Wednesday, 30 March 2016
So how is Australia’s economy faring under the Abbott-Turnbull Government in the lead-up to the 3 May 2016 federal budget and the following general election?
Australian Dept of Finance, 24 March 2016:
The underlying cash balance for the 2015-16 financial year to 29 February 2016 was a deficit of $38,719 million.1
The fiscal balance for the 2015-16 financial year to 29 February 2016 was a deficit of $35,292 million…..
Total revenue was $1,223 million lower than the MYEFO profile, primarily due to lower than expected taxation revenue and dividend income.
Total expenses were $2,831 million lower than the MYEFO profile, primarily due to lower than expected supply of goods and services, wages and salaries and grants expenses…..
Net worth is negative $352,423 million;
Net debt is $287,920 million; and
Net financial liabilities are $516,561 million.
Financial Review, 28 March 2016:
Australia is one of seven countries that Forbes magazine says is the "most likely to suffer a debt crisis" within the next three years.
China, whose economy has faltered in the past two years, comes No. 1 on the list of seven, but Australia is No. 2. Sweden, Hong Kong, South Korea, Canada and Norway complete the list of infamy.
Using data for both private and public debt compiled by Switzerland-based Bank of International Settlements, the magazine looks at the rate of growth of credit compared with gross domestic product, paying particular attention to when credit growth begins to fall……
"The bottom line is that private sector expenditure in an economy can be measured as the sum of GDP plus the change in credit, and crises occur when (a) the ratio of private debt to GDP is large; (b) growing quickly compared to GDP," the magazine says.
When credit growth slips as servicing debt exhausts funds available to finance it, "new borrowers baulk at entry costs to house purchases, and numerous euphoric and Ponzi-based debt-financed schemes fail" leading to a change in available credit.
Australia, like the other six countries on the list, fill the two key prerequisites, a high level of private debt to GDP, and a rapid growth of that ratio in the last few years, the report says.
Economic crises often coincide with private debt exceeding 1.5 times GDP and the level of private debt grows by about 20 per cent over a five-year period.
The Guardian, 15 January 2016:
The results are in: Australian households have more debt compared to the size of the country’s economy than any other in the world.
Research by the Federal Reserve has shown the consolidated household debt to GDP ratio increased the most for Australia between 1960 and 2010 out of a select group of OECD nations. Australia’s household sector has accumulated massive unconsolidated debt compared with other countries. As of the third quarter of 2015, it now has the world’s most indebted household sector relative to GDP, according to LF Economics’ analysis of national statistics……
Australia has around $2 trillion in unconsolidated household debt relative to $1.6 trillion in GDP. Australia’s ratio is 123.08%.....
Australian property investors and homeowners are burdened with massive mortgages, especially new and marginal entrants. Unlike winning a gold medal at the Olympics, having the world’s most indebted household sector is not an achievement the nation should be proud of. This is where Australia’s real debt and deficit problem lies, not in the public sector.
1. Compare with the 2013-14 financial year to 30 September 2013 which covers the last eight months of the former federal Labor government:
The underlying cash balance for the 2013-14 financial year to 30 September 2013 was a deficit of $22,929 million.
The fiscal balance for the 2013-14 financial year to 30 September 2013 was a deficit of $19,659 million…..
Total revenue was $4,580 million lower than the Budget profile primarily due to lower than expected taxation revenue. This reflects lower than expected individuals and other withholding taxation, company tax, superannuation fund tax and resource rent taxes.
Total expenses were $4,636 million lower than the Budget profile primarily due to lower than expected grants and subsidies, suppliers and personal benefits expenditure. This is in part consistent with reduced expenditure during the election caretaker period and reflecting timing differences, particularly for grants and subsidies…...
The net worth of the General Government sector is a negative net asset position of $220,670 million at 30 September 2013.
The net debt of the General Government sector is $174,557 million at 30 September 2013.