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.

13

Coalition’s first home buyer bribe gets Senate tick

The federal government has identified a number of legislative priorities when Parliament resumes on 14 October. However, analysis suggests that the Coalition may lack the numbers to pass up to seven out of eight bills in the Senate, including the Ensuring Integrity Bill and a religious discrimination bill. The proposed first-home loan deposit scheme is

8

Experts line up to denounce Dan’s $50b rail loop white elephant

The Dan Andrew’s Government’s $50 billion Suburban Rail Loop was announced just prior to last year’s Victorian State Election. It was never subjected for assessment by Infrastructure Australia or Infrastructure Victoria. There is no business case. And Victoria’s transport department wasn’t even told about the plan for fear that it would attempt to block the

9

Calls for independent commission to set Newstart

Social services organisations have called for an independent commission to be set up to determine the rate of payment for Newstart recipients: Calling for an increase to the payment in their submission, groups including Uniting Communities, the Combined Pensioners and Superannuants Association and the Consumers Health Forum said a social security commission should help set

20

The Aged Pension’s fatal policy flaw

The Australian’s Adam Creighton has penned an excellent article attacking the Morrison Government’s decision to exclude the ‘family home’ from being considered in the upcoming retirement incomes review: Treasurer Josh Frydenberg ruled out “ever” including the principal residence in the eligibility test for the pension. If the age pension is going to be means tested,

8

NDIS a boon for administrators and middle-men

Over many years, we’ve warned that the enormous pot of money on offer under the $22 billion National Disability Insurance Scheme (NDIS) would spawn a whole range of middle-men, administrators and providers seeking to cash in, leading to significant waste, or worse fraud. We’ve seen this before with the rorting of the private Vocational Education

11

Recessionberg: My economic plan is stupid

If it didn’t matter so much it would be amusing watching L-plate Treasurer Josh Recessionberg make no sense, via the AFR: Treasurer John Frydenberg has endorsed Future Fund chairman Peter Costello’s call that further interest rates cuts won’t boost the economy all that much and insisted the government is developing a productivity agenda. “Peter Costello

3

PBO blows up Budget

Via the PBO: This fourth edition of the Parliamentary Budget Office’s (PBO’s) medium-term projections report shows that ongoing government spending restraint, combined with lower public debt interest payments, are driving an improving fiscal position… The underlying cash balance is projected to improve over the next decade to a surplus of 1.6 per cent of gross

10

Peter Costello demands negative gearing reforms

Via Domain: Future Fund chairman Peter Costello has downplayed the economic impact of any future interest rate cuts, saying deep-seated or “structural” reforms were instead needed to promote growth. With financial markets putting roughly an 80 per cent chance on an official interest rate cut next week, Mr Costello on Thursday said lowering the cash

4

ABS demands more budget funding

After being savaged for years by funding cuts and jobs losses under the prior two governments (both Labor and Liberal), thus hampering its ability to perform its functions, the Australian Bureau of Statistics (ABS) has demanded increased funding to ensure that Australia successfully navigates the “information age”. From The AFR: Australia’s chief statistician, David Kalisch,

5

East-West Link fiasco goes Back to the Future

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. In May, Federal Treasurer Josh Frydenberg has urged the Victorian Government to approve the East West Link toll road project, arguing that

42

NBN facing “congestion timb bomb” as capacity breached

Dr Steven Conway, a senior lecturer in games and interactivity at Swinburne University of Technology, has warned that the National Broadband Network (NBN) is facing a “congestion time bomb” as more people and new streaming technologies breach the network’s capacity: “In a nutshell, the future is dire. In contemporary terms, it’s not great,” [Dr Conway]

14

“Panic selling” crashes coking coal, Budget next

Goodbye Budget. Via Mining: The Australian export price of metallurgical coal (FOB hard coking coal Fastmarkets MB) used in steelmaking tanked 7% to $122.50 a tonne. That’s down almost $70 a tonne compared to the start of the year. Fastmarkets MB in a market report says the availability of ample cargoes of lower quality seaborne

4

Recessionberg tramples disabled and dead for surplus

Josh Recessionberg collects his Golden Turd award at The Australian today: The principal driver was a record number of Australians in work, with 300,000 people finding a job, 100,000 more than Treasury forecast. This has the effect of increasing tax receipts and decreasing payments as people move from welfare to work. Export earnings in the

3

Go long Recessionberg stupidity

Via Reuters: The government will publish its “Final Budget Outcome” for the 2018/19 fiscal year ended on June 30 on Thursday, Treasurer Josh Frydenberg told Australia’s parliament. The report will also include revised estimates and outlook for the current financial year. “It will show an improvement on what was forecast, not only in the 2018/19

0

Victorian pollies get massive pay rises as households flounder

The newly established Victorian Independent Remuneration Tribunal has handed down its first determination regarding the pay of Victorian MPs. Victorian MPs will now receive a base salary of $182,413, up 3.5% per cent. Victorian Premier Daniel Andrews was given a $46,522 pay increase that sees him become the highest-paid state leader, while ministers and the

9

Marketisation of Australia’s public services has failed

This time last year, Ross Gittins penned an excellent article lamenting the neoliberal obsession with transferring the provision of public services to private providers, which focussed on aged care: A key part of the era of what we used to call “micro-economic reform” has been to take services formerly provided by governments – and sometimes

13

How the Coalition destroyed the NBN

MichaelWest.com.au has published interesting analysis explaining how changes implemented by the Coalition when it came to power in 2013 have wrecked the National Broadband Network (NBN): The real rot started with the “strategic review” of the NBNCo plans initiated after the 2013 election… The review predictably concluded that the latest corporate plan was too optimistic

0

RBA declares Recessionberg tax cuts FAIL

A couple of standout lines from the RBA minutes are very dovish, including a clangor for Recessionberg: “Members noted that the outlook for the construction sector was particularly weak.” “The low- and middle-income tax offset (LMITO) was expected to boost household income, and thus support consumption growth, in coming quarters. However, the Bank’s liaison with

2

Blundell-Wignall: Cut fiscal fetish

Adrian Blundell-Wignall making more sense today: Monetary policy cannot “fix” stag-deflation in the West, the fundamental cause of which is excess investment in certain parts of the world. …Here we are with 11 years of the easiest global monetary policy in history and we see not only little inflation but also weakening economic growth. This

8

Is the NBN already a white elephant?

Back in April, the head of the Australian Competition and Consumer Commission (ACCC), Rod Sims, lamented that Australians were paying more for lacklustre broadband internet under the $50 billion National Broadband Network (NBN): “We are now observing prices of low-speed NBN plans offered to new customers that are at least $10 per month higher than

1

The rise and rise of the secondary job

The Guardian’s Greg Jericho has completed some excellent analysis of this week’s quarterly experimental employment data from the ABS, which shows that there are actually more than there are people employed because a record 6% of earners work multiple jobs: In the June quarter this year there were 14.53m jobs available in Australia. Of these,

6

Australia’s welfare blow-out debunked

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 Australian Institute of Health and Welfare (AIHW) 2019 welfare report has debunked this myth,

9

Coalition facing mounting pressure over Newstart

The Morrison Government continues to face mounting pressure to raise Newstart benefits for Australia’s unemployed. Yesterday, Monash researchers released a study showing that many Newstart recipients are suffering from poor health and often too sick to work or study: “It’s hard to work when you’re sick. We found large disparities between the health of people