DEBTS

Victorian budget a risk to recovery

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Original article by Rachel Baxendale, Geoff Chambers
The Australian – Page: 1 & 6 : 21-May-21

The Victorian government’s May 2021 Budget shows that the state’s net debt will blow out to $156.3bn by mid-2025. However, the government has confirmed that the state’s deficit for 2020-21 will be much lower than previously forecast, at $17.4bn. The key measure announced in the Budget is a payroll tax surcharge of 0.5 per cent on businesses with a wages bill of more than $10m; this will rise to one per cent for businesses with wages costs of more than $100m. The surcharge is slated to raise $387m in 2021-22 and about $3bn over four years, with the proceeds to be used to finance a $3.8bn mental health package. The levy has been criticised by business leaders and federal Treasurer Josh Frydenberg, who warn that it will cost jobs and undermine the national economy’s recovery from the pandemic.

CORPORATES
AUSTRALIA. DEPT OF THE TREASURY

AAA rating likely to be downgraded

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Original article by Michael Read
The Australian Financial Review – Page: 15 : 13-May-21

S&P Global Ratings placed Australia’s triple-A credit rating on negative outlook in April 2020, in response to the COVID-19 pandemic. The Commonwealth Bank has warned that Australia could potentially be downgraded to AA+ when S&P undertakes its annual review of the nation’s credit rating in September. Fixed income strategists Philip Brown and Martin Whetton attribute this to Australia’s rapidly growing net debt. However, ratings agencies are generally positive about Budget measures aimed at further stimulating the economy.

CORPORATES
S&P GLOBAL RATINGS, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

National cost of pandemic response to reach $327bn over five years

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Original article by Patrick Commins
The Australian – Page: 4 : 5-Mar-21

The Parliamentary Budget Office estimates that the combined net debt of Australia’s three levels of government will blow out to almost $1.3tn in the five years to 2024. Federal, state and local governments are forecast to collectively spend some $327bn on COVID-19 measures over the five-year period. The independent budget watchdog now expects the national net operating balance across all levels of government in 2020-21 to be a deficit of 11.1 per cent of GDP; it had previously forecast a surplus of 1.7 per cent of GDP for the current financial year.

CORPORATES
AUSTRALIA. PARLIAMENTARY BUDGET OFFICE

States on $500bn debt binge

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Original article by Adam Creighton
The Australian – Page: 1 & 6 : 2-Dec-20

Centre for Independent Studies research fellow Robert Carling says that rising state government debt means that some states could have their credit ratings downgraded in coming years. Analysis of state governments’ Budget papers show that their combined debt will top $491bn by mid-2024, compared with just $200bn in June 2020. Carling contends that while some of the increase in debt is inevitable, some states are taking on more debt than necessary. Chris Richardson of Deloitte Access Economics in turn says rising debt is better than the alternative of lower debt and an unemployment rate that is higher for longer.

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THE CENTRE FOR INDEPENDENT STUDIES LIMITED, DELOITTE ACCESS ECONOMICS PTY LTD

Deficit high but less than predicted

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Original article by Adam Creighton,Geoff Chambers
The Australian – Page: 4 : 28-Sep-20

Deloitte Access Economics expects the federal government to announce a 2020-21 Budget deficit of $198.5bn on 6 October. This is just $14bn higher than the government had forecast in June. Chris Richardson of Deloitte says personal and corporate income tax receipts will exceed the government’s low expectations, while commodity prices have been more resilient than anticipated. He notes that the iron ore price in particular is still well above the Treasury’s projections. However, Deloitte expects federal debt to be about $401bn higher than the government’s pre-pandemic forecasts in 2023.

CORPORATES
DELOITTE ACCESS ECONOMICS PTY LTD,AUSTRALIA. DEPT OF THE TREASURY

AAA rating defies $184b deficit

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Original article by Phillip Coorey
The Australian Financial Review – Page: 1 & 6 : 24-Jul-20

The Australian economy will contract by 2.25 per cent in 2020-21, according to forecasts in the federal government’s economic update. The nation’s official unemployment rate is in turn projected to rise from 7.4 per cent at present to 9.25 per cent by the end of the year. Treasury has also forecast a Budget deficit of $85.5bn for 2019-20, rising to around $184.5bn in 2020-21. Meanwhile, the nation’s gross debt is slated to top $851.9bn in 2020-21. Moody’s and S&P have indicated that the economic update will have no impact on Australia’s triple-A credit rating.

