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.


Deloitte: Chinese trade war fixes budget

Via Deloitte: Deloitte Access Economics: Budget outlook brightens 14 December 2020: On budget night just over two months ago there was a risk that the government hadn’t done enough. Treasury was forecasting an Australian economy that would permanently be around 5% smaller than its pre-COVID forecasts, and yet policy was shifting away from income supports


2020-21 MYEFO Preview: Revenue up and expenditure down

By Gareth Aird, head of Australian economics at CBA: Key Points: The 2020/21 Mid-Year Economic and Fiscal Outlook (MYEFO) is scheduled fornext week(date to be confirmed). The MYEFOshould show an improved Budget bottom line. Our point estimate for the revised underlying cash deficit in 2020/21 is $A204bn (10.2% of GDP) Overview The landmark 2020/21 Budget


Senate inquiry recommends permanent lift in JobSeeker

A Labor-controlled Senate inquiry on COVID-19 has recommended permanently raising the rate of JobSeeker (sub titles added for clarity): Interim Finding; The rate of JobSeeker is inadequate at $40 per day. The committee is concerned that the Australian Government is withdrawing fiscal support too early in the recovery phase by reducing the Coronavirus Supplement at


Stimulus payments drive massive household income boom

Last month, CBA released analysis derived from internal data showing that average household disposable incomes have grown strongly despite weak wage and salary growth, courtesy of enormous emergency income support and early superannuation release: Annual growth in wages and salaries paid into CBA bank accounts has accelerated over the past month (latest w/e 20 November).


CBA: Public sector infrastructure spending to boom

Yesterday I turned bullish on the Australian economy following detailed analysis of the Q3 national accounts, declaring that the economy is “poised for a V-shaped recovery”. New research from CBA senior economist Kristina Clifton has cemented this view, calculating that public capex from all state and federal budgets will be up 37% this fiscal year


Why Aussie companies are loving coronavirus

Last week’s national accounts revealed why it has been a wonderful recession for Australia’s companies. While aggregate employee compensation rose by a mere 1.5% in the year to September 2020, company profits boomed by 14.4%: In fact, over the four years from September 2016, aggregate employee compensation rose by only 16% versus a whopping 58%


How Gerard Minack learned to stop worrying and love the debt bomb

After my piece yesterday, Gerard kindly sent through this analysis for readers: Unprecedented peace-time budget deficits are pushing public sector debt to post-war record levels. Welcome to the newest normal. With fiscal taking over cycle management deficits are here to stay. This won’t worry me. Yields should remain low in a world of excess private


Breaking: Depressionberg looks in mirror, sees Brad Pitt

Via AFR: The JobKeeper wage subsidy is being paid to 700,000 fewer people than forecast in the October 6 budget, which the federal government says shows the economy is recovering faster than anticipated. The latest Australian Tax Office data released by Treasurer Josh Frydenberg shows the number of JobKeeper recipients fell from 3.6 million employees


More reasons the OECD should spike Mathias Cormann

Matthias Coramnn’s job application to run the OECD is not going well. I’ve noted many reasons why it is so inappropriate: Mathias is the Morrison Government’s most radical supply-sider. He actually believes in trickle-down economics, which leaves the room short of oxygen given Cormann is obviously intelligent. Mathias has a record of deep climate skepticism


Suburban Rail Loop “worst transport project Melbourne has ever seen”

Like me, Inside Story’s Tim Colebatch is an overall fan of the Andrews Government’s Victorian State Budget, which provides massive stimulus at exactly the right time: The main game of the Andrews government’s 2020–21 budget is to deliver stimulus, and it does so in spades. It plans to spend almost $110 billion this year providing


Retirement review takes aim at pensioner houses

The Treasury’s 600-page Retirement Income Review took direct aim at pensioners’ houses, questioning why housing was excluded from the assets test to qualify for the aged pension: The Pension Loans Scheme is an effective option for accessing equity in the home for both age pensioners and self-funded retirees. The current exemption of the principal residence


Victorian Government takes right path on stimulus

The Victorian Government yesterday released its 2020-21 State Budget, which will see the Government embark on a massive stimulus program in a bid to support 200,000 jobs within 18 months and 400,000 by 2025. Below are key extracts from Treasurer Tim Pallas’ speech combined with key figures from the Budget Papers: With Victoria’s gross state


Another reason the OECD should bone Mathias Cormann

I’ve noted plenty already: Mathias is the Morrison Government’s most radical supply-side nutter. He is not corrupt which might make this position forgivable. He actually believes in trickle-down economics, which leaves the room short of oxygen given Cormann is obviously intelligent. Mathias has a record of deep climate skepticism having voted in favour of climate


RBA: JobKeeper hid 700,000 from unemployment queue

The RBA has released new analysis on the JobKeeper scheme’s impact on unemployment, which found that JobKeeper reduced Australian’s unemployment by 700,000 over the first four months of the COVID-19 pandemic: We find that one in five employees who received JobKeeper (and, thus, remained employed) would not have remained employed during this period had it


Retired Australians are creaming it

The next time you hear a seniors’ group demand an increase in the aged pension and other subsidies, consider the latest Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) report, which was released last week. This report showed that Australians aged 65-plus enjoyed by far the biggest increase in wealth between 2002 and


Dan Andrews right to ditch airport rail tunnel

Two years ago, the AirRail Melbourne consortium – which includes the owner of Southern Cross Station and part owner of Melbourne Airport, IFM Investors – offered to contribute $5 billion (on top of the state and federal government’s $10 billion) to own and operate the Airport Rail Link tunnel, with the service slated to “deliver a


Depressionberg forced to prop up failing Unstimulus

The Depressionberg Unstimulus has already triggered an employment catastrophe in the largest segment of the economy, small and medium enterprise: Things have been going better for the big end of town because it is enjoying major advantages over smaller competitors in its dominant online position, access to capital markets and more capital intensive growth models.


Mirvac tells states to wean off stamp duty

NSW Treasurer Dominic Perrottet’s plan to phase out stamp duty on property transactions and replace it with a land tax has won broad support, including from Mirvac CEO Susan Lloyd-Hurwitz. Lloyd-Hurwitz says stamp duty is a “very poor tax” that lessens mobility and keeps people in the wrong type of housing “for too long”. Lloyd-Hurwitz


Aussie companies privatise profits, socialise losses

The Australian taxpayer is businesses’ best friend. We have already witnessed company profits soar during the pandemic courtesy of JobKeeper, while workers’ wages and salaries tanked: Senior executives of Australia’s largest companies also secured massive bonuses after claiming JobKeeper subsidies: The Morrison Government’s JobMaker program will keep the largesse flowing by subsidising the wages of businesses


Don’t sell NBN to Telstra

Telstra has embarked on a major restructuring as it gears up to purchase the National Broadband Network (NBN) from the Australian Government: The restructure involves creating three separate legal entities under a Telstra Group umbrella, which Mr Penn and Telstra chief financial officer Vicki Brady said could theoretically be spun off as separately listed companies,