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.
By Leith van Onselen Last month, the Australia Institute (TAI) released analysis of the Morrison Government’s tax cut package, which reveals that they will make Australia’s tax system far less progressive with benefits flowing overwhelmingly to higher income earners: The centrepiece of this budget is large income tax cut that builds on the large income
By Leith van Onselen Over the weekend, Labor leader Bill Shorten pledged $500 million to fix waiting times at hospital emergency departments: Mr Shorten will declare that Australian doctors and nurses “deserve the best resources in the world” and must receive more commonwealth funding. “This is what people pay their taxes to Canberra for. I
By Leith van Onselen Labor has refused to rule-out scrapping the $6 billion private health insurance rebate, waiting instead for a Productivity Commission review into the sector to be finalised. From The Canberra Times: Speaking during a televised debate with federal Health Minister Greg Hunt, Ms King said: “I’m not going to rule in or
By Leith van Onselen NSW Treasurer Dominic Perrottet says the state’s Budget is expected to impacted by a $2.3 billion fall in revenue over the four years to 2021-22, primarily resulting from reduced GST receipts forecast in the April Federal Budget. Premier Gladys Berejiklian had promised $4.3 billion worth of surpluses over four years during
By Leith van Onselen A year ago, Four Corners aired a joint investigation with Fairfax on the Australian Tax Office’s (ATO) alleged bullying of small businesses. The segment featured explosive allegations by former employee turned whistle blower, Richard Boyle, and others who claimed the ATO is driven by revenue collection. Following the report, both the
By Leith van Onselen Anglicare’s 10th annual snapshot of the rental market has highlighted the woeful inadequacy of Australia’s social housing, which is failing dismally to keep pace with demand. From The Guardian: “This is a wake-up call,” the report said. “What this snapshot shows is that finding an affordable home in the private rental market
By Leith van Onselen Early last year, a former Department of Defence and Business Council of Australia boss labelled the federal government’s consultancy spend “stupendous” and claimed that much of the $130 billion in federal government external spending should have been carried out by permanent public servants. Then in August, the Joint Committee of Public
By Leith van Onselen In his Budget reply speech last year, Labor announced that those seeking tax advice from an accountant will not be able to claim more than $3,000 as a tax deduction on that advice. Accountants are pushing back hard against the policy, arguing that the cap will cause them to rush their work
By Leith van Onselen I had previously given in-principle support to building an inland rail freight line linking Melbourne and Brisbane: Rail is particularly well suited to two types of freight: Bulk Freight: rail is suited to the provision of high volume bulk freight services to export facilities because it generally requires well defined point-to-point
By Leith van Onselen A fortnight ago, Victoria’s Premier Daniel Andrews marched with the Change the Rules union rally demanding better pay for Australian workers: Premier Daniel Andrews says the objectives of Wednesday’s massive union rally in Melbourne’s CBD are more important than any disruption caused by the huge march. The Labor leader joined roughly
By Leith van Onselen The Australian Taxation Office (ATO) is taking aim at the army of negatively geared property investors, targeting seven commonly rorted deductions claimed by landlords. From The Australian: Over-claiming interest expenses… Classifying capital work as repair work… Holiday home rorts… Family ties… the most common sin here is where the owner places
Via the ABC: In 2009, the then Labor government promised a fast National Broadband Network (NBN) with optical fibre cables direct to most homes and businesses. Instead, we’ve ended up with a mix of technologies including optical fibre, copper wires, Hybrid Fibre Coaxial (HFC), fixed wireless and satellite. Every year the amount of internet data
Via The Australian: Senator Storer said if an incoming Labor government dragged the Senate back before June 30 to ram through part of its policy platform before the composition of the upper house changes following the election, he would attempt to push the government to ban Treasury costings of opposition parties. “Treasury and all other
Yesterday we heard from Grattan: …there have been a notable absence of savings measures in the past two budgets, other than the now almost obligatory measures to extract more efficiencies from the welfare budget. Budget consolidation has mainly been a revenue story. Revenues have increased by a full 2 per cent of GDP since 2013-14.