CORPORATES
AUSTRALIA. DEPT OF THE TREASURY, MOODY’S INVESTORS SERVICE INCORPORATED, S&P GLOBAL RATINGS

Federal debt boss: why borrowing isn’t easy

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Original article by Adam Creighton
The Australian – Page: 4 : 26-Aug-19

Australian Office of Financial Management CEO Rob Nicholl has rejected suggestions that the federal government’s capacity to increase its borrowings has been boosted by the downturn in bond yields. The yield on 10-year government bonds fell below the cash rate of one per cent earlier in August, and Nicholls argues that demand for government debt has not risen despite a global downturn in bond yields. The federal government is resisting pressure to ramp up its infrastructure spending instead of prioritising a return to a Budget surplus.

CORPORATES
AUSTRALIA. DEPT OF THE TREASURY. OFFICE OF FINANCIAL MANAGEMENT

States climb $180bn debt mountain

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Original article by Michael Roddan
The Australian – Page: 1 & 6 : 19-Jun-19

The combined net debt of Australia’s state and territory governments is set to exceed $184bn over the next four years, compared with just $81bn in 2018-19. Increased investment in infrastructure will be a key contributor to the debt blowout, and Robert Carling of the Centre for Independent Studies stresses the need for such projects to be subject to a cost-benefit analysis. He adds that New South Wales and Victoria could potentially be at risk of losing their AAA credit ratings if their net debt continues to rise, although he says this is unlikely in the near-term.

CORPORATES
THE CENTRE FOR INDEPENDENT STUDIES LIMITED, AUSTRALIAN LABOR PARTY, MOODY’S INVESTORS SERVICE INCORPORATED, DELOITTE ACCESS ECONOMICS PTY LTD, NEW SOUTH WALES. THE TREASURY, SOUTH AUSTRALIA. DEPT OF TREASURY AND FINANCE

$32bn debt binge funds pledges

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Original article by Rebecca Urban
The Australian – Page: 6 : 28-May-19

The Victorian Government’s May 2019 Budget has forecast a surplus of $1bn in 2019-20, rising to $1.5bn in the following financial year. State debt is projected to rise by $32.1bn over the forward estimates period, topping $54.9bn in 2022-23. The increased debt will be used to finance infrastructure projects, with expenditure on infrastructure to average $13.4bn a year over the forward estimates. Meanwhile, the government has scaled back its forecasts for growth in employment and gross state product over the next three years.

CORPORATES
VICTORIA. DEPT OF TREASURY AND FINANCE, MOODY’S INVESTORS SERVICE INCORPORATED, S&P GLOBAL RATINGS

Coalition defuses debt bomb

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Original article by Simon Benson
The Australian – Page: 1 & 2 : 2-Apr-19

Prime Minister Scott Morrison has rejected suggestions that the April 2019 Budget will be a ‘cash splash’ ahead of the federal election, stressing the government’s track record for fiscal discipline. Meanwhile, the Budget papers are forecast to show that Australia’s net debt will be reduced to zero by 2028-29 under the Coalition, compared with $370bn at present. The Budget is expected to remain in deficit for 2018-19, although it is likely to be lower than the $5.2bn that was forecast in the mid-year update. The government is tipped to bring forward the second and third stages of its tax cuts package.

CORPORATES
AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIA. DEPT OF FINANCE, AUSTRALIA. PARLIAMENTARY BUDGET OFFICE, AUSTRALIAN LABOR PARTY, AUSTRALIA. FUTURE FUND MANAGEMENT AGENCY, AUSTRALIAN FEDERAL POLICE, AUSTRALIAN SECURITY INTELLIGENCE ORGANISATION