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.

1

State tax reform must come from the commonwealth

Shadow treasurer, Jim Chalmers, has indicated that state tax reform will be on Labor’s agenda should it win the upcoming federal election: Chalmers says Labor’s focus will be on working with the states to see whether a consensus could be built around reforming inefficient state taxes such as stamp duty. Chalmers in effect says everything

4

Grattan’s shared equity scheme won’t solve affordability crisis

The Grattan Institute has proposed a shared equity scheme for low-income householders, which would be aimed at addressing what the think tank says is a “national crisis” in housing affordability. The $220 million scheme would see the National Housing Finance & Investment Corporation (NHFIC) take a 30% stake in a person’s house purchase, with the

24

Coalition’s stage 3 tax cuts are a giant inequality accelerator

New analysis of tax office data by the Australia Institute shows the extent by which high-income earners will benefit the most from the federal government’s legislated stage-three tax cuts, which are scheduled to take effect in 2024-25. In particular, people earning $200,000 or more will receive a tax cut of $174 per week, compared with

13

Dan’s Westgate Tunnel: 3 years late, $4.5b over budget

In 2017, Daniel Andrews’ Victorian Government agreed to an unsolicited bid from toll giant Transurban to build the West Gate Tunnel Project – a four kilometre toll road currently under construction in Melbourne to link the West Gate Freeway at Yarraville with the Port of Melbourne and CityLink at Docklands. Under the project’s terms, Trans­urban

16

Sydney’s scandalous toll roads become key election battleground

Recall that Sydney’s toll road network is the most expensive and extensive in the world, comprising: M2 new M4 WestConnex M5 M7 M4 Eastern Distributor Cross-City Tunnel Lane Cove Tunnel Sydney Harbour Bridge Sydney Harbour Tunnel M4 tunnels M5 (from Beverly Hills to St Peters) M5 East (Beverly Hills to General Holmes Drive) M4-M5 link

23

It’s time to abandon tax cuts

The federal government has indicated that it will junk its ‘temporary’ $1080-a-year tax offset for low and middle-income earners as it seeks to counter act rising inflationary pressures across the economy: There are increasing concerns within the government, which faces budget deficits for the rest of the decade and gross debt surpassing $1 trillion by

3

Moody’s: State stamp duties vulnerable to property correction

Moody’s Investor Services has warned that state budgets will inevitably come under pressure when the nation’s property market inevitably corrects: Stamp duty revenue across 2022 is forecast to be significantly above the average over recent years before moderating to 2025. “The transactional nature of transfer duties increases the vulnerability of state revenue to a housing

9

Port of Melbourne another privatisation rip-off

In 2016, ACCC head Rod Simms said that he no longer supported the privatisation of public assets because it often leads to consumers and end-users being price gouged: “I am getting more exasperated. I just think governments are more explicitly now privatising to maximise the proceeds – including the Commonwealth”… “I see it getting worse.

5

The great university funding myth

Kate Clayton, an academic at La Trobe University, has published an article in the Australian Institute of International Affairs claiming consecutive governments have cut funding to universities, which has forced their over-reliance on international student fees: Consecutive government funding cuts have forced universities to become reliant on international students for funding. As universities restructure in

7

Aussie universities “lowering student entry standards”

Last week, The AFR reported that nearly half of all Australians aged under 25 were studying a bachelor degree at university: University is now the destination of choice for nearly half of all young people in Australia, with new Productivity Commission data revealing that nationally 47.8 per cent of people aged under 25 are enrolled

11

A universal pension would solve labour shortages

National Seniors Australia (NSA) chief Ian Henschke claims that Australia’s rigid aged pension system discourages older Australians from working, thereby contributes to labour shortages: “These labour shortages could be filled by pensioners and those about to reach pension age if we only encouraged them and didn’t penalise them for working beyond one day a week,”

7

Australian Retailers demand taxpayer bailout

The Australian Retailers Association (ARA) has called for stimulus in its pre-Budget submission: The nation’s retailers are calling for a range of emergency measures led by tax cuts, rental relief, government-backed investments in digital technology and a strengthening of the supply chain to be included in the federal budget. These would help prop up the

19

ScoMo’s “innovation agenda” 2.0 more policy hot air

Back in December 2015, then Prime Minister Malcolm Turnbull launched his $1.1 billion National Innovation and Science Agenda under much fanfare. According to Turnbull, this agenda would “invest $1.1 billion to incentivise innovation and entrepreneurship, reward risk taking, and promote science, maths and computing in schools”, and was to include tax concessions and tax breaks

18

Doctors call for sugar tax

The Australian Medical Association has commenced a new push for the introduction of a tax on sugary drinks. The AMA wants all such drinks that have no nutritional benefit to be subject to a sugar tax. AMA president Omar Khorshid has described sugary drinks as a “ticking timebomb for the nation’s health”, and the AMA

22

US & UK shame RAT Morrison

The US government announced over the weekend that it would provide one billion free rapid antigen tests (RAT) to its citizens, while the UK government has been providing free RATs for months through chemists and online. However, Australian Health Minister Greg Hunt says the federal government does not intend to follow the US’s lead, while

29

Morrison’s gas cartel pillages billions

It still gets the least amount of press of any of the Morrison Government’s disgraces thanks to comprehensive MSM stupidity. But pound-for-pound, there is no more horrendous pillaging of Australia than that conducted by the Morrison Government’s protected gas cartel. Over the Christmas break, there were significant developments in the global energy crisis that illustrate

62

Victoria is a fine state

In 2020, independent economist Saul Eslake slammed the heavy handed display by the Victorian Government and Police against its own citizenry in enforcing its draconian COVID-19 lockdown rules. According Eslake, Victorians during the first lockdown payed almost $6 million in fines for breaching COVID restrictions, $2.2 million more than the rest of the country combined: “Let

7

A universal pension would lift labour force participation

National Seniors Australia (NSA) claims that Australia’s aged pension system discourages older Australians from working, thereby contributes to labour shortages: National Seniors chief advocate Ian Henschke said something was wrong in Australia’s pension system design when only 14.2 per cent of Australians aged 65 and over were in the workforce compared to one in four

9

Coalition summons more first home buyers with subsidies

Federal Housing Minister Michael Sukkar says the federal government is considering an expansion of its low-deposit scheme for first home buyers at a time when aspiring buyers face being priced out of the surging property market. Launched in January 2020, it allowed 10,000 first-home buyers to acquire a ‘modest’ home with only a 5% deposit.

13

Victorians slugged extra $1.9b for Dan’s West Gate Tunnel

In 2017, Daniel Andrews’ Victorian Government agreed to an unsolicited bid from toll giant Transurban to build the West Gate Tunnel Project – a four kilometre toll road currently under construction in Melbourne to link the West Gate Freeway at Yarraville with the Port of Melbourne and CityLink at Docklands. Under the project’s terms, Trans­urban