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.

10

Immigration ponzi sends NSW Government broke

The Committee for Sydney has called on the NSW Government to provide more transport networks. Committee CEO, Gabriel Metcalf, believes Sydney has grown to the point that it needs a mass transport system like London’s, but that the Government does not have the money required to fund more infrastructure projects. It suggests the Government should

10

NBN farce extends and pretends

A week after it was revealed that Australians pay the highest broadband costs in the OECD and ranks 67 out of a wider list of 83 countries: Embattled NBNco has admitted that it is running way behind schedule in connecting homes to the NBN network: Half a million homes will have to wait longer to connect

18

NBN fail: Aussies pay highest broadband costs

Research from the Australian Parliamentary Library reveals that Australia has the least affordable entry-level access to broadband among developed OECD economies, and ranks 67 out of a wider list of 83 countries: NBN researcher and University of Sydney infrastructure lecturer, Tooran Alizadeh, has described the result as “disappointing, devastating, but not surprising” that Australian are

44

NDIS rorted and defrauded

Over many years, we’ve warned that the enormous pot of money on offer under the $22 billion National Disability Insurance Scheme (NDIS) would spawn a whole range of middle-men and providers seeking to cash in, leading to significant waste, or worse fraud. We’ve seen this before with the rorting of the private Vocational Education and

1

Pretend infrastructure boom booms!

Australia’s pretend infrastructure boom to the moon!  At the AFR: “It looks like the boom is going to be a bit more protracted than we previously thought,” said Nigel Hatcher, director at Macromonitor, which specialises in economic forecasts for the construction industry. Transport construction activity around Australia is expected to hit a record $42 billion

13

Drowning Recessionberg grabs Labor policy life saver

Basically everybody can see that Josh Recessionberg is an idiot. The AFR can: Corporate Australia doesn’t need advice on capital allocation from the Treasurer. Josh Frydenberg has no skin in the game of capital allocation, unlike board directors who need to explain to their shareholders once a year – rather than every three years for a politician

8

ATO slugs Shell with $755m tax avoidance bill

Earlier this year, it was revealed that the Australian Taxation Office (ATO) had collected an extra $7.7 billion in unpaid tax liabilities since July 2016 via its tax avoidance taskforce, with 44 multinationals changing their business models in order to meet their Australian tax liabilities. Today, The Guardian reports that the ATO’s multinational tax avoidance

13

Recessionberg: I am an idiot

From Josh Recessionberg at The Australian: Josh Frydenberg will issue a rallying call to company bosses to ­invest more in new technologies — rather than returning excess cash to shareholders — in a bid to kickstart flagging productivity and boost wages by $3000 a year. In a wide-ranging address to the Business Council of Australia,

14

Actuaries Institute declares war on young

The Actuaries Institute has published a discussion paper examining a range of options for overhauling Australia’s retirement income system, which includes as its central recommendation including the family home in the pension assets test, but conveniently not for the baby boomer generation. From The Australian: Actuarial expert David Knox, former regulator Anthony Asher and public

23

Australia should consider an inheritance tax

The Grattan Institute’s Owain Emslie and Danielle Wood have done a great job examining inheritances in Australia, which flow overwhelmingly to older Australians and the wealthy, thus helping to cement wealth along class lines: A sample of estates from Victoria’s probate office suggests the median estate in Victoria is worth about $500,000. That’s likely to

51

“Generational bargain is at breaking point”

More from Kate Griffiths and Danielle Wood at the Grattan Institute. Via the ABC: Each generation of Australians has enjoyed a better standard of living than the one that came before it. But today’s young Australians are in danger of falling behind. A new Grattan Institute report, Generation gap: ensuring a fair go for younger Australians, reveals

43

Grattan: War on youth intensifying

Via Grattan: Today’s young Australians are in danger of being the first generation in memory to have lower living standards than their parents’ generation. Older Australians today spend more and have higher incomes and greater wealth than older Australians three decades ago. But living standards have improved far less for younger Australians. The wealth of households

15

Now for some fake “trust in government” reform

The ScoMo Government is a masterful fake. It is currently pretending to cut immigration, pretending to reform banking, pretending to build infrastructure, pretending to be a good economic manager, pretending to care about weak wages, pretending to care about energy prices, pretending to care about anything and everything other than rising house prices. This we

10

Recessionberg demands QE

No QE says monetary curmudgeon Stephen Grenville: QE1 was a powerful instrument in rescuing key financial markets which had frozen, but this experience has no relevance for Australia in the foreseeable future. When the current monetary system was put in place in Australia in the 1980s, ‘free markets’ were the lodestone of policy. The RBA

8

Left and right unite in calls for an investment allowance

Earlier this week, the Business Council of Australia (BCA) called on the federal government to introduce an broad-based investment allowance to help stimulate the economy. Now, the BCA has received support from the Australia Institute. Ben Oquist, the executive director of the progressive think tank, says an investment allowance is preferable to a general cut

7

Gladys launches high speed ponzi rail vision

Late last year, NSW Premier Gladys Berejiklian proposed four routes for high speed rail (HSR) into Sydney: A high speed rail project Premier Gladys Berejiklian has committed to start work on if she wins the state election could cost $100 billion… “A reasonable figure would be $100 billion in Australian dollars to build it,” [Committee

25

Private health insurance patients charged double the costs

MB has frequently questioned the efficacy of Australia’s private health insurance system and whether it should receive taxpayer subsidies. Today, The ABC has published a report on the patient cost of cancer, which reveals that those holding private health insurance cover are charged double the fee of those without: A surprising finding was that those

17

ScoMo’s visa system privatisation will Swiss cheese borders

Michael West has done a terrific job today exposing the vested interests behind the Morrison Government’s privatisation of Australia’s visa system: Despite the myriad failures of privatisation, not least the disastrous sale of the nation’s energy networks which has delivered dazzling profits to foreign multinationals at the expense of every citizen in this country, the

3

Why the public sector wage push is misguided

Last month we witnessed Labor’s shadow financial services minister, Stephen Jones, demanding the federal government stimulate the economy and wage growth by lifting public sector salaries: Mr Jones said Australians needed a pay rise and the government should “lead by example” by boosting the wages of federal workers. “The government has got a role to

10

Australia’s federation is failing

The Australian’s Judith Sloan has taken direct aim at Australia’s federation, arguing that states and territories have become increasingly reliant on the federal government for funds, while the federal government in turn is getting involved in areas that have been traditionally been the domain of the states and territories. Researchers have suggested that Australia’s GDP

8

Retail declares Recessionberg tax cut stimulus a dud

Hoocoodanode? Via Domain: A broadly anticipated ‘sugar hit’ has failed to combat bitter trading conditions for Australian retailers, which could spell bad news ahead of full-year results later this month. But for cult-favourite ice-cream seller Messina, the only sugar hits in sight are the ones it’s serving up to customers. “It’s made no difference to

7

Transurban’s “meta-monopoly” turns taxpayers into roadkill

While residents of Sydney and Melbourne are suffering from crush-loaded roads, trains, schools, and hospitals, as well as smaller and more expensive housing, toll road company Transurban is making out like a bandit. Earlier this year, ABC News reported that Sydney’s toll road network is the most expensive and extensive in the world : …transport