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.

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Labor’s elderly parent visas open $100b+ budget black hole

By Leith van Onselen Earlier this week, I provided a back-of-the-envelope estimate of the astronomical cost associated with Labor’s reckless uncapped plan to allow migrants to bring two elderly parents into Australia for a continuous period of up to ten years. In a nutshell, I argued that since there were already more than 7.3 million overseas-born

21

Labor’s elderly visas to skyrocket private health premiums

By Leith van Onselen Last year, Labor leader Bill Shorten gave a speech to the Press Club claiming Australia’s private health insurance industry is “treating Australians like mugs” and “gouging people on the basis of a con”. Shorten also pledged to cap health insurance premium increases at 2% per annum for the next few years.

96

Enemy demographers unite to condemn Labor’s elderly parent visas

By Leith van Onselen The Australian Population Research Institute’s Dr Bob Birrell and Melbourne University’s Professor Peter McDonald, who are typically at opposing ends of the immigration debate, have united to slam Labor’s reckless uncapped visa for parents of existing migrants. From The Australian: [Labor’s] policy has united in alarm two leading demographers normally at

14

Universities confess dangerous reliance on international students

Earlier this month, Ross Gittins derided Australia’s university system as “de-facto privatisation” gone wrong, whereby “governments of both persuasions had gone for years trying to get the universities off the budget books”, thereby giving universities “unrestricted power to charge overseas students”. As a result, vice chancellors have become “as money-obsessed as any company chief executive… slashing

5

High Speed ponzi rail turns farce

By Leith van Onselen For years MB has explained many times why it does not support the proposed $120 billion High Speed Rail (HSR) line linking the major eastern cities of Brisbane, Sydney, Canberra and Melbourne, due to: The exorbitant cost associated with building and operating the rail line; Lack of population density to support

70

2 million grey migrants to give Australia economic sclerosis

By Leith van Onselen Melbourne University demography professor, Peter McDonald, delivered another stark warning yesterday that Labor’s crazy policy to allow migrant Australians to bring their parents to Australia will lead to 2 million elderly migrants drowning the nation in blue rinse, straining public services and infrastructure, and rapidly age the population. From The Australian:

16

NSW Government: Labor’s elderly visas to “swamp hospitals”

By Leith van Onselen The New South Wales Treasury’s analysis indicates that the state would receive an additional 37,000 aged migrants under Labor’s family visa program, putting pressure on its hospitals. From The Australian: Hospitals in Australia’s biggest destination for migrants could be swamped as more than 37,000 aged parents arrive from overseas under Bill

2

It’s raining infrastructure pork

By Leith van Onselen The final weekend of the election campaign saw both major parties rain infrastructure promises down on the electorate. Yesterday, Bill Shorten announced that if elected, Labor would contribute $10 billion towards Dan Andrew’s $50 billion suburban rail loop: Here’s the announcement via The Canberra Times: The opposition will splash $10 billion

87

Labor’s elderly parent visas will bankrupt Australia’s welfare state

By Leith van Onselen In the wake of Dr Bob Birrell’s startling report on Labor’s proposed uncapped visa for parents of existing migrants, it is worth considering what the long-term costs could be to Australian taxpayers and whether Labor’s policy is affordable. Before considering these issues, below is Labor’s policy as per its website: The

16

Labor commits $1b for high speed rail white elephant

By Leith van Onselen For years, Labor’s infrastructure spokesman, Anthony Albanese, has pushed hard for a High Speed Rail (HSR) line linking the east coast capitals. Now he appears to be getting his wish, with Labor officially pledging $1b towards the project: Labor has promised to spend $1 billion buying land between Melbourne, Canberra, Sydney and

6

States demand compensation for Labor’s negative gearing reforms

By Leith van Onselen In an audacious move, Liberal State Governments have banded together to demand compensation from a future Labor Government from any loss in revenues arising from its negative gearing and capital gains tax (CGT) reform. From The Australian: The letter — signed by NSW Treasurer Dominic Perrottet, Tasmanian Treasurer Peter Gutwein and

109

Labor visa earthquake to trigger elderly migrant tsunami

Below is an edited extract of a new paper by Dr Bob Birrell from the Australian Population Research Institute. Summary An alarmist headline? Not really. This judgement follows from an analysis of Labor’s proposed temporary visa for parents of existing migrants, entitled, a ‘Fairer Long stay parent visa for Australia’s migrant and multicultural communities’. The

16

NBN proving a $50b white elephant

By Leith van Onselen A new study on the National Broadband Network (NBN) by the University of Sydney and Arizona State University has found that around half of all homes in Sydney, Melbourne and Brisbane have been connected to inferior NBN technology: The data suggests around half (40-60%) of homes in the three cities only

1

Victoria University: Cutting company tax would make Australians worse-off

By Leith van Onselen Victoria University’s Centre of Policy Studies (CoPS) has released a new report, entitled The Economic Impact and Efficiency of State and Federal Taxes in Australia, which analyses deadweight losses and macroeconomic consequences of state and federal taxes, and challenges traditional orthodoxy regarding company taxes: In total, we calculate excess burdens for

2

Labor vows to lift Newstart if elected

By Leith van Onselen On last night’s Q&A program, Labor leader Bill Shorten vowed that Labor would lift Newstart if elected, but said he would wait until a review is completed before deciding by how much. From The AFR: Responding to a question from an unemployed 61-year old woman who is struggling, Mr Shorten rejected

45

Greens hose $40bn at Australian migrant retirement village

By Leith van Onselen In an astonishing act of fiscal vandalism, the Australian Greens have pledged to make it faster and easier for migrants to reunite with their parents in Australia, vowing to clear the 97,000 strong backlog of migrant elderly parents seeking permanent residency in Australia.  From SBS News: The party wants to cap