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.
Business Council of Australia (BCA) chief, Jennifer Westacott, has called on the Morrison Government to implement a Labor-style investment allowance in place of company tax cuts. From The AFR: Under Labor’s scheme, which was costed at $1.8 billion a year, all businesses in Australia would have been able to immediately deduct 20 per cent of
Last month we witnessed Labor’s shadow financial services minister, Stephen Jones, demanding the federal government stimulate the economy and wage growth by lifting public sector salaries: Mr Jones said Australians needed a pay rise and the government should “lead by example” by boosting the wages of federal workers. “The government has got a role to
The Australian’s Judith Sloan has taken direct aim at Australia’s federation, arguing that states and territories have become increasingly reliant on the federal government for funds, while the federal government in turn is getting involved in areas that have been traditionally been the domain of the states and territories. Researchers have suggested that Australia’s GDP
Hoocoodanode? Via Domain: A broadly anticipated ‘sugar hit’ has failed to combat bitter trading conditions for Australian retailers, which could spell bad news ahead of full-year results later this month. But for cult-favourite ice-cream seller Messina, the only sugar hits in sight are the ones it’s serving up to customers. “It’s made no difference to
You would be hard pressed to find a bigger racket than Australian pharmacies. How many any other industries in Australia have had laws implemented that ban new entrants from opening within 1.5 kilometers of an existing business? How many other industries allow only registered professionals in the field to own and operate a business? And
While residents of Sydney and Melbourne are suffering from crush-loaded roads, trains, schools, and hospitals, as well as smaller and more expensive housing, toll road company Transurban is making out like a bandit. Earlier this year, ABC News reported that Sydney’s toll road network is the most expensive and extensive in the world : …transport
The Morrison Government is being urged to remove Australia’s 33% luxury car tax following the demise of the local car assembly industry. From The AFR: Treasury is consulting on plans to extend a refund scheme for primary producers and tourism business operators, saving owners up to $10,000 on luxury car purchases… Farming advocates welcomed the
The Guardian has continued its series on high-speed rail (HSR), which has turned its focus away from East Coast HSR – linking Melbourne, Canberra, Sydney and Brisbane – to smaller branch HSR rail lines linking regional cities, like Goulburn, with their respective capital cities: A lack of vision and political will, short-termism, genuine concerns about
Via The Guardian: The Essential poll, undertaken from 1-5 August, also gauged voter support for the current rate of Newstart, with almost 60% of people believing the Newstart benefit of about $280 a week was too low for a single person with no children. About 30% said they thought the amount was “about right” while
“Unabashed supporter of a bigger Australia”, Bernard Salt, has penned another article in The Australian warning of an impending ‘ageing crisis’ as the baby boomer generation retires, which explicitly endorses the false solution of mass immigration: Concerns about the sustainability of the age pension system are underpinned by the ageing of the population, especially the
Earth to Recessionberg. Earth to Recessionberg. Earth to Recessionberg. Your economy is falling apart. Come in Recessionberg! Nobody is listening. Perhaps nobody is home. Recessionberg is too busy today reassuring “quiet Australians”: Josh Frydenberg has urged Australians not to overreact to the turmoil on world markets as he moved to smooth concerns the US-China trade
The Morrison Government is facing increasing pressure to write-down the value of the National Broadband Network (NBN) in order to lower wholesale costs for both downstream telecommunications retailers and Australian consumers. Only last week, the head of the Australian Competition and Consumer Commission (ACCC), Rod Sims, stated that the government “must ignore those who worry
The Guardian has run a detailed report explaining how Australian taxpayers have given “$8m of $20m earmarked to progress high-speed rail to a consortium led by a man who has no expertise in major infrastructure projects, who had been a bankrupt and who was once a National party candidate”: The Consolidated Land and Rail Australia
We argued previously that the NSW State Government had hit ‘peak stupid’ in deciding to spend $2.5 billion to demolish and rebuild the Olympic Stadium and the Sydney Football Stadium, both of which are underutilised. These stadiums were assessed to deliver zero net economic benefits for the state, according to analysis by hired gun KPMG. Moreover, these
After ACCC head, Rod Sims, last week called for the value of the $50 billion National Broadband Network (NBN) to be written-down in order to lower prices, ABC business editor, Ian Verrender, has warned that the Morrison Government is facing a $20 billion budget hit to fix the NBN: As a cautionary tale of the
