By Leith van Onselen Finance Minister Mathias Cormann has ruled-out splitting the Coalition’s income tax package so that the Senate can pass low-and-middle income tax cuts in isolation to higher income tax cuts. From The Guardian: The finance minister “completely “reject[ed]” the suggestion that the revenue lost from tax cuts would lead to budget deficits
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.
By Leith van Onselen A group of academics have warned that fewer Australians will have university or TAFE skills if governments don’t reform tertiary education. From The Conversation: On current trends, participation rates in tertiary education – which includes university and vocational education training (VET) – will fall over the next decade. A thriving economy depends
Via Ross Gittins today: Morrison, with all his skiting about returning the budget to surplus he may have painted himself – and the economy – into a corner. In a speech last week, Reserve Bank governor Dr Philip Lowe made it clear that cutting interest rates might not be enough to keep the economy growing…And
By Leith van Onselen New Labor leader, Anthony Albanese, is under pressure within the party to oppose the Morrison Government’s high-income tax cuts. From The Canberra Times: Mr Albanese challenged Mr Morrison to recall Parliament before June 30 to pass the first tranche of the tax cuts package, which mostly benefits low and middle income
By Leith van Onselen With stamp duty receipts across Australia tanking, economist Shane Oliver and Property Council chief executive Ken Morrison have both lashed Australia’s state governments for being so reliant on stamp duties, with Shane Oliver urging states to dump stamp duties in exchange for raising the GST or broadening land taxes. From The Australian:
By Leith van Onselen Last month, Victoria’s Premier Daniel Andrews marched with the Change the Rules union rally demanding better pay for Australian workers: The Labor leader joined roughly 100,000 people for the ‘Change the Rules’ demonstration, which began outside Trades Hall in Carlton about 10am and shut down several streets and caused significant disruptions
By Leith van Onselen The NSW Office of State Revenue has released stamp duty data to April, which reveals a massive $1.2 billion (17%) decline over the past year and a $1.6 billion (22%) decline since stamp duty receipts peaked in October 2017: The latest retracement in stamp duty receipts follows a sharp 15% decline
By Leith van Onselen Australia’s soaring energy prices, brought about by the gas gouge, has helped foster a boom in solar power installations across Australia, with one-in-five Australian homes installing rooftop solar. However, alongside this boom has come a proliferation of dodgy installations, with an audit of the Clean Energy Regulator (CER) by the Australian
By Leith van Onselen Sally Capp – the former executive director of the Property Council of Australia’s (PCA) Victorian branch and Melbourne Lord Mayor – has questioned the Victorian Government’s announced increase in the surcharge imposed on foreign buyers of residential property from 7% to 8%. Capp warns that the increase has come at a “critical
By Leith van Onselen When it comes to cruelty against the unemployed, it’s hard to top the Morrison Government. As the Budget heads back towards surplus, and with the Government pledging money for tax cuts and retirees, it refuses to lift Australia’s Newstart Allowance, which is about to fall to 30% below the poverty line:
By Leith van Onselen The ABS’ 2017-18 tax revenue data, released last month, revealed that the Victoria Government is the most reliant on stamp duty receipts in the nation, accounting for 25% of total tax revenues in 2017-18: Last year’s mid-year Budget Review for Victoria contained the below hopelessly optimistic forecasts around stamp duty receipts,
Via Domain: Scott Morrison and Josh Frydenberg are about to challenge an Australian fiscal record. This isn’t one they’ll be boasting about any time soon, and it’s one that may not find its way into a Guinness book of records. When Tony Abbott took office federal tax as a proportion of GDP was 21.3 per
By David Collyer Victorian Treasurer Tim Pallas has pre-announced Land Tax changes ahead of Monday night’s state budget. Expect a dramatic budget contraction as Victoria’s key ‘own revenue’ source, Stamp Duty, has shrunk with the fall in both property transaction volumes and prices. “The government says stamp duty revenue will collapse by an average of
Via the excellent George Theranou at UBS: Monthly budget data for Apr-19 released today showed the Commonwealth General Government budget position already materially beating the Budget released on April 2, 2019…allowing for seasonality (etc), the Govt said the UCB is tracking $1.9bn better than expected (in just one month). UBS thinks the recent surge in
By Leith van Onselen Mid last year, the Hodgman Liberal Tasmanian Government rejoiced at the recent acceleration in the state’s population growth: Tasmania’s population is growing at its fastest rate in five years and the State Government wants to see more of it… “There’s no doubt that Tasmania has ample room for additional intake of people
