Victorian Premier, Dan Andrews, was out and about over the weekend spruiking his government’s 90 kilometre suburban rail loop, which he admitted is still yet to be costed and yet to be subject to a business case: Mr Andrews said there had already been “thousands” of hours of technical planning over the past 12 months,
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.
In its pre-Budget submission, National Seniors has demanded the Morrison Government reduce the taper rate by which the Aged Pension is phased-out: It wants to reduce the taper rate, which reduces the age pension for people depending on the value of their assets. The taper rate was lifted by then-treasurer Scott Morrison more than two
A new Treasury paper, released on Friday, claims Australia’s retirement system is giving the wealthiest Australians twice as much financial assistance as those on the lowest incomes: The overall level of public support provided by the retirement income system should be targeted to those who need it most. Higher income earners generally have a greater
Via Moody’s Moody’s Investors Service says in a new report that softer domestic economic conditions and a slow housing market recovery will squeeze state revenue in 2020, but will not disrupt 28 consecutive years of economic growth in Australia (Aaa stable). Debt-funded public spending will continue to underpin economic growth across the Australian states, but
With membership in private health funds in free-fall: BUPA, Australia’s largest health insurer, has demanded more subsidies from the federal government: BUPA, the nation’s largest health insurer covering 3.6 million Australians, has suffered the most among rivals in the past year, losing nearly 80,000 customers from its hospital cover policies as younger customers decided they
Victoria looks to become the first jurisdiction to implement direct road user charges, according to confidential sources leaked to The Age, with electric vehicles in the immediate firing line: Victoria is likely to be the first mover, with senior government and industry sources confirming consultations had begun on a charge that is under consideration for
You’ve got to love the powers that be. Their arrgoant disregard for standards of living, for the wishes of the people, for simple economic sense, via Domain: A new blueprint for the NSW economy predicts the state’s annual output will hit $1 trillion by the end of next decade and reach $2 trillion by around
The private health insurance death spiral rolls on, with the percentage of Australians in private health insurance continuing to plummet: There is no good news for private health insurers in the quarterly health Insurance statistics released today. The headline number – the proportion of the population insured – continues to decline and most of the
Via the AFR: Scott Morrison has all but slammed the door on fast-tracked tax cuts or other ”panicked reactions” in next month’s mid-year budget update, saying the government has already injected $9.5 billion of near-term stimulus into the economy since the May election. Under external pressure to do more to stimulate the economy than he
In desperate search of quick cash to fund the state’s ballooning population, the Victorian Government is looking to sell-off the state’s monopoly motor registry agency, VicRoads, to private interests: Investment bank Morgan Stanley has won the role to embark on a scoping study for the Victorian Government to determine whether to sell its motor registry
The NSW Government has demanded the federal government commit and bring forward funding for shovel-ready infrastructure projects in Sydney: In the letter dated November 7 sent to Prime Minister Scott Morrison and Federal Treasurer Josh Frydenberg, the NSW leaders have asked the Commonwealth to bring forward crucial funding to assist the state in getting the
And why wouldn’t it? It was never more than a PR stunt, via The Australian: Federation reform could be the secret to improving productivity in Australia and avoiding blurred responsibility in fields such as health, the treasurer, Josh Frydenberg, has suggested. In a speech to be delivered at the University of Adelaide on Thursday, Frydenberg reveals
Despite undergoing a record $93 billion re build, and selling-off nearly every public asset possible, NSW Treasurer Dominic Perrottet admits the state faces a massive infrastructure shortfall of $30 billion, as unrelenting immigration overruns Sydney: NSW faces a massive infrastructure funding shortfall of about $30 billion needed to drive projects critical to building the state’s
In the 14 years to June 2018, Melbourne’s population ballooned by 1,320,000 or 36%, with an average of 94,000 people flooding into the city each and every year, driven mostly via immigration: And over the next 48 years, Melbourne’s population is projected by the ABS to more than double to 10.2 million people, growing at
Australian Housing and Urban Research Institute (AHURI) has released new research claiming that older empty-nesters are clinging to their larger family-friendly homes. The AHURI also recommends a wide range of tax reforms to encourage seniors to downsize: “They like to stay where they’re familiar,” said lead researcher Associate Professor Stephen Whelan from the University of
