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 week, Infrastructure Partnerships Australia CEO, Adrian Dwyer, accused the Turnbull Government of reducing infrastructure investment and called for an extra $7.5 billion in infrastructure spending over the next four years to offset a decline in such expenditure over the last decade: “The bottom line is the long-term 10-year trend has
By Leith van Onselen In February 2016 year I warned that the cigarettes tax – a policy adopted by both major parties in the lead-up to the Federal Election – would achieve two broad outcomes: It would fail to raise the projected revenue. With smoking rates falling, it is a declining tax base and this decline
Good stuff again today from the AICD chair Elizabeth Proust who says: The AICD chair’s position also places her starkly at odds with Business Council of Australia boss Jennifer Westacott, who has spearheaded a campaign to “remind Australians that business generates 86 per cent of all jobs” as companies lobby the crossbench to pass the government’s
It’s a deluge of Budget leaks and rumours today so here’s our roundup. At the AFR, the rich will get a milkshake: The government has confirmed high-income earners will receive tax relief in Tuesday’s budget but they will have to take a back seat to those on lower incomes whose taxes will be reduced from July 1
By Leith van Onselen The Budget leaks continued over the weekend, with Fairfax’s Mark Kenny reporting that the Turnbull Government will include tax cuts for higher income families in Tuesday’s Federal Budget: [Finance Minister Mathias] Cormann said it was “very important” that Australia’s tax policy settings remained “competitive”. “We will be prioritising low and middle income
By Leith van Onselen After Deloitte Access Economics senior partner, Chris Richardson, earlier this week called on the Federal Budget to raise Australia’s “unnecessarily cruel” Newstart (dole’) payment, the Business Council of Australia (BCA) has joined the chorus: The head of the Business Council has renewed calls to increase the Newstart allowance, after the Liberal MP
Via Bill Evans at Westpac: • The Federal Budget 2018 is to be delivered by the Treasurer on Tuesday night, May 8. • This is likely the last (and only second) annual budget of this parliament prior to the next Federal election, due no later than 18 May 2019. • The budget position has improved
By Leith van Onselen MB has frequently questioned the efficacy of Sydney’s WestConnex toll road and tunnel project – the $17 billion 33 kilometre motorway under construction that is more expensive per kilometre than the Chanel Tunnel. This hideously expensive project will see existing free public roads like the state-owned M4 (that have already been paid
Cross-posted from The Conversation: Sole parent families have suffered most from the Coalition government’s recent tax and welfare changes, our analysis shows. We compared the impact of taxes and welfare in the Coalition and Labor budgets on different families over eight years. The impact of Coalition tax and welfare changes on sole parent families can
Cross-posted from The Conversation: Unhealthy diets and poor nutrition are leading contributors to Australia’s burden of disease and burgeoning health-care costs. In 1980, just 10% of Australian adults were obese, today that figure is 28% – among the highest in the world. And yet, as shown on Monday night’s Four Corners’ episode – which was
By Leith van Onselen Since it came to office in late 2013, the Coalition Government has spuiked its plan to push the public service to regional centres in a bid to decentralise the federal bureaucracy. From the beginning, Labor has rubbished the idea, claiming that it would represent “pork barelling” and would also make the
By Leith van Onselen The media is awash today spruiking analysis by economic consultancy, AlphaBeta, which suggests the Turnbull Government’s initial company tax cuts may have boosted both investment and jobs. This analysis, which was commissioned by accounting software and online bookkeeping provider Xero, shows that companies with turnovers of less than $2 million, which
Labor is out with pre-Budget leaks of its own, via the AFR: Federal Labor plans to at least match the income tax cuts to be outlined in next week’s federal budget, increase spending on health and education, and still deliver higher surpluses, owing to its plans to raise up to $220 billion extra in revenue
Via The Guardian: With the major parties set to use budget week as a staging post for a tax battle to play out between now and the next election, the Greens have entered the field, proposing a “Buffett rule” for high earners and a super profits tax for the mining industry. In a policy to
By Leith van Onselen ABC Fact Check has released a report confirming that the Howard Coalition Government of 1996 to 2007 was Australia’s highest taxing of modern day governments: …the Howard government delivered 12 budgets, the first being the 1996-97 budget (delivered in August 1996), the last being the 2007-08 budget (delivered in May 2007)…
By Leith van Onselen Deloitte Access Economics senior partner, Chris Richardson, has called on the Federal Budget to raise Australia’s “unnecessarily cruel” Newstart (dole’) payment, claiming that doing so is even more urgent than Budget repair. From The ABC: “It is our standout failure as a nation… I’m a longstanding campaigner for budget repair, but
The head of the BCA is imploding. Via the AFR: As Labor leader Bill Shorten ramped up his campaign of using the banks as a reason not to cut company taxes, BCA chief executive Jennifer Westacott said this was just a convenient excuse to pursue what was already an entrenched anti-business agenda. “The actions of
By Leith van Onselen Back in September, Labor’s infrastructure spokesman, Anthony Albanese, cited parliamentary library figures showing that infrastructure investment under the Coalition would decline from 0.4% as a share of GDP to 0.2% over the next 10 years: “It will be cut in half”… “That has a real impact on growth and on jobs.
