When the Howard Government navigated his GST reform package through the Senate at the turn-of-the-century, it was forced by the Democrats to exempt fresh food, health and education in a bid to protect lower income earners from the GST’s regressive impacts. However, according to Crispin Hull, these exemptions have created perverse impacts, with higher-income earners
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.
Australian motorists paid $19.68 billion in fuel excise tax in the 2019 financial year, but the forecast growth of electric cars creates the potential for a budgetary black hole. With the Electric Vehicle Council predicting 50 per cent of new cars sold in 2035 will be electric, EVC CEO Behyad Jafari says governments will need
We all know who runs the country, via the AFR: Treasurer Josh Frydenberg will instruct the corporate watchdog to tell banks to waive responsible lending standards for individuals who operate a small business, in a bid to ease the credit squeeze on the sector. Following meetings over the past week with the chief executives of
The Federal Court has struck down the Coalition’s controversial ‘backpacker tax’, introduced in 2016, ruling that it is unlawful to charge non-residents higher taxes than Australian residents: The federal court in Brisbane ruled it was not lawful that a non-citizen should have to pay more tax on earnings than an Australian doing the same job.
The percentage of Australians between the ages of 20 to 39 with private health insurance has fallen from 40% to 34% over the past five years. During the same period, older Australians have been claiming more on than their health insurance than ever. Private health premiums are rising much faster than inflation and wages growth:
The Australian’s Adam Creighton claims that some wealthy seniors are deliberately ‘upsizing’ to more expensive homes in order to receive bigger Aged Pension payments: Older Australians are buying more expensive homes in retirement to hang on to the Age Pension, according to experts who say pension eligibility rules are causing nationwide over-investment in housing. Part
Via the ABC: A $500-million scheme will help 10,000 first-home buyers get into the market with a smaller deposit than they would otherwise need. Prime Minister Scott Morrison promised before the election it would be people’s “first leg on the first rung of the ladder”. Then, housing and economic experts were dubious. Now, with more
While the Morrison Government refuses to lift Australia’s Newstart allowance, which has fallen to 30% below the poverty line: And is among the lowest in the OECD: So-called “Jobactive” providers are rorting Australian taxpayers of millions for doing “absolutely nothing”: A news.com.au investigation into the Jobactive scheme has unearthed multiple instances of substandard service, inefficient
The federal government announced in the 2017 Budget that it would remove a capital gains tax (CGT) exemption for around 100,000 expatriate Australians who sell their main residence while overseas. While the measure was projected to raise $581 million over the forward estimates, it has been condemned by tax and legal experts as being “unjustifiably
The NSW Government has demanded the federal government help pay for Sydney’s $20 billion Metro West Rail Line, which is desperately needed to cope with Sydney’s swelling population: Mr Constance took a swipe at his Coalition counterparts in Canberra for their reluctance to stump up for the new metro rail line from central Sydney to
Via Alan Kohler today: By how much? Well earlier this month, KPMG chief economist Brendan Rynne suggested between $77 and $83 a week, which would cost about $3 billion. Seems reasonable. Rynne’s argument was mostly about fairness, not fiscal stimulus: Newstart hasn’t increased in real terms since 1994 – if it had kept pace with
In September last year, ACCC chairman Rod Sims warned state governments against accepting unsolicited bids for infrastructure projects: “The ACCC considers that state governments should only award new toll road concessions through a competitive bid process, and not following an unsolicited proposal unless there is a truly compelling reason,” Mr Sims said. “Accepted unsolicited proposals
Via Ross Gittins: …secretary to the Treasury, Dr Steven Kennedy…explained to Senate Estimates the long-established orthodoxy among macro-economists in the advanced economies that “short-term economic weakness or unsustainably strong growth is best responded to by monetary policy” (interest rates) not fiscal policy (government spending and taxation). Now, I have to tell you Kennedy isn’t making
The 2018 Federal Budget expanded the Pension Loan Scheme (PLS) to allow all retirees to obtain a state run reverse mortgage, which allowed pensioners to boost their retirement income by up to $17,800 for a couple without impacting on their eligibility for the pension or other benefits. Now, seniors groups are demanding that the 5.25%
