Invest
Aussie budget ‘no good policy, just damn good luck’
An Australian economist has slammed the government’s economic management ahead of this month’s mid-year economic and fiscal outlook, attributing a potentially healthier budget to luck rather than good governance.
Aussie budget ‘no good policy, just damn good luck’
An Australian economist has slammed the government’s economic management ahead of this month’s mid-year economic and fiscal outlook, attributing a potentially healthier budget to luck rather than good governance.
Economist and senior fellow of think tank Per Capita Stephen Koukoulas says an anticipated improvement in the MYEFO can largely be attributed to soaring commodity prices.
“Generally, commodity price seam has been very positive over the last seven months, and particularly over the last month or two we’ve had this incredible run up in prices. Even if it’s only partly sustained, we don’t even have to build on these current price levels and we could be getting a significant windfall through no good policy, just damn good luck,” Mr Koukoulas said.
“We’re getting lucky with iron ore well over $70 a tonne. The coal price has been strong and copper has been solid.”
Coal has rallied in recent months, with coking coal price surging from $75 to around $230 per tonne, while thermal coal has surpassed $100 per tonne.
Iron ore is currently sitting at around US$78 and just last week copper hit an 18-month high on an intraday basis.
The strong commodity prices are likely to buoy Australian budgetary numbers, with the September quarter seeing real net national disposable income rise 0.8 per cent on the back of a 4.5 per cent surge in the relative price of Australian exports to imports.
Encouragingly, nominal GDP and real GDP, considered good indicators of household and budget income, both rose over the quarter as well.
AMP chief economist Shane Oliver said that despite the economy shrinking 0.5 per cent over the quarter, talk of a recession was purely speculative.
“While the GDP contraction in the September quarter will no doubt invite talk of a recession, growth is likely to bounce back in the December quarter, avoiding a recession so there is no reason to get too gloomy,” Mr Oliver said.
“In an ideal world, now would be a time for some fiscal stimulus focused on infrastructure spending. But with public debt well up from pre GFC levels and the government focused on reducing the budget deficit and the increasingly difficult task of maintaining Australia’s AAA credit rating this looks unlikely.”
Consequently, favourable budget figures would not be the result of good economic management, according to Mr Koukoulas.
“When the mid-year update on the budget is released, I wouldn’t be at all surprised if the budget bottom line has improved quite markedly simply because the economy is being resilient, the commodity price cycle has helped, and the budget numbers might be looking like we’re on a path back to budget surplus rather than something that gets pushed back to 2020,” he said.
“I’m sure [Treasurer Scott] Morrison is having a look at the budget numbers thinking, ‘Thank God, we might be repairing the budget without having to hike one tax or cut any spending’.”
“It’s like what we saw from 2003 to 2007 ... none of that was good policy. They were throwing money away, but they just kept updating the budget numbers with this huge windfall of revenue coming in,” Mr Koukoulas added.
Despite Australia’s good position, concerns remain.
“For Australia, budget improvement [would be] great news, but the problem is if it’s sustainable. There’s still the question of what happens if commodity prices take another fall next year or the year after,” Mr Koukoulas said.
“Obviously, there’s no urgency to cut spending and increase taxes but you’d still like to have a small budget surplus to lock in that moderation in debt levels and work from there.”
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
