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.
Analysis of tonight’s federal budget reveals the Morrison Government is targeting marginal seats over key infrastructure priorities. According to The Guardian, only 21 of 144 projects announced so far in the budget have been endorsed as priorities by Infrastructure Australia (IA): Of $16 billion in funding, around $10 billion has been committed for projects not
For years MB lamented how Australia’s public service has been stripped raw by decades of government outsourcing, waves of senior redundancies, and a preference for governments to seek advice from paid consultants. The end result is that the “frank and fearless advice” that the public service was once renowned for has vanished, replaced by spin
The AFR reports that baby boomers were the economy’s biggest winner last year, with “with average super balances and investment accounts posted record gains of more than $240,000”: “Sure, the pandemic was awful, but financially it was brilliant for Boomers with a good job, a house, some super and maybe some investments,” says Alex Dunnin,
The federal government is being urged to extend its $2.7 billion Boosting Apprenticeship Commencements program, which will be closed to new entrants next week. The program sees employers receive a 50% wage subsidy of up to $7,000 a quarter for first-year apprentices, with the scheme achieving its goal of 100,000 new apprentices less than five
National Seniors Australia (NSA) chief Ian Henschke believes Australia’s inflexible aged pension means testing discourages older Australians from working, thus contributing to labour shortages. Henschke is calling for pensioners to be allowed to take on paid work without losing their pension entitlements: Currently, Australians receiving the pension can only work a minimal amount before their
Robert Carling – a Senior fellow at the Centre for Independent Studies – has called on the Morrison Government to “end the fiscal repair charade by announcing automatic annual indexation of marginal income tax thresholds” in next week’s federal budget: The faster nominal incomes grow, the more potently bracket creep lifts average tax rates… After
Let’s recall the glory days of LNP economic mismanagement of 2019 when Treasurer Josh Frydenberg was busy driving the economy into the ground for the purposes of budget repair. Growth was weak and unemployment rising amid a flood of indentured slavery migrants. The RBA and every other serious economist in the country was demanding more
Prime Minister Scott Morrison has strongly hinted that the Coalition will cut fuel excise in next week’s federal budget: Mr Morrison dropped an unmistakeable hint on Monday that the government would proceed with a cut or delayed rise to petrol duties, currently set at 42 cents a litre. The Prime Minister said the government was
By Gareth Aird, head of Australian economics at CBA Key Points: The 2022/23 Australian Budget is scheduled for release at 7.30pm (AEST) 29 March 2022. The Budget bottom line on an unchanged policy basis is significantly improved because of the much better performing economy and materially higher commodity prices. But a pre-election Budget means more
The Grattan Institute has released a new report, entitled “Roundabouts, overpasses, and carparks: Hauling the federal government back to its proper role in transport projects”, which claims the Coalition made 71 transport promises worth $100 million or more at the last federal election, but that only one was based on a business case from Infrastructure
Alan Kohler has rubbished calls to reduce the fuel excise in response to rising petrol prices, claiming it would be equivalent to cutting carbon taxes: Petrol excise is Australia’s de facto carbon tax… It’s already one of the lowest gasoline taxes in the world… Australians still enjoy fairly low petrol prices – in most European
Economists have urged the federal government to ensure that any Budget measures aimed at easing cost-of-living pressures are directed to people who are the most vulnerable. Angela Jackson from Impact Economics & Policy and University of New South Wales economics professor Richard Holden warn that Budget relief could result in higher inflation unless it is
Tax experts have renewed calls to abolish the Luxury Car Tax, which was introduced in 2000 by the Howard Government to protect the local car assembly industry: In a submission ahead of the May 2022-23 Federal Budget announcement, professional accounting body – Certified Practising Accountants (CPA) Australia – said Luxury Car Tax was a complex
Modelling by the CSIRO indicates that the $14.5 billion inland rail link between Melbourne and Brisbane will be able to carry 22 million tonnes of freight a year and deliver savings of $213 million annually. This modelling was conducted before the recent petrol price spike. The CSIRO also estimates the rail link has the potential
Australian Automobile Association (AAA) MD Michael Bradley says the federal government should resist growing pressure to reduce the fuel excise tax. He argues that although such a move would provide motorists with temporary relief from rising petrol prices, it would result in less funding to repair and upgrade Australia’s roads: “We need to be investing
The federal government is under growing pressure from state Liberal premiers to temporarily reduce the fuel excise in response to rising petrol prices. South Australian Premier Steven Marshall is amongst the leaders who have urged the federal government to reduce the $0.442 per litre excise tax, amid concern that cost-of-living issues could affect the outcome
Two years ago, Inside Story’s Tim Colebatch labelled Dan Andrews’ Suburban Rail Loop – a 90 kilometre orbital rail system that would run underground between Cheltenham and Werribee at a cost of up to $120 billion – “the worst transport project Melbourne has ever seen”: The government’s commitment to build the worst transport project Melbourne
Morgan Stanley economist Chris Read estimates that the rising price of petrol will increase Australians’ fuel costs by $12 billion in 2022, or about $1,100 per households. This has led independent senator, Rex Patrick, to call on the Morrison Government to cut fuel excise in order to soften the blow on households. However, Treasurer Josh
S&P Global has released new forecasts on Australian state government debt, which shows massive increases across Victoria and to a lesser extent NSW and Queensland in response to the coronavirus pandemic and infrastructure investment: According to S&P, the combined debt of the state and territory governments will blow out to more than $500 billion in
Last week, former Treasurer Peter Costello urged the federal government to slash spending in order to bring the federal budget back into balance. Now Costello has hit out at the Reserve Bank of Australia (RBA) for being too slow to raise interest rates, urging it to “get with the curve, rather than behind it”: Mr
Former treasurer Peter Costello contends that tax reform should not be a priority for the federal government. He says it is important to get government spending under control and begin the process of Budget repair as the nation emerges from the COVID-19 pandemic. Costello notes that government expenditure was not really reined in following the
Dr Cassandra Goldie, the CEO of ACOSS, has called on the federal government to end poverty once and for all by lifting JobSeeker. Dr Goldie notes that poverty was all but eliminated during the beginning of the pandemic, but was then reinstated when JobSeeker was cut back to just $45 a day: Between March and
In 2001, just prior to the 2001 Federal Election, the Howard Government made the short-sighted decision to freeze Australia’s fuel excise at 38.14 cents a litre, abandoning the twice yearly CPI increase that had long been a feature of Australia’s excise system. Facing an assault over the rising cost of living, John Howard’s decision was
You know an election is coming when the opposition promises to crack down on multinational tax avoidance. That’s exactly what Labor’s shadow assistant treasurer, Andrew Leigh, has done: Tax havens are dodgy, and they’re being used to dodge all kinds of obligations. From drug kingpins to terrorists, kidnappers to fraudsters, tax havens are a favourite
In 2007, former Labor adviser turned Co-Director of the e61 Institute for Economic Research, Andrew Charlton, published a book entitled Ozonomics: Inside the myth of Australia’s economic superheroes: This book went to great lengths to discredit the view that the Howard-Costello Government was a sound economic and fiscal manager: Charlton also penned a detailed report
