Chris Richardson taking a shot at redemption: Deloitte Australia has produced the attached document – as a declaration of what Australia needs to do to combat the, in particular, economic and business impacts of COVID-19, and to provide a summary of policy responses across federal and state/territory governments to date. In a nutshell, the Deloitte
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.
Earlier this month, we warned that Australia’s hospital system was already dangerously short of hospital beds before the coronavirus outbreak, given it has only 3.8 hospital beds per 1,000 people – only slightly better than Italy and less than one-third Korea and Japan: The Grattan Institute followed claiming that at current growth rates, Australia would
A few weeks back there were concerns that Australia’s beleaguered National Broadband Network (NBN) would struggle to cope with extra user demand as large numbers of Australians work from home and access online streaming services: NBN Co said it had already seen a rise in demand during both working hours and the peak evening usage
MB’s idea of implementing a temporary universal basic income (UBI) to see Australia through the coronavirus crisis has received support from the 156,000-member United Workers Union: UWU national secretary Tim Kennedy, in a position paper, said there was an urgent need for the federal government to intervene “and play an active role in guaranteeing and
Services Australia is hiring more staff and redeploying existing personnel as people made unemployed by the coronavirus lockdown continue to swamp Centrelink offices and the MyGov portal. Government Services Minister and serial buffoon, Stuart Robert, last night admitted that he underestimated the number of people who would seek to access MyGov following the lockdown decision,
When the National Disability Insurance Scheme (NDIS) began to be rolled out in 2016, we warned that it would attract an army of fraudsters middle-men seeking their slice of the $22 billion honey pot on offer. After all, witnessed similar rorting under the private vocational education and training (VET) and pink batts schemes, alongside the
Via Westpac: The COVID-19 shock to the Australian economy will trigger a deep recession and a sharp spike in the unemployment rate, jumping to 11% by mid-2020. The unfolding economic recession is shaping up to be more severe than the GFC. The Federal budget position will deteriorate sharply over this year and next. We anticipate
More excellent work from the Grattan Institute today, which projects that Australia’s hospital intensive care units (ICU) will soon be overrun with coronavirus cases: The number of confirmed COVID-19 cases in Australia has been doubling every 3-to-4 days… a shutdown of anything that isn’t truly essential will be needed to avoid overwhelming the healthcare system…
From the Grattan Institute: Yesterday the Federal Government announced its Round 2 fiscal response to COVID-19, pushing its announced fiscal measures to $85 billion, or more than 4 per cent of GDP. Only a few weeks ago these would have seemed incredible sums. Yet Australia is only in the middle of the pack in terms
According to ABC News, “people are lining up outside Centrelink offices across the country, with some queues stretching down roads and around blocks, as many businesses are told to shut from midday”. Meanwhile, myGov has crashed “as Australians try to access government services like Centrelink online”. Government Services Minister, Stuart Robert, claims the site is
So, the Morrison Government has announced a second round of economic stimulus worth $66 billion with money for those made unemployed by the coronavirus, households, pensioners, and small businesses. Details of the second package are found here and here. Certainly, the complexity surrounding the Government’s stimulus measures has increased with the second package, with multiple
Via Moody’s: “The package of measures announced by the Australian government will likely buffer, although not fully offset, the economic impact from coronavirus-related disruptions. Australia’s relatively strong fiscal position points to a limited impact of the economic downturn and the fiscal stimulus on the sovereign’s fiscal strength.” Oh dear.
