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 Tonight’s Federal Budget is expected to hose cash around a wide cross-section of the population. According to leaks and announcements, low-to-middle income earners will receive tax cuts. Veterans, carers, single parents, aged pensioners and people receiving the disability support pension will receive one-off payments to compensate for rising energy costs. And
Via the ABC: A multi-billion-dollar reconfiguration of the Coalition’s seven-year tax plan to favour low- and middle-income earners will be at the heart of Treasurer Josh Frydenberg’s first Federal Budget. The ABC understands the Morrison Government will today unveil a reshaping of its already legislated tax plan, with tax cuts favouring low- and middle-income earners
By Leith van Onselen The Australian Tax Office (ATO) has released its taxation statistics for the 2016-17 financial year, which registered a small fall in the number of negatively geared property investors, with annual losses claimed also falling marginally. According to the ATO, there were 2,179,107 people claiming net rent in 2016-17 (2,149,796 claiming gross
By Leith van Onselen Scott Morrison seems to believe he can “bust” Melbourne’s congestion, and bribe his way into office, for the pissy sum of $2.1 billion. From The ABC: The Federal Government has announced it will fund $2.1 billion worth of transport infrastructure in Victoria, to help cater for the state’s growing population, as
By Leith van Onselen Health insurance premiums will increase by an industry-weighted average of 3.25% from today, while the base-insurance rebate will decline to 25.06%. From The Australian: Premiums will rise today by an industry-weighted average of 3.25 per cent… The base rebate will fall to 25.06 per cent for under-65s earning $90,000 or less
Via The Guardian: Bringing forward the Coalition’s income tax cuts would give high-income earners an extra $104 a week while low- to middle-income earners would gain just 50 cents to $4 a week, according to new modelling. The Australian Council of Social Service released the modelling on Monday to warn the Morrison government off any attempt to
By Leith van Onselen Shadow treasurer Chris Bowen says the revenue projections and economic forecasts to be outlined in the April 2019 Budget will be revised by Labor if it wins the federal election. He has flagged plans for Labor to hand down a mini-budget in the September quarter. Labor is also widely tipped to
Nobody but MB readers seem to understand the level of insult for Australians Treasurer Josh Frydenberg is readying in the Budget: Josh Frydenberg says he will deliver a responsible budget on Tuesday, after announcing the government will deliver cheques to four million welfare recipients to help pay their energy bills. The Treasurer said now was
Fake news alert. At The Australian: The number of landlords with five or more investment properties has surged as buyers get in before a potential Labor government implements its negative-gearing policy from January 1. New Australian Taxation Office figures released yesterday revealed the number of landlords with five investment properties grew at nearly six times
Yes it will: OVERVIEW AND OUTLOOK The credit profile of Australia (Aaa stable) reflects its very high economic strength, buttressed by its robust growth potential and demonstrated flexibility in adjusting to a shifting economic environment. The latter has been reflected in the economy’s ongoing adjustments to changes in the role of the resources sector in
So says Mr Joye today: In what could be an electoral game changer, the government’s budget has remarkably moved into a full surplus on several key measures – the “net operating balance” and “fiscal balance” report a surplus of more than $7 billion over the year to February – 12 months ahead of the government’s forecast,
By Leith van Onselen Shadow treasurer, Chris Bowen, has announced that Labor’s signature negative gearing and capital gains tax (CGT) reforms will come into effect on 1 January 2020, roughly seven months after the federal election. This is six months earlier than the 1 July 2020 start date speculated by most observers. From The ABC:
By Leith van Onselen In late 2017, the Victorian Labor Government completed a shady $6.7 billion deal with Transurban to build the West Gate Tunnel Project, which will see Transurban contribute $4.4 billion towards the cost in exchange motorists paying $15 billion in additional tolls on CityLink until 2045. Former Premier Jeff Kennett described the
By Leith van Onselen The CBA estimates that the federal government could post a combined surplus of about $60 billion between 2019-20 and 2021-22. CBA adds that the government could have up to $70 billion at its disposal for spending initiatives during the upcoming election campaign, including scope for up to $6 billion in additional
Via Bill Evans at Westpac: In previous years the Reserve Bank has generally observed that fiscal policy has had only a very limited bearing on monetary policy decisions. It is reasonable to contemplate whether 2019 will be different. Firstly, if we take the expected approach from the Budget (an expansionary budget with a focus on
