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.

6

Victorian Government takes right path on stimulus

The Victorian Government yesterday released its 2020-21 State Budget, which will see the Government embark on a massive stimulus program in a bid to support 200,000 jobs within 18 months and 400,000 by 2025. Below are key extracts from Treasurer Tim Pallas’ speech combined with key figures from the Budget Papers: With Victoria’s gross state

14

Another reason the OECD should bone Mathias Cormann

I’ve noted plenty already: Mathias is the Morrison Government’s most radical supply-side nutter. He is not corrupt which might make this position forgivable. He actually believes in trickle-down economics, which leaves the room short of oxygen given Cormann is obviously intelligent. Mathias has a record of deep climate skepticism having voted in favour of climate

5

RBA: JobKeeper hid 700,000 from unemployment queue

The RBA has released new analysis on the JobKeeper scheme’s impact on unemployment, which found that JobKeeper reduced Australian’s unemployment by 700,000 over the first four months of the COVID-19 pandemic: We find that one in five employees who received JobKeeper (and, thus, remained employed) would not have remained employed during this period had it

67

Retired Australians are creaming it

The next time you hear a seniors’ group demand an increase in the aged pension and other subsidies, consider the latest Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) report, which was released last week. This report showed that Australians aged 65-plus enjoyed by far the biggest increase in wealth between 2002 and

3

Dan Andrews right to ditch airport rail tunnel

Two years ago, the AirRail Melbourne consortium – which includes the owner of Southern Cross Station and part owner of Melbourne Airport, IFM Investors – offered to contribute $5 billion (on top of the state and federal government’s $10 billion) to own and operate the Airport Rail Link tunnel, with the service slated to “deliver a

18

Depressionberg forced to prop up failing Unstimulus

The Depressionberg Unstimulus has already triggered an employment catastrophe in the largest segment of the economy, small and medium enterprise: Things have been going better for the big end of town because it is enjoying major advantages over smaller competitors in its dominant online position, access to capital markets and more capital intensive growth models.

7

Mirvac tells states to wean off stamp duty

NSW Treasurer Dominic Perrottet’s plan to phase out stamp duty on property transactions and replace it with a land tax has won broad support, including from Mirvac CEO Susan Lloyd-Hurwitz. Lloyd-Hurwitz says stamp duty is a “very poor tax” that lessens mobility and keeps people in the wrong type of housing “for too long”. Lloyd-Hurwitz

4

Aussie companies privatise profits, socialise losses

The Australian taxpayer is businesses’ best friend. We have already witnessed company profits soar during the pandemic courtesy of JobKeeper, while workers’ wages and salaries tanked: Senior executives of Australia’s largest companies also secured massive bonuses after claiming JobKeeper subsidies: The Morrison Government’s JobMaker program will keep the largesse flowing by subsidising the wages of businesses

17

Don’t sell NBN to Telstra

Telstra has embarked on a major restructuring as it gears up to purchase the National Broadband Network (NBN) from the Australian Government: The restructure involves creating three separate legal entities under a Telstra Group umbrella, which Mr Penn and Telstra chief financial officer Vicki Brady said could theoretically be spun off as separately listed companies,

10

JobSeeker cut to throw 190,000 more people into poverty

The Australia Institute (TAI) has released a new report arguing that the Morrison Government’s decision to reduce the rate of JobSeeker by $150 from January 2021 will push an additional 190,000 Australians below the poverty line: On the 10th November 2020 the Coalition Government announced that it was again cutting the coronavirus supplement from its

72

NSW Budget launches massive stamp duty reform

Late last year, NSW Treasurer Dominic Perrottet flagged that he was looking at eliminating inefficient state taxes like stamp duties, to spur growth. Yesterday he put rhetoric into action, launching a reform that would offer owner-occupiers an alternative to stamp duty via a fixed $500 up-front fee plus an annual tax of 0.3% on unimproved

9

NSW is a land baron’s best friend

A September report from the Australian National Audit Office (ANAO) slammed the Department of Infrastructure for purchasing land from a billionaire family at 10 times its market value in what it calls a “significant and unusual transaction” related to the Western Sydney Airport. Auditor-General Grant Hehir then told a Senate hearing that the federal government

14

Innes Willox declares war on unemployed

For years Chief Executive of the Australian Industry Group (AIG) and Migration Council of Australia Chair, Innes Willox, has lobbied against laws to prevent wage theft, lobbied against stricter labour hire rules, has spread copious propaganda about skills shortages, and has lobbied incessantly for mass immigration. Now Willox is urging the federal government to look

9

NBN rollout cost continues to soar

As Communications Minister, Malcolm Turnbull abandoned plans to build a Fibre-to-the-Premises (FTTP) National Broadband Network (NBN) across most of the country. Instead Turnbull replaced it with a multi-technology mix (MTM) that included previously retired copper cabling. This change to MTM was marketed by Turnbull as a cost-saving measure. However, the enormous amount of rectification works

8

JobMaker becomes JobTaker

The Senate has voted 30-28 to pass the federal government’s $4 billion JobMaker bill without any amendments, after One Nation and Centre Alliance agreed to back the legislation. One Nation had previously indicated that it would support an amendment proposed by Labor that was designed to prevent employers from sacking existing staff and hiring younger

14

“Woefully in­adequate” JobMaker may not pass Senate

Shadow employment minister Brendan O’Connor indicated yesterday that Labor is unlikely to oppose legislation to enact the federal government’s $4 billion JobMaker hiring credit scheme. However, he says the bill is “woefully inadequate” and no amount of amendments will fix it: “No amount of amendments will fix this woefully inadequate proposed legislation, which will not

5

Childcare funding “20-times more effective” than tax cuts

The Australia Institute (TAI) has released a new report, entitled A comparison of the economic impacts of income tax cuts and childcare spending, which claims that boosting childcare funding would be nearly 20 times more effective at creating jobs than a tax cut of the same size: Almost 450,000 Australians with children under the age

25

Just raise the JobSeeker rate, ScoMo

Prime Minister Scott Morrison has thrown 1.5 million unemployed Australians a temporary lifeline, extending the JobSeeker supplement to the end of March: The Australian understands cabinet’s expenditure review ­committee signed off last week on extending the coronavirus supplement payment beyond December 31, when it was due to expire. The welfare payment boost is now expected

1

Labor, Greens demand changes to inept JobMaker

Labor has yet to decide whether to support the federal government’s JobMaker hiring credit scheme. However, senior Labor sources have indicated that the Opposition will side withy the Greens in seeking amendments to the draft legislation to ensure that employers cannot sack older staff and replace them with workers under the age of 35 in

1

Grattan slams Australia’s mega infrastructure waste

The Grattan Institute has released a new report, entitled The rise of megaprojects: counting the costs. The report slams Australia’s infrastructure selection processes, which too often choose large trophy projects over higher returning smaller ones, and tends to experience large cost blowouts: Below is the overview of the report, alongside key charts: Australian governments are fast-tracking

20

Time to rein government agency fat cats

The fleecing of taxpayers by senior executives of Australia’s government agencies and authorities has well and truly jumped the shark. Last month we learned of the extraordinary salaries and bonuses paid to senior executive within NBN Co – the statutory authority in charge of Australia’s failing National Broadband Network (NBN). NBN Co CEO Stephen Rue