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NAB’s opinion of the budget

The National Australia Bank, in their assessment of the 2018-19 budget, described the government’s commitment to a tax to GDP ratio of 23.9% as “largely political but probably means that without significant spending restraint (unlikely in our view) future surpluses will be marginal. Hence there is little to no room for the Budget to adapt to any economic downturn while retaining the projected surplus – and indeed little macro policy flexibility.”

On the infrastructure spend, they point out that two thirds of the $75 billion came from previous announcements and, of the new funding, “Much of this is back ended and some may not go ahead (e.g. the Victorian Government has not committed to matching funding of the $5bn Melbourne to airport rail link).”

The “modest” personal tax cuts for 2018-19 “are unlikely to add much to growth” and the company tax cuts, should they go ahead, “in the short term really involves a switch from corporate to personal taxes (given our imputation system). Hence in many macro models the impact of corporate tax cuts on domestic demand are generally found to be relatively small.”

They “remain somewhat sceptical about the [surplus] projections – if nothing else there is clearly an ‘election cycle of promises’ still to go” and a $21bn Contingency reserve to fund it.

“It will be interesting to see how much further spending will be rolled out in the election cycle. Already it has been confirmed that there will be a “Women’s” Budget in the spring.”

Despite Scott Morrison’s assurances that they will no longer need to borrow to fund recurrent expenditure, the NAB says “we don’t really return to structural – as against a nominal – surplus for some time – i.e. post 2020/21.”

“Put differently revenue continues to be the main driver of the Budget and the medium term surpluses rely on more strict expenditure control than anything we have seen recently.”

While the bank sees infrastructure spending, non-mining business investment and, in the very near term, LNG exports adding to growth, they “still worry about the consumer who we expect will remain very cautious.”

“Going forward we see limits on how much more consumers will be willing to run down savings. As a result we still see consumer caution in the face of higher electricity prices, low wages growth, stalling/falling house price wealth and high debt levels.”

Businesses, on the other hand, are doing well.

“While business conditions remain at very high levels (trend conditions of around +19 vis long run averages of +5.5) business continues to use better profits to pay down debt and balance sheet strengthening.”

The Business Survey “continues to point to a strengthening labour market – with growth in jobs around 24k (or more) for at least the next 6 months” and unemployment falling to around 5 per cent by year’s end – though they warn that is dependent on the participation rate not continuing its “puzzling rise.”

ScoMo would have us believe the improvement in projections is due to their sound fiscal management and their restraint. The bank thinks otherwise.

“The improvement in the underlying cash balance in 2018-19 and 2019-20 is entirely due to parameter changes – principally revenue. This reflects in part the flow on effects of higher commodity prices to mining sector profits, but also more general strength in business activity and employment growth. In contrast, policy decisions detract from the underlying cash balance in each year… while the forward estimates have a degree of spending discipline from 2019-20– it is noteworthy that growth in spending in the prior three years is more rapid… the real expenditure constraint in the Budget is from 2020/21 onwards.”

The only new announcement for the childcare and education sectors was “an additional $247 million over four years from 2018-19 to extend the National Schools Chaplaincy Programme.”

The only contribution to affordable housing was “$550 million over the five years starting 2018-19 to improve access to housing for Indigenous residents in remote Northern Territory.”

The bank was silent on the lack of any funding to address climate change and the continued freeze on Foreign Aid, inexplicable decisions considering the existential threat posed by the former and the national security benefit of the latter. When will big business get on board about the economic benefits of these essential investments in our future in this region?


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  1. Jaquix

    Good analysis from an unlikely source. Only $247 million to further fund the chaplaincy thing, is certainly not to be called “education” as the NAB has called it. Notice too they say that business is doing well, and using their new profits to pay down debt. No mention of increasing wages!

  2. Kaye Lee


    The article is not the full statement. Wage rises were mentioned a few times but not terribly optimistically. Click on the link to read the whole thing.

    “Finally it is worth remembering that tax cuts – were they to get up politically – would not necessarily provide a large initial boost to activity and or wages.

    As noted earlier Nab recently used its Business Survey data base to explore the likely impact of a company tax cut.