After Professor Peter McDonald hijacked last year’s COAG meeting with immigration propaganda, Queensland Premier Annastacia Palaszczuk backed the ‘Big Australia’ mass immigration policy: Queensland Premier Annastacia Palaszczuk said it was clear from Professor McDonald’s presentation that a cut in immigration numbers was not the answer. “It has to be maintained, if not increased. That’s what
By Leith van Onselen Last year I labelled the $22 billion National Disability Insurance Scheme (NDIS) a “bureaucratic nightmare”, citing my family’s own personal experience with our 11-year old autistic son. Despite being diagnosed in the “severe range” of autism spectrum disorder, unable to converse or read, and attending a special school, my son was initially
By Leith van Onselen The NSW Office of State Revenue has released stamp duty data to February, which reveals a $1.5 billion (21%) decline over the past year and a $1.8 billion (24%) decline since stamp duty receipts peaked in October 2017: The latest retracement in stamp duty receipts follows a sharp 19% decline in
Via Domain: Australian officials are increasingly concerned that trade negotiations between China and the United States will lead to a special deal between the two countries that displaces Australia’s exports, including coal, to its biggest market. China is likely to significantly increase imports of American coal from West Virginia, Donald Trump’s electoral heartland, if it
By Leith van Onselen With an election fast approaching, Labor’s infrastructure spokesman, Anthony Albanese, continues to push hard for a High Speed Rail (HSR) line linking the east coast capitals. Here’s Albo’s latest press release: Scott Morrison’s latest re-announcement of his “faster rail’’ proposal to link big cities with regional centres is too little, too late
By Leith van Onselen Infrastructure expert, Professor David Hensher, has warned that Sydney requires “hundreds of billions” of dollars in infrastructure investment needed to fix current congestion problems, let alone keep up with projected population growth. From The ABC: The NSW Government has $110 billion worth of plans for Sydney’s transport — but that’s a fraction
By Leith van Onselen The University of Sydney has joined MB in warning that NSW is facing a potential Budget crisis as the property crash wipes billions in dollars of stamp duty revenue: With a state election imminent in NSW, it is timely to consider the fiscal opportunities and constraints facing whoever wins government. Election
By Leith van Onselen In late 2017, the Victorian Labor Government completed a shady $6.7 billion deal with Transurban to build the West Gate Tunnel Project, which will see Transurban contribute $4.4 billion towards the cost in exchange motorists paying $15 billion in additional tolls on CityLink until 2045. Former Premier Jeff Kennett described the
By Leith van Onselen The AFR’s Market View continues to flog the company tax dead horse, arguing that lower company taxes are necessary to lift wages: One reason wages are not rising that fast today is that company taxes are too high. Treasury modelling shows that two-thirds of the benefits of cutting company tax would
By Leith van Onselen The Australian Council of Social Service (ACOSS) has called for any increase in the minimum wage to be matched with an increase in Newstart. From News.com.au: Council chief executive Cassandra Goldie said the existing daily rate of the unemployment payment was equivalent to just two hours of work at the minimum
By Leith van Onselen The University of New South Wales’ City Futures Research Centre states that more than one million social and affordable homes will need to be built across Australia over the next 20 years. Laurence Troy from the Centre says an increasing number of people are going into rental stress, which will lead
By Leith van Onselen The Coalition is set to announce a small cut in Australia’s permanent non-humanitarian migrant intake in April’s pre-election Budget to a cap of 160,000 from 190,000. From 9 News: Cabinet has authorised the changes, which would slash the targeted annual intake of permanent migrants by up to 30,000… A regional settlement
By Leith van Onselen Both the Liberal and Labor parties have engaged in a spending war to sway voters for this week’s State Election. According to Fairfax, the Coalition has pledged around $28 billion in commitments, much of it in health and education, whereas Labor’s election pledges total nearly $24.0 billion. So, no matter which
By Leith van Onselen The ABC has asked the question in the wake of Luxembourg’s decision to abolish all fares from next month: “It’s possibly the first example of an entire region, in this case a city-state, making public transport universally free,” says public transport advocate Tony Morton… In 2013, the Estonian capital Tallinn opted
By Leith van Onselen Leaked emails from industry experts have shredded the roll-out of Australia’s National Broadband Network (NBN) and warned that taxpayers face a potential $20 Budget hit. From The Saturday Paper: In the unusually frank correspondence, sent between members of a discussion list hosted by advocacy body Internet Australia, industry veteran Robin Eckermann