The Australian’s Adam Creighton has continued his war against the Aged Pension’s largesse towards wealthy retirees, labelling it “an economically costly inheritance preservation scheme”: Last week figures emerged showing about 255,000 pensioners lived in homes worth more than $1m, costing taxpayers an estimated $6.3bn a year — enough to reduce the top marginal tax rate
If this is his reassurance tour then he should go back to Canberra, from L-plated Treasurer Josh Recessionberg today: “In today’s global environment characterised by changing demographics, elevated debt levels, environmental pressures, and great power tensions, it’s critical that we pursue reforms at home that retain our competitiveness, openness, and fiscal discipline, and that globally
A new report by the Australia Institute estimates that through its sovereign wealth fund’s two-thirds ownership of Equinor, the Norwegian Government stands to make $8.1 billion from oil and gas exploration in the Great Australian Bight, which is greater than Australian taxpayers would make: Norwegian oil company Equinor is planning exploratory drilling for oil and
Tasmanian Liberal Premier, Will Hodgman, has joined the chorus of commentators calling on the Morrison Government to lift Australia’s deplorably low Newstart Allowance: “It would be a good thing to see those on low incomes and those who do depend on social security benefits to have an increase to reduce that pressure in their lives,”
The best laid plans of mice and property locusts, via the AFR: Big banks are seeking the flexibility to charge higher interest rates under the Morrison government’s scheme to help first home buyers because of the increased risk of lending to first-time borrowers with as little as 5 per cent deposit. The big banks also
Apparently Australia’s L-plated Treasurer, Josh Recessionberg, is about to try to convince the nation that it’s all good with the economy: Labor will accuse the Morrison government of putting the nation at risk from a “cancer of complacency” ahead of a series of addresses by Treasurer Josh Frydenberg to reassure consumers over the state of
Finance Minister Mathias Cormann said yesterday that the federal government would consider bringing forward income tax cuts in an effort to stimulate the economy. Westpac and the Commonwealth Bank have both called on the government recently to ‘fast track’ tax cuts in an effort to boost consumer spending. Cormann says the government’s inclination is to
With NSW’s stamp duty receipts sinking like a lead balloon: NSW Treasurer, Dominic Perrottet, has called for tax reform, including the elimination of inefficient state taxes like stamp duties, to spur growth: Given that the NSW government is already building almost as much infrastructure as the market can handle, slashing taxes for business and homebuyers,
The CEO of Medibank Private, Craig Drummond, has warned that Australia’s private health insurance system faces an “existential crisis” as cost pressures drive healthier, younger members out of the system: “The hardest problem is solving this inevitable and inexorable increase in cost in the system,” Drummond says. “So how do we bridge that gap between
The Australian Taxation Office (ATO) estimates that some property owners have undeclared income of more than $70,000 a year in earnings from short-term rental platforms like Airbnb. This has contributed to an income tax shortfall of around $9 billion. The ATO has used data-matching technology to compare income from tax returns with financial records provided
Back in 2016, Prime Minister Malcolm Turnbull proposed allowing the states to levy their own income taxes so that they can pay for their own services, such as hospitals and education. However, the proposal was viewed with skepticism by the states, as noted by Fairfax’s Mark Kenny at the time: While outwardly wanting to appear
Via FTAlphaville: The skill of the good economist, like the good writer, lies not just in what they include in their work, but what they choose to leave out. The real world is hideously complex. So too are people. If economists are going to tell us anything about either, then they must resort to abstraction.
It was dubbed the “biggest public policy scandal in Australian history: the systematic rorting of the vocational education and training system (VET)”. It was the reckless policy first introduced by the Howard Government and then expanded by the Gillard Government, which gave private VET providers virtually unregulated access to government subsidies for every student they
L-plate treasurer, Josh Recessionberg, has done the near impossible and crashed the miracle economy. When he assumed the role of Treasuerer, Recessionberg made a critical misjudgement that if he follwed the Costello recipe of running surpluses, cutting taxes and stuffing in migrants then he’d force the RBA to ease, and rising house prices would boost
After last week reporting that some wealthy seniors are deliberately ‘upsizing’ to more expensive homes in order to receive bigger Aged Pension payments, The Australian’s Adam Creighton reports today that elderly Australians living in $1m-plus homes are claiming $6.3 billion in pension payments: Retirees living in $1m-plus homes are receiving more than $6.3bn a year