Wed, 17 May 2017  |  

In arguing the case for cutting the company tax rate from 30 per cent to 25 per cent over the course of the next decade, Treasurer Scott Morrison claimed that one of the key effects of such a move would be to boost investment, employment and wages growth. 

Let's use the inverse of that logic when it comes to hiking company taxes.

Specifically, does Mr Morrison think that hiking company tax rates will mean lower investment, employment and wages?

Tue, 16 May 2017  |  

This article first appeared on the Yahoo 7 Finance web page at this link: 


Let’s repair the budget once and for all

Let’s once and for all repair the budget and start on a path of lowering government debt by hiking taxes on luxury cars, wine, petrol, diesel, beer, spirits and so-called ‘other’ alcoholic beverages.

Not only will a decent lift in tax in these areas fix the budget, it will be good for the general health of the population (less alcohol consumed), it will help the environment (less driving and a switch to other means of transport) and in the case of luxury cars, it will be fair (taxing expensive cars).

It can work.

As the dust from the 2017 budget slowly settles, it is apparent that there is a moral and political advantage from selectively hiking taxes. There is strong support for the 20 per cent lift in the Medicare levy from 2.5 to 3 per cent; the bank tax is seen to be a claw-back of some of the support that government has previously given to the big four banks; while the tobacco excise tax impost (admittedly delivered over many years) is set to deliver nearly 3 per cent of all revenue to the government and people should stop smoking in any event.

As things stand, there is a problem in that even with this brazen tax grab from the Turnbull government, the budget deficit is still substantial and gross government debt is on track to exceed $600 billion within three years and then it will hit a stonking $725 billion (which will be around $55,000 per household) by 2026-27.

Let’s start from a budget fact that in the financial year 2020-21, the government will raise $15.2 billion from the tobacco excise tax. That is a lot of money from the 13 per cent of the population that smoke.

The luxury car tax in that year, will by way of comparison raise a puny $720 million even though sales of luxury car are already at a record and are set to growth further over the next few years.
So $15 billion from smokers and $0.7 billion from luxury cars?

Wed, 10 May 2017  |  

This article first appeared on the Yahoo 7 Finance website at this link: 


Morrison has donned rose tinted glasses

As per the normal process, the 2017-18 budget documents went to the printer over the weekend, some 48 hours prior to Treasurer Scott Morrison delivering the budget to the Parliament.

In that time, flood of economic news has cast a shadow over the economic forecasts which are for an acceleration in economic growth over the next few years, a gradual fall in the unemployment rate and a quite staggering acceleration in wages growth.

“Optimistic” might be the catch cry of those budget forecasts.

Morrison is hoping that the economy will miraculously pick up, leading to a surge in tax revenue which feeds into the estimate of a return to budget surplus in 2020-21. Suffice to say, any shortfall in what would be a strong performance in the economy will lead to yet another blow out in the deficit and the return to surplus will be pushed back yet another year or two.

Wed, 10 May 2017  |  

This article first appeared on The Guardian web site at this link: 


Warm words in Morrison's budget barely disguise a story of fiscal failure

Three years ago, then-treasurer Joe Hockey delivered the first budget of the Abbott government. It was a classic austerity budget, designed to tackle the “debt and deficit disaster” and “fiscal emergency” that it had railed against in opposition. That budget saw a raft of spending cuts, user charges and tax increases as the government tried to fast-track the return to budget surplus.

The effect of the policy changes in that budget saw the forecast for the 2016-17 deficit fall to $10.8bn, and then to a mere $2.8bn in 2017-18. There were budget surpluses forecast in 2018-19 and beyond. According to Hockey, the budget had effectively been fixed and the emergency thwarted.  Or so it seemed.

Over the intervening three years, the budget bottom line numbers have soured. This is despite the global economy registering solid, unbroken growth that has seen Australian export volumes grow substantially. Domestically, the economy has recorded average gross domestic product (GDP) growth at a reasonable rate, around 2.5% per annum over three years, despite the crash in mining investment and the volatility in commodity prices.

Suffice to say, something has gone badly wrong with budget repair over the past three years.

Thu, 04 May 2017  |  

The Dun & Bradstreet business Expectations Survey were worrying for those looking for economic momentum into the second half of 2017.

For the full report, click on the following link. 