By Leith van Onselen In late 2017, the Turnbull Government implemented university funding reforms that made it harder for students to access the Higher Education Loan Program (HELP) for courses that have poor employment prospects, thereby effectively ending the demand-driven university system established by the Gillard Labor Government. Now, Australia’s universities are urging the newly
Via the AFR: Labor is unlikely to shift its opposition to the Coalition’s high-end income tax cuts but has signalled jettisoning a central plank of its climate change policy as it grapples with the loss of its blue-collar base. Incoming Labor leader Anthony Albanese suggested on Thursday that the opposition would not support the government’s
By Leith van Onselen A new report claims that Australia’s ageing population is placing increasing strains on Australia’s health system. From SBS News: Australia’s ageing population is driving up hospitalisation rates while health practitioners are witnessing a dramatic rise in vaccine-preventable influenza cases in hospitals. The latest Admitted Patient Care 2017-18 report, released on Thursday,
By Leith van Onselen Victorian Premier, Dan Andrews, is under assault on multiple fronts for refusing to allow the Morrison Government to build the controversial East-West Link, which was dumped by Andrews after the 2014 State Election. Federal Treasurer Josh Frydenberg has urged the Victorian Government to approve the East West Link toll road project,
Via New Daily: Tax cuts for the “top end of town” could be waved through Parliament by Labor as it considers putting the Prime Minister under pressure to deliver on his tax cuts and his promised surplus. Labor on Tuesday accused Scott Morrison of his first broken promise over potential delays to planned $1080 tax cuts, and
By Binoy Kampmark, lecturer at RMIT University There are no protests on the streets and no effigies of university officials being burned by protesting students today. There are no protests outside the officers of the over-remunerated Vice Chancellors and their various henchpersons. It is business and malpractice as usual after revelations by Australia’s national broadcaster that Australian universities have
By Leith van Onselen Over recent months we’ve warned how the impending stamp duty bust in Victoria will force the Andrews Government to tighten its belt. Now with the Morrison Government returned unexpectedly, things have gone from bad to worse: Treasurer Tim Pallas now faces the unenviable task of preparing a state budget without almost
By Leith van Onselen Last weekend’s Federal Election offered another reminder of why Australia’s infrastructure delivery system is busted and badly ill-equipped to keep pace with the federal government’s mass immigration ‘Big Australia’ policy. In the wake of the Coalition’s re-election, the Morrison Government and Victoria’s Andrews Government are locked in a heated battle over
Via The Australian: Scott Morrison’s promised tax cuts will be delivered by the 2019-20 financial year, with the Australian Tax Office saying it can pass on the promised changes if Labor agrees to them. There was speculation in other media outlets this morning that the tax cuts would not be passed on as the Prime
By Leith van Onselen Tax cuts announced by the Morrison Government in the April Federal Budget are likely to be delayed until 30 June 2020 because Parliament is unlikely to resume in time to pass the measures. From ABC News: Tax cuts of up to $1,080 per person will likely be delayed for another year
By Leith van Onselen The election campaign saw both sides of politics shower Victoria with infrastructure promises in a bid to sway votes. But with Labor losing the unlosable election, it’s pledge to contribute $10 billion towards Dan Andrew’s $50 billion suburban rail loop has also gone the way of the dodo, meaning that if the
By Leith van Onselen The first order of business for the re-elected Morrison Government will be to legislate its tax cuts announced in the April Budget. From The Canberra Times: Treasurer Josh Frydenberg set out the government’s plan to legislate its tax cuts, as pledged in the April 2 budget, so that the gains could
The Queensland Audit Office has released a new report warning that the state’s universities have become too reliant on international students for revenue, with the University of Queensland (UQ) now deriving more than half its fees from this source following 83% growth since 2014: Queensland universities are becoming increasingly dependent on revenue from international students.
Via Domain: The expenses of landlords who negatively gear investment properties have been revealed in new figures showing property owners collectively spent millions of dollars on gardening, office costs and travel. Expenses claimed for loss-making rental properties, 2016-17 EXPENSE COST ($) Interest on loan(s) 18,003,089,767 Capital works deduction 2,686,282,577 Plant depreciation 2,267,756,183 Council rates 1,975,758,715
By Leith van Onselen All generations believe that Baby Boomers are getting the best deal from the government at present. This is according to a poll conducted by Roy Morgan for the Australian Futures Project, a non-partisan, non-profit group that seeks to end short-termism in Australia. The poll also found that 50% of Australians do