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.


Private schools ruthlessly rorted JobKeeper

How did Australia’s elite private schools score hundreds of millions of dollars of JobKeeper dollars without ever ‘shutting down’ and recording giant operating surpluses? From The ABC: For the first time, the ABC can reveal all 395 non-government schools that reported claiming JobKeeper in 2020 and the amounts they received. The ABC has also analysed


Gas cartel pays no tax, forces Aussies to pay more

While the gas cartel is busy forcing Australian energy bills up by sending our gas offshore, turns out the industry also pays minimal tax. According to a new report from The Australia Institute (TAI), major gas companies haven’t paid income tax in seven years despite earning $138 billion from their Australian operations: New analysis of


Wealthy to reap most benefit from higher childcare subsidies

Analysis by the Australian National University (ANU) suggests that families on higher incomes will benefit the most from the child-care policies of both Labor and the Coalition. The analysts shows that the wealthiest 20% of households will save an average of $2,547 a year under Labor’s policy. In contrast, the Coalition’s child-care policy will result


Albo hoses $2.2b on Dan’s Suburban Rail Loop boondoggle

Two years ago, Inside Story’s Tim Colebatch labelled Dan Andrews’ Suburban Rail Loop – a 90 kilometre orbital rail system that would run underground between Cheltenham and Werribee at a cost of up to $120 billion – “the worst transport project Melbourne has ever seen”: The government’s commitment to build the worst transport project Melbourne


ANU: JobKeeper cost $112,819 per job saved

Research from the Australian ­National University suggests that the federal government’s JobKeeper wage subsidy scheme saved 812,000 jobs. The scheme cost $89 billion in total, which equates to about $112,819 for each job that it saved. The working paper notes that JobKeeper may have been introduced slightly too late and could have been wound back


Don’t introduce a levy to fund aged care

Modelling by the University of New South Wales indicates that the annual cost of providing aged-care services is likely to rise significantly in coming decades. The report’s co-author Ellora Shirodkar says the future cost of aged-care services could potentially range from 4% of GDP to 25%. Shirodkar warns that universal entitlement to aged care is


Election pork hurled at seniors

The AFR’s John Kehoe has attacked the election pork being thrown at seniors, questioning why the wealthiest generation in Australia’s history is receiving even more taxpayer support: The election is exacerbating the intergenerational inequities and the fiscal burden being placed on workers. The Morrison government – matched by Labor – will grant an extra 50,000


Aussie universities cry poor as they rake in profits

Monash University’s annual report shows that it has posted a record surplus of $416 million for 2021. In fact, La Trobe was Victoria’s only university to post a deficit for 2021. Ben Eltham of the National Tertiary Education Union (NTEU) says the size of the surplus is “frankly obscene” given that Monash retrenched 267 employees


Has RBA bumbling triggered an Australian soverign debt crisis?

The relentless rise in Australian yields, to levels far beyond anything that the economy will be able to take, is now posing an interesting question. Futures are now pricing a terminal interest rate of 3.7% next year. This would obviously destroy Australian house prices and the economy both: Sovereign yields are quickly playing catch-up in


Victoria budget readies for stamp duty collapse

The 2022-2023 Victorian Budget has been released which tips an $2.0 billion drop in the state’s stamp duty receipts in 2022-23 off a predicted 4% decline in property values over the 2023 calendar year: Revenue from land transfer duty is expected to increase to $10.2 billion in 2021-22, consistent with strong residential dwelling price growth


Younger generations should “squeal louder” for wealth taxes

Former Reserve Bank of Australia (RBA) governor, Ian Macfarlane, believes younger Australians should be “squealing louder” about inter-generational inequity, which is seeing them being over-taxed on their labour income while the wealthy older generations pay minimal taxes: “The people who hold all the wealth are the older people – we don’t really tax wealth. The


Russian-Ukraine war catapults commodity prices into stratosphere

The Russian-Ukraine war has catapulted the Reserve Bank of Australia’s (RBA) index of commodity prices to its highest ever level. As shown in the next chart, the commodity price index soared 3.4% in April in SDR (currency-weighted) terms to be up 19.4% over the quarter and by 39.9% year-on-year: The RBA’s commodity price index in


Labor pledges $500m to roll-out electric vehicle charging stations

A few weeks back, The Australia Institute (TAI) released a report claiming that Australia was 91% reliant on foreign oil, with road transport consuming more than half (54%) of liquid fuel. TAI also estimated that “if all passenger vehicles in Australia were pure electric vehicles, 33% of imported oil could be replaced with domestic electricity”:


Desperate Morrison throws fresh bribe at wealthy boomers

March’s Federal Budget extended its minimum pension drawdown requirement for a further 12 months, thus enabling affluent retirees to keep their superannuation balances without needing to sell their assets. The biggest beneficiaries of the extension are wealthy retirees, who use superannuation tax breaks to escape tax on funds they are accumulating to pass on to their


Liberal MP demands pay rise for struggling federal politicians

With the annual inflation rate of 5.1% now more than twice the rate of wages growth, and the average Australian worker’s wages are going backwards in real terms, Indigenous Australians Minister Ken Wyatt has called for federal politicians to be given a pay rise. The base salary of federal MPs is $211,250 a year, while


Labor takes aim at ‘cult of consultants’

For years MB 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 spin


Better wages and conditions key to fixing aged care

Opposition leader Anthony Albanese has previously promised that Labor would provide 24/7 nurses in aged-care homes and emergency Medicare clinics, but he has conceded that labour shortages will make that commitment hard to achieve in the short-term. Albanese now says that Labor will look at bringing in migrant workers as a ‘stop-gap’ measure while more


Why quarantine facilities are still a good investment

The Victorian Government has copped flack on Twitter for building a large quarantine facility at the tale end of the pandemic, which will now lay idle after the State Government on Saturday lifted the requirement for unvaccinated travellers to complete seven days of quarantine. The $580 million 1000-bed quarantine hub in Mickleham Victoria has housed


Use pensioners to solve Australia’s labour shortage

National Seniors Australia (NSA) chief Ian Henschke believes Australia’s inflexible aged pension means testing discourages older Australians from working, thereby contributing to labour shortages. A recent NSA survey of pensioners revealed that 20%, or roughly 500,000, would consider re-entering the workforce if they could keep their pension entitlements and merely pay tax on their work