The Treasury – Digital Finance Analytics (DFA) Blog

Beyond The Budget BS…

In this show, I want to go beyond the superficial analysis of the recent budget given my in box has been flooded by “analysis: thousands of sources, much missing the point.

And in passing a recognition that the proposal to remove the non compete clause in employee contracts, is one welcome surprise.

But the Spin was in full force through the budget speech this week, with Chalmers claiming it represented the biggest ever” improvement in the budget bottom line since Labor’s May 2022 election, based on the May 22 forecast deficit of $79.8 million. This is the annual loss, not the cumulative total! Now, wall-to-wall deficits projected are projected ahead, so it’s a bit rich for the Treasurer to spin so hard, we all might get giddy.

Actually, the budget has been in deficit 33 of the past 50 years – or two-thirds of the time since Gough Whitlam lost office. And yet in that time our standard of living has improved and we still exist as a sovereign nation. So why all the focus on deficits and surrounding spin?

In summary, according to KPMG we got a forecast underlying cash balance of $42.1 billion in 2025-26; a $4.8 billion improvement on the recent MYEFO estimate. But Nearly $85 billion of “off-budget” spending over the forward estimate period, resulting in cumulative headline cash balance deficits of $236 billion over the four years to 2028-29.

But whether we look at the gas cartel, or tobacco tax, so many issues of importance were missed, indicative a a budget for the election, not reform for the ages….

http://www.martinnorth.com/

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Digital Finance Analytics (DFA) Blog

Beyond The Budget BS…

00:00 / 00:18:58

Beyond The Budget BS…

In this show, I want to go beyond the superficial analysis of the recent budget given my in box has been flooded by “analysis: thousands of sources, much missing the point.

And in passing a recognition that the proposal to remove the non compete clause in employee contracts, is one welcome surprise.

But whether we look at the gas cartel, or tobacco tax, so many issues of importance were missed, indicative a a budget for the election, not reform for the ages….

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Are We In The Midst Of A Cash Long Con?

Last Tuesday on my live show, I discussed the current Treasury paper on Mandating Cash Acceptance in Australia. But today I want to take this further and I will outline my concern that the Government many well be playing a long con with the community ahead of the upcoming election.

The paper says Cash acceptance refers to the practice of businesses accepting cash as a form of payment for goods and services. Cash acceptance levels must remain sufficient to enable consumers, including those unable to use digital payment methods, to participate in the economy.

my suspicion, is this is more political than anything else. The Government knows cash availability is a BIG issue, and cannot be avoided, so this Treasury paper allows the issue to flow on beyond the next election. Meantime the neo-liberals, in the pockets on the big banks, still want to take our rights to use cash away, so on one hand they can appear to be taking the right for cash seriously, but can also continue to assume the banks they support them. It’s a classic yes Minister long con.

We can break that by making sure we provide responses to Treasury, along the lines, of first, there should be no carve out of essential services – which is difficult to try to define, and all businesses should still be required to accept legal tender in the form of cash. A simple antidote to the long con.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Are We In The Midst Of A Cash Long Con?

00:00 / 00:14:04

Wanted Adults In The Budget Room, As Deficits Roar And Games Are Played!

Total budget revenue is cumulatively higher by about $380 billion over five years compared with Treasury’s forecasts on the eve of the May 2022 election.

Yet, at a time when revenue is booming and the economy is operating around full capacity, the deficit in underlying terms is forecast to be $26.9 billion (1 per cent of gross domestic product), a $1.3 billion improvement since the May budget.

Cumulative underlying deficits over four years are projected to blow out to $144 billion, $21.7 billion worse than expected seven months ago.

Where are the adults in the room because from the budget point of view, they appear to have left years ago, and the result will be more pressure on ordinary households and businesses across the country.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Wanted Adults In The Budget Room, As Deficits Roar And Games Are Played!

00:00 / 00:14:38

The MYEFO Magic Pudding…

The Mid-Year Economic and Fiscal Outlook (MYEFO) update released on Wednesday estimates the Australian economy is expected to expand by a low 1.75% in 2023–24 before regaining momentum in 2024-25, when improved real incomes are expected to support a recovery in household consumption. It also notes inflation – although moderating – is still too high.

The outlook attributes that mainly to global oil prices and Treasury has not changed its forecast timetable for inflation’s return to the 2-3% target band, with 2.5% hit in mid 2025, so the Government is more optimistic than the RBA when it comes to expected progress on inflation. The RBA expects inflation to be at 3.0% by mid-2025.

Treasury’s analysis of the structural budget position suggests that the budget in 2023-24 is neutral with respect to inflation – it is neither adding nor reducing inflationary pressures.

Treasury continues to expect the economy will slow over the next few years to grow below trend with the unemployment rate drifting higher to 4.5% in 2025-26.