The key points of the release were:

Business expectations have dropped off for the September quarter following a softer-than-expected March quarter. Dun & Bradstreet's April Business Expectations Survey shows lower actual sales, profits, employment, selling prices and capital investment in the first quarter of 2017 compared to the final quarter of 2016.

After an encouraging end to 2016 and significant optimism in the early part of 2017, the business sector has indicated a deterioration in conditions into the second half of the year. It points to a growing risk that the RBA may deliver a further interest rate cut in the months ahead which would be even more likely if inflation remains well contained, as per the results on expected selling prices.

Thu, 04 May 2017  |  

This article first appeared on the Yahoo7 website at this link: 


Australia is failing when it comes to unemployment

Unemployment around most of the western world is falling at a rapid rate and in many countries it is at a level that is at, or close to, full employment. That means the unemployment rate is low enough to see skills and worker shortages start to appear in some industries and regions and as a result, wages growth is accelerating.

Stimulatory policy settings have driven this favourable outcome, even if those extreme policy settings were in reaction to the economic horrors of the global banking and financial crisis which plummeted much of the world into a recession that threatened to cascade into a depression.

In large part, these falls in unemployment are the result of the success of the unconventional monetary policy actions of central banks – zero or even negative interest rates followed up with huge bouts of quantitative easing have kicked in to support growth, lower unemployment, avoid deflation at the depths of the recession and now it is starting to rekindle much needed inflation.

Unfortunately, Australia has lagged the rest of the world at least in terms of the recent momentum in economic activity and the direction of the unemployment rate.

The unemployment rate is going up and wages growth is going down.

Wed, 03 May 2017  |  

This article first appeared on the Crikey website at this link: 


ScoMo's ludicrous new budget slogan is stupid and unnecessary

Treasurer Scott Morrison is in trouble. Or at least his budget is.

As Morrison sat down to frame his second budget and the fourth of the current Coalition government, Treasury presented him with an economic triple whammy on the outlook: a wider budget deficit, sluggish economic growth and many years ahead where unemployment will be stuck at a relatively high 5.25-5.75%.

This is an outlook that requires a policy response.

To his credit, Morrison is set to increase infrastructure spending to not only boost growth but to add to productivity. As Labor did during the global crisis, Morrison knows he needs to deliver some fiscal stimulus to move the economy out of its low inflation/high unemployment funk.

The problem politically is that this means an already wide budget deficit and rising level of government debt will need to be expanded. This is anathema to the Coalition and will reinforce the rank hypocrisy of its political strategy over the past decade of maligning budget deficits and rising government debt regardless of the state of the business cycle and level of unemployment and what that debt is being used for.

The budget papers, next week, will show net government debt as a share of GDP on track to reach the highest level since the aftermath of World War II. Faced with this political embarrassment on the economy and rapidly growing debt, Morrison has chosen to trot out a new slogan. Morrison is covering the government’s economic and fiscal challenges by seeking to distinguish between “good” and “bad” government debt.

It is clear that the slogan is cover for what will be a blowout in the budget bottom line.

Mon, 01 May 2017  |  

This article first appeared on The Business Insider at this link 

Click on the link to the podcast with Dr Chris Wright who gave some interesting insights into 457 visas, the labour market and a range of other matters.


PODCAST: With Stephen Koukoulas and Dr Chris Wright on good vs bad debt and the 457 visa changes

Working life is changing. A “job for life” is no longer an expectation. People now have “portfolio careers”. The “gig economy” is an increasing source of income for people, but it comes with none of the associated benefits of work like superannuation and paid holidays.

In Australia, we just learned that consumer prices have been growing marginally ahead of wages. The federal government has moved to tighten the skilled migration program by replacing the 457 visa program with a more restrictive regime.

All of this comes as the RBA has signalled it is less than comfortable with the evident weakness in the labour market: youth unemployment is at all-time highs, and we are starting to see signs of high levels of underemployment among older workers too.

Dr Chris Wright from the University of Sydney business school is an expert in labour market dynamics. On this week’s episode of Devils and Details, Wright joins us along with prominent economist Stephen Koukoulas for an intriguing discussion about what is happening to the way we work and the challenges for Australian businesses in finding the right people.