By Leith van Onselen The Victorian Budget was released yesterday afternoon, which contained all the hallmarks of a typical election year Budget, with cash splashes on all manner of programs, along with a nice dose of spruik. Below are key extracts from the Treasurer’s speech, which highlight the Budget’s essence: Victoria is the fastest growing
By Leith van Onselen In September 2016, it was revealed that drop-out rates for first year university students had hit an all-time high one-in-five, with the Grattan Institute’s higher education policy expert, Andrew Norton, claiming there was a correlation between drop-out rates and increasing enrolments, particularly among low-Australian Tertiary Admission Rank (ATAR) students. On Sunday,
By Leith van Onselen Yesterday, Treasurer Scott Morrison stated the government had set a 23.9% of GDP “speed limit” on taxes, claiming now is the right time for income tax cuts: We have a speed limit on taxes which we stick to – 23.9 per cent. That is as high as we believe taxes should
By Leith van Onselen After it last week suggested it may pass the Turnbull Government’s company tax cut package, the dregs of the Xenoponzi Party – rebranded the Centre Alliance (CA) – appears to be having second thoughts, with CA senator Rex Patrick stating the Turnbull Government needs to outline in the May Budget how it
By Leith van Onselen Labor over the weekend pledged that if it wins the upcoming federal election it will amend the GST so that it no longer applies to women’s sanitary products, like tampons. From The ABC: Opposition spokesperson for health Catherine King said tampons were a basic necessity for women. “They cost women over
Via COMSEC: In the twelve months to March 2018, the Budget deficit stood at $14 billion (around 0.8 per cent of GDP) – the smallest rolling annual deficit for nine years. Companies drive improvement: Company tax collections in the year to March were up 23 per cent on a year earlier, close to
By Leith van Onselen The Australian Tax Office (ATO) has released its taxation statistics for the 2016-17 financial year, which registered a small fall in the number of negatively geared property investors, with annual losses claimed also falling marginally. According to the ATO, there were 2,166,755 people claiming net rent in 2015-16 (2,087,468 claiming gross
If a report from Domainfax is true then the Xenophon dregs are complete morons: It is understood next month’s budget will tackle longstanding concerns about the way energy companies are taxed by curbing “uplift concessions”, which determine tax deductions associated with exploration and construction. But in a concession expected to win industry support, the changes will exempt
By Leith van Onselen The ABS has released Taxation Revenue and Government Financial Statistics for the 2016-17 financial year, which reveals that total tax revenues rose by 5.0% over the year from $465,216 million in 2015-16 to $488,499 million in 2016-17: This was driven by a $16,030 million (6.0%) increase in taxes on income and
By Leith van Onselen After last month claiming that “Australia’s high company tax rate is wage theft on a grand scale”, Business Council of Australia (BCA) president, Grant King, returned yesterday for another dose of company tax cut propaganda. From The Australian: Our high corporate tax rate is the area where we are under the
It’s not shaping up as any kind of spectacular election Budget if the initial leaks are anything to go by. The Australian reports: Scott Morrison has dumped plans for a 0.5 per cent hike in the Medicare Levy from next year to fill Labor’s $57 billion funding shortfall for the National Disability Insurance Scheme, claiming
By Leith van Onselen In the wake of the ABS’ population data for the 2016-17 financial year, which revealed that Melbourne’s population increased by an insane 250,000 over just two years and by 1.2 million people in just 13 years (see above chart), Fairfax’s Clay Lucas has attacked successive Victorian governments for failing to provide