The migration intake has been a hot topic recently. As expected, the MYEFO forecasts upgrade the outlook for net overseas migration (NOM) in 2023-24 by 60k to 375k. We suspect that this will likely undershoot the eventual outcome. In 2024-25, forecasts for NOM have been marked down slightly to 250k, likely reflecting the expected impact of the Government’s recently announced migration strategy.

Gross debt is expected to peak at 35.4% of GDP in 2027-28, this is 0.2 percentage points lower than projected in the May Budget. While debt is expected to be lower, the expected cost of capital has also increased since the May Budget, reflecting the rise in government bond yields. Overall, these counteracting forces net out to a slight increase in interest payments as a share of GDP over the medium term.

Sadly, in a blow for budget transparency, there is still a line for decisions taken but not yet announced. We don’t know what decisions these are, but they are significant – the estimates start at $270 million in 2023-24 and rise to $1.8 billion in 2026-27. It is impossible to tell what this spending is for. If the government were to reverse those decisions between now and the next budget update, we will never know.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

The MYEFO Magic Pudding...

00:00 / 00:10:58

The MYEFO Magic Pudding…

Treasury’s analysis of the structural budget position suggests that the budget in 2023-24 is neutral with respect to inflation – it is neither adding nor reducing inflationary pressures.

Treasury continues to expect the economy will slow over the next few years to grow below trend with the unemployment rate drifting higher to 4.5% in 2025-26.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Australia’s Crazy Mixed-Up Future Means Less Home Ownership And Higher Taxes

The Australian government this week released the latest iteration of its Intergenerational Report, the sixth since the first was published in 2002. It is an intensely political document of nearly 300 pages.

Powerful forces will continue to shape Australia’s economy over the coming decades including population ageing, expanded use of digital and data technology, climate change and the net zero transformation, rising demand for care and support services, and increased geopolitical risk and fragmentation. These forces will influence the future path and structure of our economy and change how Australians live, work, and engage with the world.

The Australia of the 2060s will be very different from the one we know today. It will be older, with slower economic growth, a big “care” economy, and an export sector that is radically transformed due to the imperatives of climate change. But the finances will be under pressure, and migration will still be a critical element. Housing will continue to be a disaster.

Slower economic growth will place pressure on the tax base at a time of rising costs, creating a long-term fiscal challenge. Despite recent improvements in Australia’s fiscal position, debt-to-GDP remains high by historical standards. Long-term spending pressures are also rising across health, aged care, the National Disability Insurance Scheme (NDIS), defence and interest on government debt.

The economy will be about two and a half times as big, and real incomes are expected to be 50% higher by 2062-63. On the downside, economic growth will be slow – growing at an average pace of 2.2% over the coming four decades, from an average of 3.1% over the previous four decades.

Population will also increase more slowly than previously – by an average of just 1.1% annually. The report projects 40.5 million people in the early 2060s.

Migration is projected to fall as a share of the population. While the number of people 65 and over will double, Australia is still expected to have a younger population than most advanced countries.

Better policy decisions can still reshape the future, but the current mob are on the same ol same ol track, to the benefit of corporations and the well off but not for ordinary Australians who are trapped in this crazy policy vacuum.

Go to the Walk The World Universe at https://walktheworld.com.au/

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Small Lenders To Be Supported

The Treasurer has announced a second stimulus plan as Australia fights to contain the economic impact of the coronavirus.

Hours after the emergency rate cut by the Reserve Bank, the Prime Minister and Treasurer addressed Australia announcing a further $15 billion investment to enable smaller lenders to continue supporting Australian consumers and small businesses.

This funding will complement the Reserve Bank of Australia’s (RBA’s) announcement of a $90 billion term funding facility for authorised deposit-taking institutions (ADIs) that is also expected to support lending to small and medium enterprises.

The government’s latest action is aimed to enable customers of smaller lenders to continue to access affordable credit as the world deals with the significant challenges presented by the spread of coronavirus.

“Small lenders are critical to Australia’s lending markets, often driving innovation and providing competition for larger lenders,” said the Treasurer Josh Frydenberg.

“Combined, these measures will support the continued ability of lenders to support their customers and in doing so the Australian economy,” the Treasurer added.

The Treasurer confirmed that the Australian Office of Financial Management (AOFM) will be provided with an investment capacity of $15 billion to invest in wholesale funding markets used by small ADIs and non-ADI lenders.

The $15 billion capacity would allow the AOFM to support a substantial volume of expected issuance by these lenders over a 12 month period.

“Importantly the assets being purchased by the AOFM will not be limited to residential mortgage backed securities.

“The AOFM will also be able to invest in a range of other asset backed securities and warehouse facilities. The Government will provide the AOFM with investment guidelines that will outline the basis on which the AOFM is to undertake these investments,” the Treasurer added.

Enabling legislation will be introduced in the week commencing Monday, 23 March 2020. The AOFM is expected to be able to begin investing by April.