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.
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So says The New Daily: The Coalition says the economic recovery from COVID-19 is already underway and strong enough to withstand cuts to income support. But the latest data suggests the gamble might not pay off. “What we’re seeing in the figures is primarily JobKeeper-related. It’s people who were considered employed under JobKeeper but now
The Guardian’s Greg Jericho has produced some nice charts showing the V-shaped recovery that has taken place for part-time workers (outside of Victoria), while full-time jobs have failed to launch: Hours worked per capita is one of the best ways to measure the health of the labour force. It also is good for measuring just
Via The Fake Left: Australia’s largest companies would be unable to claim their share of $4bn to hire young workers under Greens amendments to significantly tighten eligibility for the jobmaker hiring credit. The Greens will seek to exclude companies that have recently declared a dividend or have underpaid workers through Senate amendments to the government bill
Last month, a report from the Australian National Audit Office (ANAO) slammed the Department of Infrastructure for purchasing the land from a billionaire family at 10 times its market value in what it calls a “significant and unusual transaction” related to the Western Sydney Airport. Now, Auditor-General Grant Hehir has told a Senate hearing that
The latest Australian Homelessness Monitor, conducted by the University of New South Wales and the Centre for Social Impact, shows that the national homelessness rate is set to surge as short-term coronavirus and housing protections phase down: The most immediate concern now is an imminent surge in homelessness. This is likely in coming months as
As they should. At The Fake Left: The Labor frontbencher Andrew Leigh has written to more than 200 big companies, including Apple, McDonald’s and Microsoft, asking them to reveal whether they have received jobkeeper subsidies and used the money to pay shareholder dividends or executive bonuses. His move comes amid investor disquiet over what has
Last week I offered a few suggestions to Australia’s league of failing economists in the hope that some might escape the mediocrity of debate that is holding the nation back. Paramount was that they should avoid the Australian Financial Review because, frankly, it has no idea what it is talking about when it comes to
Ross Gittins getting clocked on to the MB take with some good detail: So you see how much the budget’s fiscal stimulus measures have been affected by the government’s “core values”. No less than $38 billion goes as tax breaks to business, three-quarters of the $20 billion in transfers to individuals comes as tax cuts,
Australian Competition & Consumer Commission (ACCC) chairman Rod Sims says it is probably inevitable that the federal government will privatise the national broadband network (NBN). However, Sims says he does not think it will happen for some years. The government has invested $50 billion in the NBN, but Sims says that money does not need
The Victorian government’s 2019-20 financial report has been released, which reveals that the state’s net debt has blown out to $44.3 billion, compared with $25.5 billion previously. Victoria is also set to post a Budget deficit of $6.5 billion for 2019-20, following a surplus of $1.2 billion in the previous financial year. State revenue fell
I wanted to talk about the Australian budget. I’m not seeing what the admirers are seeing. At first, I was worried that I’d missed something. But yesterday’s dovish speech by Governor Lowe suggests the Reserve Bank are seeing exactly the same thing I am. Four months ago, I wrote what good government stimulus would look like. This budget
The RBA has finally made it to where it should have been ten years ago: Turning to the broader policy question, we have been considering what more we can do to support jobs, incomes and businesses in Australia to help build that important road to the recovery. The options have been laid out in previous
There is growing concern that the federal government’s JobMaker wage subsidy for younger Australian workers will push older Australians onto the unemployment queue: Professor Baird says the hiring credit provides an incentive for employers to “cherrypick people of a certain age” and will encourage employment of younger job seekers over older job seekers — a
WTF is this world that we are living in! Via the AFR: Treasurer Josh Frydenberg has strongly resisted suggestions to embrace so-called modern monetary theory (MMT), whereby governments force central banks to print money to fund fiscal expenditure. …”I never thought as a Liberal Treasurer that I would be here with the highest deficit and
Should I have ever doubted that propaganda works just fine: The Westpac-Melbourne Institute Index of Consumer Sentiment surged by 11.9% to 105.0 in October from 93.8 in September. This is an extraordinary result. The Index has now lifted by 32% over the last two months to the highest level since July 2018. The Index is
Australia Post has been embroiled in more controversy, with Fairfax reporting extreme largesse from its CEO at the same time as it wound back deliveries: Australia Post boss Christine Holgate hired a $3000-a-day “reputation management” firm while the organisation sought to justify winding back mail delivery services and win political influence during the coronavirus pandemic.
