For several years, media outlets like The Australian ran a campaign against the so-called ‘blowout’ in welfare spending, backing claims made by the Coalition Government that nearly half of the population receives more in welfare than they pay in tax. The 2019 Household Income and Labour Dynamics in Australia (HILDA) survey has demolished this myth,
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.
The Australian Council of Social Service (ACOSS) has released a survey of Newstart recipients, which reveals that the overwhelming majority are forced to skip meals: People who receive Newstart or other allowances have an income that is well below the poverty line. The single rate of Newstart is $282 per week, which is more than
We argued previously that the NSW State Government had hit ‘peak stupid’ in deciding to spend $2.5 billion to demolish and rebuild the Olympic Stadium and the Sydney Football Stadium, both of which are underutilised. These stadiums were assessed to deliver zero net economic benefits for the state, according to analysis by hired gun KPMG. Moreover, these
Telstra chief executive Andy Penn has joined the chorus calling on the Morrison Government to lower wholesale prices for the National Broadband Network (NBN): “Unfortunately, because of where wholesale broadband prices have gone, basically all operators are losing money reselling the NBN, and therefore some — and they’ve said it publicly — are looking at
The percentage of Australians aged between 20 and 28 with private health insurance cover for hospitals fell by 6.9% (33,975 people) in 2018, according to data from the Australian Prudential Regulation Authority. The overall percentage of Australians with hospital cover at the end of 2018 was 44.6%, the lowest level since December 2006, whereas the
Bloxo is back with a suggestion, via the AFR: Having cut its cash rate to a record low of 1 per cent recently, the Reserve Bank of Australia (RBA) is rapidly running out of room to provide further support for growth…forcing the central bank to use unconventional policy tools, such as quantitative easing, at a
Prime Minister Scott Morrison has told Coalition MPs that any future welfare spending will go to pensioners, not the unemployed: Pensioners will be prioritised ahead of unemployed Australians for any boost to welfare payments as the Morrison government stands firm against growing demands to lift the Newstart allowance. Prime Minister Scott Morrison has told colleagues
Recall that Deputy Prime Minister Michael McCormack has told unemployed job seekers to get off welfare and go bush for jobs: “There are jobs out there in regional Australia, and there are good paying jobs. And what I think we do need in this country is a more mobile workforce. So people have to be prepared to move
Prime Minister Scott Morrison has revealed plans for a major overhaul of the federal public service, which will include a push for cultural and organisational change. Amongst other things, the reforms will result in increased accountability for senior public servants. The sweeping reforms will coincide with the departure of Martin Parkinson, who will retire as
Facing intense pressure to lift Newstart, Deputy Prime Minister Michael McCormack yesterday told unemployed job seekers to get off welfare and go bush for jobs: “There are jobs out there in regional Australia, and there are good paying jobs. And what I think we do need in this country is a more mobile workforce. So
Commonwealth Auditor-General Grant Hehir will conduct a second investigation into the federal government’s use of contractors, consultants and labour-hire firms. His first probe indicated that the government was spending so much in this area that Parliament’s joint committee of public accounts and audit ordered an inquiry into its use of external firms. Hehir’s second investigation
Moody’s Investors Service has released a report on the fiscal position of Australia’s state governments. It notes that the soft state of the economy has the potential to reduce the amount of revenue that the states receive from the goods and services tax, while increased debt is regarded as “credit negative” for their fiscal status.