The claim that private schooling saves taxpayers money has been shattered by new research from education researchers from the University of Sydney, University of Wollongong and University of Canberra. Analysing My School website data, these these researchers found that non-government schools are typically funded at the same or higher level as similar public schools: Some
The Parliamentary Budget Office (PBO) has released a report estimating that that the “fair value” (or saleable value) of the National Broadband Network (NBN) is just $8.7 billion – less than one-third the federal government’s equity investment: The NBN is a very large infrastructure investment project, with NBN Co receiving $29.5 billion in equity over
Trade Minister Simon Birmingham has emphasised the need for a “strong airline sector”, after the federal government announced a $715 million financial assistance package in response to the coronavirus. However, UNSW economics professor, Tim Harcourt, warns that the government may need to acquire equity stakes in airlines if the virus-induced downturn worsens. Whereas UQ’s John
The Morrison Government has announced that it would introduce a ‘welfare wage’ to help those made unemployed to ride out the coronavirus: Hundreds of thousands of workers who face losing their jobs due to the coronavirus crisis will be given fast access to a new, temporary wage that will be set at a higher rate
The pick of the Aitken brothers makes good sense today, at the AFR: James Aitken says central banks are doing the right thing as they struggle to respond to market turmoil caused by the coronavirus – and wait for medical and fiscal developments to come to the rescue. “Central banks cannot print medicines, or vaccines
Via News: The New Zealand government has splashed the cash in a bid to lessen an expected coronavirus-induced recession, unveiling a $NZ12.1 billion worth of support package. A wage guarantee, welfare increases, an aviation industry bailout, tax relief and new health spending feature in the bumper package, equivalent to 4 per cent of GDP –
The Grattan Institute has called for more Budget help to assist the 4.2 million casual or self-employed workers without leave entitlements: Over a third – around 37 per cent – of Australian workers do not have paid leave entitlements. There are about 11.5 million Australian workers. About 2.2 million of them are casual employees –
The New South Wales Government is set to announce tax cuts and spending on government property to the value of $1.6 billion to help stimulate the NSW economy in the wake of the coronavirus. It will also allocate an additional $700 million to help the state’s medical response to the coronavirus crisis. The $1.6 billion
Ray Dalio on what the world needs now: The Implications of Hitting the Hard 0% Interest Rate Floor While I’m going to pass along my thoughts to you, I want to emphasize that I wasn’t, and still am not, able to anticipate the most important things happening in the markets because of the extremely rare
On Friday I wrote an article claiming that Australia’s hospital system is poorly equipped to cope with COVID-19, given it has only 3.8 hospital beds per 1000, compared to more than 3-times that number in Korea and Japan: Now our partners at Nucleus Wealth have provided the below chart showing that Australia’s hospital beds per
That’s how crap the first attempt was, via AFR. The next one looks to be better focussed on what is needed: The federal government is working on a second coronavirus stimulus package that could be rolled out within days. Less than a week after unveiling a $17.6 billion package to try to save business and boost consumption, the crisis
Communications Minister Paul Fletcher will convene a meeting of executives from NBN Co, Telstra, Optus and other telcos later today. The meeting will discuss how the national broadband network (NBN) will cope with the expected rise in usage due to the coronavirus outbreak. The NBN is seeing large numbers of Australians being directed to work
The Australia Institute (TAI) has has attacked the Morrison Government’s economic stimulus package as being the right size but poorly targeted: The Prime Minister announced a $17.6 billion coronavirus economic stimulus package in order to try and stave off a recession. Looking at the specifics of the stimulus announcement, one thing stands out: the size
Alan Kohler springs to life: It’s now clear to us all that the problem for authorities is to try to prevent the health system from being overwhelmed without causing an economic depression. That’s with D, as in 10 per cent GDP contraction, not an R for a two-quarters recession, which is already a given. Prime
From CBA Economics Key Points: The Commonwealth government last week delivered a fiscal stimulus of $A17.6bn to boost demand in the economy. The government also announced measures that while important to support the health of Australians, will have a contractionary impact on spending in the economy.■ Monetary policy still has a big role to play
Facing a multi-billion dollar reduction in fees from the loss of international students, Australia’s universities are now putting their hands out for budget stimulus: Universities and international education providers are holding out for more direct coronavirus support in the May budget… International Education Australia chief executive Phil Honeywood said he would push for more support