Thu, 27 Apr 2017  |  

This article first appeared on the Yahoo7 Finance website at this link: 


Inflation is low and remains low

Inflation edged up a little in the March quarter – from an annual rate of 1.5 per cent at the end of 2016, the headline rate rose to 2.1 per cent. The underlying rate of inflation, which the RBA trends to place more weight on when it comes to assessments of interest rate policy, was even more muted, lifting from 1.5 per cent to 1.8 per cent.

And recall, the RBA target range for inflation is between 2 and 3 per cent.

Annual underlying inflation has been at or below 2 per cent since late 2015, and has been below 2.5 per cent, the midpoint of the inflation target, since the end of 2014. That is a long time.

The data today confirm that inflation is low and remains low and in isolation, continues to give the RBA plenty of scope to further reduce interest rates. When the recent data on unemployment, building approvals, private sector business investment and wages growth are added to the mix, the case for an interest rate cut is strong.

Thu, 20 Apr 2017  |  

This article first appeared on The Guardian website at this link: 


The Australian budget is likely to confirm this is a big-spending, big-taxing government

While much of the focus of the upcoming federal budget will, quite rightly, be policy issues associated with housing affordability, areas of changes to spending and revenue, there will also be an opportunity to analyse the underlying values of the government.

This will be the fourth budget of the current Coalition government and will show us the ‘big picture’ of government policies and priorities. There will be data on aggregate government spending, taxation receipts, gross and net government debt and the budget deficit.

The most accurate way to analyse the trends in the key budget figures will be to assess them as a ratio of GDP. Government spending, for example, totalled $48.8bn in 1982-83 and this rose to $423.3bn in 2015-16, which is, at face value, an enormous increase. But spending actually fell from 25.8% of GDP in 1982-83 to 25.6% of GDP in 2015-16. It is a similar issue with government debt, the budget deficit and other benchmarks.

Based on the performance of the economy since the last fiscal update in December 2016, the budget is likely to confirm that this is a big-spending, big-taxing government with a strategy for continuing budget deficits and rising debt as it funds some of its pet projects.

It is all but certain that government debt will remain above 25% of GDP in 2017-18 and the forward estimates, meaning the government will be the first in the last 50 years to have spending at more than a quarter of GDP for eight straight years.


As house prices fall across Australia, should we be worried for our economy?

Tue, 13 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


As house prices fall across Australia, should we be worried for our economy?

Are you a home owner?

If you are in Sydney, Perth and Darwin, you are losing money at a rapid rate.

In Melbourne and Canberra, prices are topping out and there is a growing risk that prices will fall through the course of this year. If your dwelling is in Brisbane or Adelaide, you are experiencing only gentle price increases, whilst the only city of strength is Hobart, where house prices are up over 13 per cent in the past year.

The house price data, which are compiled by Corelogic, are flashing something of a warning light on the health of the housing market and therefore the overall economy. For the moment, the drop in house prices has not been sufficient to unsettle the economy, even though consumer spending has been moderate over the past year.

The importance of house prices on the health of the economy is shown in the broad trend where the cities that have the weakest housing markets tend to have the slowest growth in consumer spending and are the worst performance for employment and the unemployment rate. The cities with the strongest house prices have strong labour markets and more robust consumer spending.

Trump could cause the next global recession: here's how

Wed, 07 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


Trump could cause the next global recession: here's how

The Trump trade wars threaten the global economy. This is not an exaggeration or headline grabbing claim, but an economic slump based on a US inspired global trade war is a distinct and growing possibility as it would dislocate global trade flows, production chains and bottom line economic growth.

Up until a few weeks ago, there was a strong enthusiasm for the economic policies of US President Donald Trump. Tax cuts and planned infrastructure spending were seen to be good for the US and world economies. US stocks and many around the rest of the world rose strongly, to a series of record highs. At the same time, bond yields (market interest rates) surged as the market priced in interest rate hikes and inflation risks from the ‘pro-growth’ policies. It was seen to be good news.

Very few, it seems, were worried about the consequences for US government debt and the budget deficit from this cash splash, especially when the US Federal Reserve was already on a well publicised path to hiking interest rates.

About a month or two ago, a few of the more enlightened and inquisitive analysts started to focus on the fact that the annual budget deficit under Trump was poised to explode above US$1 trillion with US government set to exceed 100 per cent of annual GDP.

A debt binge fuelled by tax cuts was a threat to the economy after the temporary sugar hit.