So says ScoMo: Scott Morrison has emphatically ruled out lifting the $40-a-day rate of Newstart, warning campaigners including Barnaby Joyce they are out of touch with what voters want. The Prime Minister, who credits “the quiet Australians” with his election victory, said voters want the welfare system to work for taxpayers too. “I’m not going
In an upcoming speech leaked to The Guardian, ACCC head Rod Sims will reportedly call on the value of the $50 billion National Broadband Network (NBN) to be written-down in order to lower prices: In a speech Sims will give to the ACCC and Australian Energy Regulator conference in Brisbane on Thursday, he will say
Earlier this week, former National Party senator, John Williams, backed calls by seniors groups to have the Newstart allowance increased for older unemployed people. Williams claimed it is harder for older people to get another job, whereas Ian Henschke from National Seniors Australia claimed it is absurd that an unemployed person aged 65 is expected to
Over the weekend, Telstra chief executive Andy Penn called on the Morrison Government to drop wholesale prices for the National Broadband Network (NBN): “Unfortunately, because of where wholesale broadband prices have gone, basically all operators are losing money reselling the NBN, and therefore some — and they’ve said it publicly — are looking at 5G to
Shadow financial services minister Stephen Jones says the federal government should stimulate the economy and wages growth by increasing salaries in the public sector. He argues that the government is a major employer and it should “lead by example” in boosting wages. From The Australian: Mr Jones said Australians needed a pay rise and the
Former National Party senator John Williams is backing calls by seniors groups to have the Newstart allowance increased for older unemployed people. Mature-age workers now make up the majority of the unemployed, with those over 55 being the biggest single age cohort on Newstart. Williams says it is harder for older people to get another
For several years, media outlets like The Australian ran a campaign against the so-called ‘blowout’ in welfare spending, backing claims made by the Coalition Government that nearly half of the population receives more in welfare than they pay in tax. The 2019 Household Income and Labour Dynamics in Australia (HILDA) survey has demolished this myth,
The Australian Council of Social Service (ACOSS) has released a survey of Newstart recipients, which reveals that the overwhelming majority are forced to skip meals: People who receive Newstart or other allowances have an income that is well below the poverty line. The single rate of Newstart is $282 per week, which is more than
We argued previously that the NSW State Government had hit ‘peak stupid’ in deciding to spend $2.5 billion to demolish and rebuild the Olympic Stadium and the Sydney Football Stadium, both of which are underutilised. These stadiums were assessed to deliver zero net economic benefits for the state, according to analysis by hired gun KPMG. Moreover, these
Telstra chief executive Andy Penn has joined the chorus calling on the Morrison Government to lower wholesale prices for the National Broadband Network (NBN): “Unfortunately, because of where wholesale broadband prices have gone, basically all operators are losing money reselling the NBN, and therefore some — and they’ve said it publicly — are looking at
The percentage of Australians aged between 20 and 28 with private health insurance cover for hospitals fell by 6.9% (33,975 people) in 2018, according to data from the Australian Prudential Regulation Authority. The overall percentage of Australians with hospital cover at the end of 2018 was 44.6%, the lowest level since December 2006, whereas the
Bloxo is back with a suggestion, via the AFR: Having cut its cash rate to a record low of 1 per cent recently, the Reserve Bank of Australia (RBA) is rapidly running out of room to provide further support for growth…forcing the central bank to use unconventional policy tools, such as quantitative easing, at a
Prime Minister Scott Morrison has told Coalition MPs that any future welfare spending will go to pensioners, not the unemployed: Pensioners will be prioritised ahead of unemployed Australians for any boost to welfare payments as the Morrison government stands firm against growing demands to lift the Newstart allowance. Prime Minister Scott Morrison has told colleagues
Recall that Deputy Prime Minister Michael McCormack has told unemployed job seekers to get off welfare and go bush for jobs: “There are jobs out there in regional Australia, and there are good paying jobs. And what I think we do need in this country is a more mobile workforce. So people have to be prepared to move
Prime Minister Scott Morrison has revealed plans for a major overhaul of the federal public service, which will include a push for cultural and organisational change. Amongst other things, the reforms will result in increased accountability for senior public servants. The sweeping reforms will coincide with the departure of Martin Parkinson, who will retire as