    In terms of where the tax cuts would be used, those businesses who considered a tax cut would improve their outlook pointed to the
    most significant impact being increased business investment. Those pointing to a tax cut having a significant positive impact, by
    category, are as follows:

    o Investment growth 32%
    o Paying down debt 17%
    o Employment growth 14%
    o Wages growth 8%”

    Mind you, that is what they said on the survey – not what will necessarily happen

  3. flohri1754

    Very succinct … makes me think more of NAB. Typical LNP budget then is the bottom line … cut ABC (again) … keep funding the “chaplains” …. ignore the climate … nothing for renewables. Really sad actually to have such a proposed budget in 2018 …

  4. Kaye Lee


    Needless to say, inequality, welfare and poverty didn’t rate a mention in the NAB appraisal though, to be fair, they are not commentators on social justice.

    This punitive approach is typical of the Coalition’s reactionary approach to everything. They don’t understand the value of preventative measures.

  5. Ill fares the land

    In the same way that Donald Dumpling has fabricated a crisis with Iran (which no-one else can see – which in Donald’s mind is an affirmation that the other world leaders are fools and he is a goddam genius). the LNP has fabricated an economic recovery in order to buy votes with the promise of tax cuts.

    Howard and Costello pulled the same stunt (with dire consequences that are still impacting on the government budget), but they were awash with revenue. Scomo only has a surplus of self-belief that he is an astounding and outstanding economic manager and some decidedly rubbery forward revenue estimates. Howard and Costello gave away money they had – instead of committing to infrastructure spending. Scomo is giving away money he hopes to have and committing to infrastructure spending that has largely already been accounted for – and a significant part of that by Labor – but then the tax cuts are as much a dare to Labor to match those cuts. If Labor won’t, the LNP will shriek about how Labor is a “higher-taxing & higher-spending government” than the LNP. My suggestion is that this is all a part of a campaign to allow the LNP to believe it can reclaim government if it calls a poll in September/October

  6. New England Cocky

    “the government’s commitment to a tax to GDP ratio of 23.9% as “largely political but probably means that without significant spending restraint (unlikely in our view) future surpluses will be marginal. Hence there is little to no room for the Budget to adapt to any economic downturn while retaining the projected surplus – and indeed little macro policy flexibility.”

    Further proof that the Loathesome Nasty People misgovernment have absolutely no idea about managing a soft drink stall selling one brand of drink, let alone any intention of striking a national Budget for the benefit of the egalitarian voters.

    But what else could you reasonably expect from a Prim Monster having deposits in the Cayman Islands after working for the major cause of the 2009 GFC????

    Bring on the Federal election!!!!!

  7. Kaye Lee

    “Kelly O’Dwyer has confirmed that Tuesday’s budget will set aside funding for a women’s economic security statement to be delivered in September.”

    Yup, they don’t bother with we women unless we are useful for them. Why wait to September? Or why not wait for MYEFO? Pretend to care when there is an election in the offing?

  8. Jack Russell

    On the other hand, I think they do understand the value of preventative measures … that’s why they are so very very good at NOT delivering them.

    The same as they also completely understand the role of government as sovereign currency issuers … and have highjacked that process to specifically serve their own idealogical purposes.

    The L/NP siphon is pouring the wealth of this country into private off-shore bank accounts at full capacity … and this latest budget is the blueprint for a larger, more efficient siphon.

  9. Harry

    The voters must make a fundamentally important decision.

    Do we continue the growing gap between the very rich and everyone else, or do we fight for an economic agenda that creates jobs, raises wages, protects the environment and provides universal health care and education for all? Are we prepared to take on the enormous economic and political power of the entitled class, or do we continue to slide into economic and political oligarchy?

    The Labor party is much better than the appalling Coalition but it still very much neoliberal and seems if anything committed to pursuing the largely irrelevant goal of returning the budget to surplus.

    The focus should be on full employment, price stability, sustainability and well-being, i.e. as low as practicable spending gap between where we are now and the capacity of the economy. The resulting fiscal balance will be whatever as its not a meaningful target.

    Taxes should :

    -regulate access to real resources to encourage sustainability

    -create fiscal “space” for the government to enact its social agenda

    -moderate excess, where excess has a negative impact on society

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