By Leith van Onselen In his Budget reply speech last year, Opposition Leader Bill Shorten announced plans to impose a cap on the amount that can be claimed for getting tax returns done by a tax agent. Shorten said Labor would apply a cap of $3,000, claiming that 48 wealthy individuals had paid an average
By Leith van Onselen After Labor last month doubled down on lifting Australia’s superannuation guarantee (compulsory superannuation) to 12%, the Grattan Institute has issued a firm rebuke in its pre-election Orange Book: [Grattan] urges the next government to abandon the current plan to increase compulsory superannuation payments from 9.5 per cent to 12 per cent,
By Leith van Onselen Migrant communities have stepped up their campaign to loosen Australia’s newly established ‘temporary’ elderly parental visas, which from this month will allow up to 15,000 elderly parents of migrants to live in Australia for a continuous period of three, five or 10 years. Several migrant communities have labelled these “absolutely unfair” because
By Leith van Onselen With the election campaign in full swing, Prime Minister Scott Morrison suddenly cares about traffic congestion across Melbourne: More than $150 million of ‘congestion busting’ road projects in Melbourne will be announced by the Coalition on Monday. The Morrison government says the $154 million investment will help ease gridlock across the
By Leith van Onselen The Australian Chamber of Commerce & Industry (ACCI) and the Council of Small Business of Australia (COSBA) has urged Labor to reconsider its proposed $17 billion reforms to the taxation of discretionary trusts, arguing that many small and family-owned businesses could be adversely affected by the policy. From The Australian: “Our
By Leith van Onselen Instead of arguing on policy merit, baby boomer mouthpiece Robert Gottliebsen has urged the Coalition to wage an almighty scare campaign against Labor’s tax policies in a bid to wrestle electoral victory from the jaws of defeat: A scare campaign would raise the prospect that all pensioners are in danger [from
By Leith van Onselen With the Budget projected to head back to surplus, and the Coalition pledging money for tax cuts and retirees, it still refuses to throw the unemployed a bone. Yesterday, social services minister, Paul Fletcher, again dismissed calls to raise Newstart, claiming the government’s current policy is “appropriate”. From The Guardian: Asked if
Via the AFR comes Scummo’s monstrous budget black hole: The Morrison government would need to cut spending by about $40 billion a year by 2030 to afford its big personal income tax cuts and deliver on its budget surplus forecasts, new analysis by the Grattan Institute shows. The Coalition has positioned its $387 billion in
By Leith van Onselen Greens Senator, Nick McKim, has labelled “horrific” the number of years taken for migrants to bring their elderly parents to Australia under Australia’s permanent migration program. From SBS News: Migrant advocates have voiced outrage and disbelief as it emerged wait times for some Australian family reunion visas are now up to
By Leith van Onselen The NSW Office of State Revenue has released stamp duty data to March, which reveals a massive $1.5 billion (21%) decline over the past year and a $1.9 billion (25%) decline since stamp duty receipts peaked in October 2017: The latest retracement in stamp duty receipts follows a sharp 19% decline
By Leith van Onselen Ross Gittins has done a good job today destroying the Australian Treasury’s perennially heroic Budget forecasts, which forever project an imminent ‘future boom’ for the Australian economy: …the longer Treasury dwells in the land of hope-springs-eternal, the more it gives its political masters the budget numbers they crave: ones showing the
By Leith van Onselen In 2000, former Treasurer, Peter Costello made the fateful decision to allow the conversion of franking credits into cash refunds for shareholders. This enabled tax-free (mostly wealthy) retirees to claim imputation credits even if they pay no tax. The Australia Institute explains: Some of the wealthiest people in Australia pay negative
By Leith van Onselen When it comes to cruelty against the unemployed, it’s hard to top Prime Minister Scott Morrison. When asked in September about raising Australia’s paltry Newstart Allowance, Morrison argued that the Budget couldn’t afford it: [Morrison] says while financial figures released this week show the economy at its strongest point in a
By Leith van Onselen The AFR’s shameless lobbying against Labor’s negative gearing policy hit another low over the weekend with another attack on the estimated savings from Labor’s policy: More evidence has emerged that Labor has seriously underestimated the extent of investment in newly-built housing and therefore overstated the revenue that might be raised by
By Leith van Onselen The 2019 Federal Budget included an obscure measure, entitled Destination Australia Program, promising to fund scholarships for both domestic and international students to study in regional Australia: $93.7 million from 2019-20 (and $23.7 million per year ongoing) to establish the Destination Australia Program to support domestic and international students to study
By Leith van Onselen Australian Council of Social Service CEO Cassandra Goldie has used the start of the federal election campaign to call for an increase in unemployment benefits. She says an above-average number of Newstart recipients live in seven of the 10 most marginal seats, and that an increase in the dole is a