Two months ago, the Mackenzie Institute released research arguing that the Australian economy had been “hollowed out” by policies that preference higher education over vocational alternatives: The institute condemns the 2008 Bradley review – which spawned Australia’s recently abandoned demand-driven system of higher education funding – for producing a glut of graduates and exacerbating the funding
From the Scummo files, at The Australian: It pays to be in power. Especially if you’re one of the 52 people in Scott Morrison’s so-called “Star Chamber” lucky enough to score a secret taxpayer-funded pay rise. According to the Department of Finance, as of October 1 the Prime Minister has signed off on 52 “personal staff”
And it ain’t up. Via Zero Hedge: Once upon a time Caterpillar was considered the bellwether stock for the industrial sector. If that’s still the case, then the world is on the verge of a recession as moments ago CAT reported dismal Q3 earnings while slashing its profit outlook, blaming deteriorating global growth. CAT reported
From new Treasury Secretary Stephen Kennedy today in parliament: “There are reasons to be optimistic about the outlook. I do see the economy strengthening from here. Medium-term fiscal frameworks [which] reflect an apparent short-term economic weakness or unsustainably strong growth are best responded to by monetary policy. In periods of crisis there is a case
With the percentage of Australians between the ages of 20 to 39 with private health insurance falling from 40% to 34% over the past five years, and older Australians claiming more than ever, private health insurance providers have demanded government subsidies to keep the industry viable. However, the health program director at the Grattan Institute,
Anyone living in Melbourne would know that we live in a nanny state. Speed limits have been lowered across the board with fixed ‘road safety’ cameras planted strategically to fine unwary motorists for travelling a few kilometres per hour above the lowered limit. Along with stamp duty, the Victorian Budget has also become reliant upon
Via Michael West: A former school teacher from Copacabana Beach has just locked horns with the four most powerful private institutions on the planet. And they don’t like it. The shoddy audit standards, massive government consulting business and global tax avoidance operations of the Big Four accounting firms, EY, KPMG, Deloitte and PwC, now finally
Via the ABC: There is now a real risk the government’s coveted budget surplus is at risk of turning into a sizeable deficit, according to several economists. While it is too early to judge the final position of the budget, figures released by the Department of Finance last week show the budget is now back
Treasurer Josh Frydenberg says the federal government would not pursue changes to the GST without a mandate from the public, adding that it has no plans to seek one. His comments follow the New South Wales government’s release of a discussion paper which canvasses broadening the GST base to offset a forecast decline in revenue
The Department of Finance has released data showing that the federal government’s unfunded superannuation liability topped $233.1 billion at the end of 2018-19, up $50 billion from $183.1 billion at the start of the financial year, due primarily to the cratering of interest rates. Meanwhile, the Future Fund’s assets rose to $165.7 billion in the
The drumbeat of contempt for the L-plated treasurer, Josh Recessioberg, is ceaseless and growing louder. Monetary curmudgeon Stephen Grenville leads us off: The story begins in the 1960s. The combination of the Vietnam War, LBJ’s Great Society and the moon landing put such pressure on US capacity that inflation was inevitable. Once the inflation-expectations genie
The NSW Office of State Revenue has released stamp duty data to September, which reveals a massive $1.59 billion (25%) decline over the past year and a $2.58 billion (35%) decline since stamp duty receipts peaked in September 2017: The slump in stamp duty receipts follows a sharp 22% decline in property transfers in the
Via Banking Day: The Australian Taxation Office can disclose tax debt information to credit reporting agencies, following the passage of a tax bill last week. Under normal circumstances, it is an offence for a taxation officer to disclose protected information that has been acquired by them as a taxation officer. Under the new law, included
Via Ross Gittins today: Scott Morrison’s problem is that he gets politics – and is good at it – but doesn’t get economics. The Prime Minister doesn’t get that if he keeps playing politics while doing nothing to stop the economy sliding into recession, nothing will save him from the voters’ wrath. Neither he nor