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

JobSeeker cut to throw 190,000 more people into poverty

The Australia Institute (TAI) has released a new report arguing that the Morrison Government’s decision to reduce the rate of JobSeeker by $150 from January 2021 will push an additional 190,000 Australians below the poverty line: On the 10th November 2020 the Coalition Government announced that it was again cutting the coronavirus supplement from its

72

NSW Budget launches massive stamp duty reform

Late last year, NSW Treasurer Dominic Perrottet flagged that he was looking at eliminating inefficient state taxes like stamp duties, to spur growth. Yesterday he put rhetoric into action, launching a reform that would offer owner-occupiers an alternative to stamp duty via a fixed $500 up-front fee plus an annual tax of 0.3% on unimproved

9

NSW is a land baron’s best friend

A September report from the Australian National Audit Office (ANAO) slammed the Department of Infrastructure for purchasing 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. Auditor-General Grant Hehir then told a Senate hearing that the federal government

14

Innes Willox declares war on unemployed

For years Chief Executive of the Australian Industry Group (AIG) and Migration Council of Australia Chair, Innes Willox, has lobbied against laws to prevent wage theft, lobbied against stricter labour hire rules, has spread copious propaganda about skills shortages, and has lobbied incessantly for mass immigration. Now Willox is urging the federal government to look

9

NBN rollout cost continues to soar

As Communications Minister, Malcolm Turnbull abandoned plans to build a Fibre-to-the-Premises (FTTP) National Broadband Network (NBN) across most of the country. Instead Turnbull replaced it with a multi-technology mix (MTM) that included previously retired copper cabling. This change to MTM was marketed by Turnbull as a cost-saving measure. However, the enormous amount of rectification works

8

JobMaker becomes JobTaker

The Senate has voted 30-28 to pass the federal government’s $4 billion JobMaker bill without any amendments, after One Nation and Centre Alliance agreed to back the legislation. One Nation had previously indicated that it would support an amendment proposed by Labor that was designed to prevent employers from sacking existing staff and hiring younger

14

“Woefully in­adequate” JobMaker may not pass Senate

Shadow employment minister Brendan O’Connor indicated yesterday that Labor is unlikely to oppose legislation to enact the federal government’s $4 billion JobMaker hiring credit scheme. However, he says the bill is “woefully inadequate” and no amount of amendments will fix it: “No amount of amendments will fix this woefully inadequate proposed legislation, which will not

5

Childcare funding “20-times more effective” than tax cuts

The Australia Institute (TAI) has released a new report, entitled A comparison of the economic impacts of income tax cuts and childcare spending, which claims that boosting childcare funding would be nearly 20 times more effective at creating jobs than a tax cut of the same size: Almost 450,000 Australians with children under the age

25

Just raise the JobSeeker rate, ScoMo

Prime Minister Scott Morrison has thrown 1.5 million unemployed Australians a temporary lifeline, extending the JobSeeker supplement to the end of March: The Australian understands cabinet’s expenditure review ­committee signed off last week on extending the coronavirus supplement payment beyond December 31, when it was due to expire. The welfare payment boost is now expected

1

Labor, Greens demand changes to inept JobMaker

Labor has yet to decide whether to support the federal government’s JobMaker hiring credit scheme. However, senior Labor sources have indicated that the Opposition will side withy the Greens in seeking amendments to the draft legislation to ensure that employers cannot sack older staff and replace them with workers under the age of 35 in

1

Grattan slams Australia’s mega infrastructure waste

The Grattan Institute has released a new report, entitled The rise of megaprojects: counting the costs. The report slams Australia’s infrastructure selection processes, which too often choose large trophy projects over higher returning smaller ones, and tends to experience large cost blowouts: Below is the overview of the report, alongside key charts: Australian governments are fast-tracking

20

Time to rein government agency fat cats

The fleecing of taxpayers by senior executives of Australia’s government agencies and authorities has well and truly jumped the shark. Last month we learned of the extraordinary salaries and bonuses paid to senior executive within NBN Co – the statutory authority in charge of Australia’s failing National Broadband Network (NBN). NBN Co CEO Stephen Rue

39

NBN should fear 5G competitive threat

Last week, NBN Co chief financial officer, Philip Knox, flippantly brushed off the emerging competitive threat from 5G wireless broadband on the NBN’s viability: “We spend virtually zero time thinking about it or talking about it. We’ve always said it’s a complementary technology. It’s highly optimised for mobility and less so for fixed wireless”… Roger

9

Chinese-owned resort gifted $500k for quarantining no one

The Victorian Government’s handling of its hotel quarantine program has come under renewed scrutiny. It has been revealed that the Sands Golf Resort in Torquay was paid $511,500 to house returned travellers under two state government contracts. However, the resort was not used as a quarantine hotel, and the Chinese-linked company that owned it subsequently

20

Health profits halve as private health funds turn red

Data from the Australian Prudential Regulatory Authority (APRA) shows that the nation’s 37 private health insurers booked a combined profit of $723 million in 2019-20. The figures also show that 11 health funds made a loss for the financial year, compared with just five in 2018-19. Medibank and Bupa retained their rankings as Australia’s leading

4

Deloitte: Major projects to boom (we hope)

Via Deloitte: Deloitte Access Economics’ Investment Monitor is primarily a source of information for businesses and others about major engineering and commercial construction projects and their promoters. It is also a barometer of structural change in the Australian economy, and of the investment climate – now and in the future. The database for this edition

19

ATO takes aim at JobKeeper rorters

The Australian Taxation Office’s (ATO) second commissioner, Jeremy Hirschhorn, has warned companies receiving JobKeeper not to pay executive bonuses or increase dividends: “There was nothing explicit in the rules for the stimulus measures that required companies to stop paying executive bonuses or from increasing dividends to shareholders, but there was a quick backlash for those

26

Marketisation of public services has failed Australia

Following the recent Australia Post scandal, economics professor John Quiggin has taken direct aim at the profound failure of privatisation and corporatisation to deliver improved services to Australians: The statutory authority model, used at the state level for electricity, water, housing and a range of infrastructure services was highly successful for most of the 20th

16

Cruel Coalition toys with unemployed Australians

The Morrison Government has indicated that it will extend the JobSeeker supplement beyond 1 January, but won’t permanently lift JobSeeker above its poverty level of $40 a day: A permanent increase to the JobSeeker rate in January is unlikely with extra income for out-of-work Australians expected to be in the form of “temporary” help… “Right

37

NBN blames streamers and gamers for poor service

Around two years ago, former CEO of NBN Co blamed online gamers for creating congestion on the National Broadband Network (NBN) and threatened to throttle internet speeds: NBN Co is “evaluating” slowing down or limiting downloads for users during peak times in order to overcome these fixed wireless congestion problems. At a parliamentary hearing in

9

Seniors group lashes biased JobMaker wage subsidy

The Treasury’s submission to a Senate inquiry into the JobMaker hiring credit scheme contends that its focus on people aged 16-35 is justified as this age group has a much higher unemployment rate than the broader population. However, the Council on the Ageing (cota) has hit back, using their submission to raise concern that employers