The Grattan Institute has given a ‘tick of approval’ to Labor’s $6.2 billion childcare policy, which proposes to increase the maximum Child Care Subsidy from 85% to 90%, slow down the rate at which the subsidy tapers off, and remove the annual cap: It’s economic reform, not welfare As veteran commentator John Durie points out: “When a
Not directly but implicitly. From the IMF: Governments around the world are taking extraordinary measures to respond to the COVID-19 crisis. While maintaining the focus on addressing the health emergency and providing lifelines for households and businesses, governments need to prepare economies for the transition to the post-COVID-19 world—including by helping people get back to
Labor, crossbenchers and the Greens are reportedly threatening to block the Morrison Government’s JobMaker program unless it is extended to all age groups: Scott Morrison’s $4bn wage subsidy scheme for new employees aged up to 35 could be derailed in the Senate by Labor, crossbenchers and the Greens, with the government staring down pressure to
This morning I was interviewed by Luke Grant from Radio 2GB to discuss Friday’s article “Don’t fret over the national debt”. In the interview I discuss the missing ingredients in last week’s federal budget and why concerns over Australia’s ballooning national debt are unfounded.
It’s ineptitude on a grand scale. First, put forth a policy that defies all basic economic logic, from Domain: Small business is cautious about hiring more people during the pandemic despite incentives in the federal budget aimed at a business-led recovery from the recession. …Peter Strong, head of small business advocates COSBOA, says the $4
At Murdoch’s Coalition Propaganda HQ the budget is a cash splash with no equal: Millions of workers will have a pay cheque boost within weeks after the federal budget was rushed into law — including tax cuts projected to inject $7bn into the economy by mid-2021. Scott Morrison’s economic recovery plan, which passed both houses
Housing bodies have slammed the federal budget for failing to invest directly in public housing: More than 80,000 people are on Victoria’s waitlist, according to Homelessness Australia, requiring 6000 properties to be built per year for a decade just to catch up with the other states and territories. Chair Jenny Smith said the Morrison Government
From Sky News: Prime Minister Scott Morrison has announced the bringing forward of personal income tax cuts outlined in the budget was successfully passed today in the Senate. Mr Morrison announced under the bill, businesses would receive tax changes, allowing them “to invest in their future, creating jobs right across the country to ensure that
More than three-quarters of employees at the taxpayer-funded National Broadband Network are earning exorbitant six-figure salaries – including at least 850 paid more than $200,000 per year. Fairfax has uncovered data revealing 110 NBN workers were being paid between $300,000 and $400,000 – with another 34 receiving even higher base salaries. It’s also been revealed
The usual suspects are fretting over the Australian Government’s ballooning debt, claiming we will leave a nasty legacy for future generations: “On very optimistic projections, we don’t think Australia will be debt-free until the early 2080s,” said Cian Hussey, research fellow at conservative think tank the Institute of Public Affairs. The Federal Government has committed
At the AFR there is one sane man still standing. Paul Brennan is an independent economist and has worked at Citigroup Global Markets as well as the RBA, federal Treasury and the OECD: The instant asset write-off on all depreciable assets, costing $27 billion over the forward estimates, is central to driving business investment and
I wouldn’t recommend listening to John Adams whine about the budget et al if you value your time. Most of it is garbage: the virus is harmless (except it’s only harmless because we addressed it); the budget has ruined Australia through unrecoverable public debt (except the RBA can buy all of it no worries at
Here is the problem for Depressionberg Unstimulus in black and white from a hilarious buzzing swarm of property locusts, at the AFR: David Harrison, head of one of the country’s biggest property fund managers, Charter Hall [said] “They are showing leadership. They are borrowing money. They are subsidising the economy that needs to be subsidised,”
There’s a press rumour that an empty chair has been seen mulling the budget, at The Australian: Anthony Albanese will use his first budget reply speech to roll out major economic and social policies, including productivity reforms aimed at repairing skills shortages, and to deliver a pre-election pitch to women, young families, blue-collar workers and