Via the AFR: Pressure is building within the government over the inadequacy of the Newstart payment after a majority of the Nationals backed an increase, while Liberal senator Dean Smith also broke ranks. With Prime Minister Scott Morrison adamant there would be no above-inflation increase to the unemployment benefit, the Nationals discussed the issue at
The most recent wages price data from the ABS shows that public sector wages have grown far more strongly than the private sector over the past five years: With this data in mind, The New Daily reports that Australia’s highest ranked public servants are earning close to $1 million: If you want to see a
Liberal MP, Julian Leeser, has hosed calls to raise Newstart, arguing that the federal budget simply cannot afford it: An increase to the dole would have a major implication for the budget bottom line at a time when there is a need for strong fiscal management, a Liberal backbencher warns. Prime Minister Scott Morrison this
When it comes to cruelty against the unemployed, it’s hard to top the Morrison Government. Listen to lousy ScoMo today on a Newstart rise: “The government has no plans to do that,” he said. “We will continue to increase Newstart every six months as has always been the practice. “More importantly, for those who are
Via Domain: Billions of dollars of congestion-easing infrastructure projects that could boost the economy and increase safety are stuck years down the track as the Reserve Bank of Australia calls on the Morrison government to do more. As Prime Minister Scott Morrison promises to pull forward some infrastructure projects, an analysis of the federal budget
The cost of healthcare is under scrutiny in the wake of revelations that a growing number of Australians are seeking early access to their superannuation to pay medical expenses. The Association of Superannuation Funds of Australia raised concerns about this trend in February, warning that it demonstrates the need for government funding to the healthcare
New Social Services Minister, Anne Ruston, has sparked outrage from Labor after she claimed on radio that the Aged Pension was “welfare” for people who can’t look after themselves. From The New Daily: “Pensioners do it tough. They deserve our respect, they get a pension as payback for what they have done in contributing to
The NSW Office of State Revenue has released stamp duty data to June, which reveals a massive $1.65 billion (24%) decline over the past year and a $2.3 billion (31%) decline since stamp duty receipts peaked in October 2017: The latest retracement in stamp duty receipts follows a sharp 23% decline in property transfers in
The University of Melbourne’s John Freebairn argues that reducing the tax rate for larger non-resident shareholders would stimulate economic growth and help to increase wages. From The Australian: Mr Freebairn said lower tax rates for large corporations would provide a “stimulus to the investor”, which would see “GDP grow” and that “some of that goes
The Grattan Institute has released a new working paper, entitled The history and purposes of private health insurance, which forecasts an ‘exodus’ of young and healthy people from the private health system leaving private health insurers struggling to cope with older, sicker patients. This leaves the industry in need of desperate reform: Australia’s private health
National Seniors Australia (NSA) has reacted angrily to the federal governments changes to the pension deeming rate, accusing the government of having its “hands in pensioners’ pockets at a time when they can least afford it”. From The Guardian: The National Seniors Australia chief advocate, Ian Henschke, said the Coalition’s $600m commitment was welcome, but
Over the weekend, the Morrison Government announced changes to deeming rates for the Aged Pension, which are expected to deliver pensioners an additional $600 million of funding over the next four years. Specifically, the deeming rate used to calculate how much a pensioner earns on their financial assets will decrease from 1.75% to 1% for
It’s always funny to read the RBA – which is partly responsible for Australia’s record household debt load – lamenting that high household debt is curbing spending. Via a new RBA research paper: We explore the relationship between owner-occupier mortgage debt and spending using detailed panel data on Australian households. We find evidence consistent with
Yesterday, Fairfax reported that around 600,000 retirees are about to receive fortnightly pension increases from reductions to the deeming rate – a move supported by Labor: Prime Minister Scott Morrison’s expenditure review committee will consider how to minimise the budget impact of changes to the deeming rate for pensioners, while acknowledging many are feeling short-changed
S&P Global Ratings upgraded Australia’s credit rating outlook to ‘stable’ in September 2018. S&P’s Anthony Walker says the federal government must retain its target of returning the Budget to surplus in 2019-20 in order to retain its triple-A credit rating. He has stressed the need for the government to have a strong public balance sheet
After unsuccessfully taking its negative gearing and capital gains tax (CGT) reforms to the past two elections, Labor is set to officially dump the policy from its platform. From The Australian: Anthony Albanese has given his biggest signal yet that he will dump Bill Shorten’s negative gearing and franking credits reforms, responding “No” when asked
Sections of Australia’s media have launched an all out attack on the passing of the Coalition’s income tax package by the Senate. The Monthly claims the tax cuts commits Australia to austerity and will worsen inequality: On the face of it, spending $158 billion over the next 10 years – which is what the Coalition
Treasurer Josh Frydenberg says the federal government will change the deeming rate for pensioners by the end of 2019, and that over 25 per cent of pension recipients will be better off as a result. Shadow social services minister Linda Burney says a change in the deeming rate is urgently needed, and that cutting it