ombudsman (FWO) has investigated 14 universities over potential underpayment of


How business lobbyists drove $40b in JobKeeper waste

Callum Foote and Michael West have made explosive allegations that the business lobby pressured the federal government not to amend JobKeeper when it was discovered by Treasury three months in that billions was being paid to companies with neutral or rising turnover. Accordingly, the federal government kept the fiscal tap wide open, showering businesses with


JobMaker has failed, and that’s a good thing

Treasury officials have confirmed that the Morrison Government’s $4 billion JobMaker wage subsidy is a failure. Only 5,278 jobs had been ‘created’ by mid-2020, 99% below initial expectations that 450,000 jobs would be created by the end of 2021: Treasury documents from the middle of this year reveal that just 5,278 people had been hired


Joe Aston: JobKeeper waste $40b, not $27b

The AFR’s Joe Aston has continued his assault against the Morrison Government’s JobKeeper waste, this time rubbishing the Australian Treasury’s paper defending JobKeeper overpayments. Aston claims that the actual level of ‘waste’ is closer to $40 billion, not the $27 billion claimed by Treasury: All of the major newspapers dutifully reported that between April and


Treasury defends JobKeeper rorters

Earlier this year, the Parliamentary Budget Office (PBO) revealed that a whopping $13 billion (over 13% of the $98 billion wage subsidy) was handed to nearly 200,000 companies that received JobKeeper payments but whose profits rose: Yesterday, the Australian Treasury released a paper defending these overpayments on the grounds that doing so would have stifled the


How the “cult of consultants” usurped the public service

For years MB has lamented how Australia’s public service has been stripped raw by decades of government outsourcing, waves of senior redundancies, and a preference for governments to seek advice from paid consultants. The end result is that the “frank and fearless advice” that the public service was once renowned for has vanished, replaced by