Published on June 12, 2016
1. Economy and Government Policies –Australia– June 2016 By: Paul Young, CPA, CGA
2. Disclaimer • This presentation discuss government and economics policies for Australia
3. Paul Young - Presenter Bio • CPA/CGA • 25 years of experience in Academia, Industry and Financial solutions • Youtube Channel - https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg
4. Agenda • Debt to GDP • Budget Deficits • Economic Forecast • GDP Analysis • Retail Sales • Income inequality • Trade • Tax policies • Banking Sector
5. Government Debt to GDP • Out of the G20 nations, the European Union holds the biggest national debt, with a whopping US$14.8 trillion (A$16.8 trillion). This isn’t surprising given the European Union is made up of 28 member states. • The European Union also holds the fifth-highest debt as a proportion of GDP of 87.4 percent, which means its debt is almost worth the same value as its total economic output. • The United States ranks second behind the European Union, with US$12.0 trillion (A$13.6 trillion) of debt. It holds the eighth-highest debt as a proportion of GDP, of 71.8 percent. • Australia ranks well compared with other G20 nations according to the research, placing 13th on the list of national debt per nation. Australia’s national debt is US$485.1 billion (A$549.8 billion) which represents 32.6 percent of the country’s GDP. • Saudi Arabia was ranked at the bottom of the list, with just US$87.7 billion (A$99.5 billion), which represents 12.2 percent of its GDP. • The highest debt as a proportion of GDP was Japan, with 226.1 percent, which means that the country’s national debt of US$11.3 trillion (A$12.9 trillion) is more than double what it made for the year. It also ranked third-highest for national debt. If Japan spent the next two years repaying its debt with its entire GDP, it would still be in the red.
6. Australia – Deficit/Surplus • Chris Richardson calculates that the budget deficit from now to 2018/19 will total $129 billion, $21 billion worse than Treasurer Scott Morrison forecast in December’s midyear budget. • “The budget boom of the past decade continues to become a budget bust,” Mr Richardson says in the latest Deloitte Access Economics budget monitor on Tuesday. He expects the budget deficit for 2015/16 will be $41.7 billion, $4.3 billion bigger than previously forecast. • For subsequent years: • 2016/17 — $38.6 billion rather than $33.7 billion • 2017/18 — $27.8 billion instead of $23 billion • 2018/19 — $21.3 billion, $7.1 billion more than forecast in December. • While the recent surge in the iron ore price would add some $15 billion to the tax take if it was sustained over the four-year budget estimates, this merely blunts the impact of ever slowing wage growth and the renewed strength of the Australian dollar on revenue.
7. Australia – Income Inequality • Australians in the top 20 per cent of wealth holders have 70 times the wealth that people in the bottom 20 per cent have, a report on Australia's widening wealth inequality says. • The report from the Australian Council of Social Service on Monday says Australia's level of income inequality is above the Organisation for Economic Co- operation and Development average. • Welfare groups are demanding that authorities strengthen Australia's social safety net in order to prevent widening inequality from becoming the new norm. • The top five per cent of households in Australia earned more 15 times as much as the bottom five per cent of households in 2012, based on a range of data including Australian Bureau of Statistics figures, the ACOSS report says. •
8. Global Forecast
9. Australia GDP - • Australia's economic growth rate accelerated in the first quarter this year as strong export volumes and household spending on services helped offset lacklustre business profits and investment. • The Australian Bureau of Statistics said on Wednesday gross domestic product expanded 1.1 per cent in the first three months of the year, compared with a revised 0.7 per cent in the final 2015 quarter. • The figure was even better than the hurriedly revised economists' estimates after a much stronger contribution from net exports, revealed on Tuesday, had pushed GDP forecasts up from 0.6 per cent on Monday to 0.8 per cent just ahead of Wednesday's data.
10. Retail Sales / Australia • An unusual decline in food and liquor sales has caused retail turnover to miss economist forecasts, with relatively weak 0.2 per cent growth. • Economists surveyed by Reuters had typically expected retail sales to grow 0.3 per cent in April. • The Bureau of Statistics data for April show supermarket and grocery stores had a 0.2 per cent fall in sales, seasonally adjusted, while liquor retailing dropped 1.4 per cent. • Specialised food retailers saw a steep 1.1 per cent decline in their sales, indicating that shoppers were not shifting from supermarkets back to small stores. • While people were shunning fresh food and groceries, they flocked to restaurants and cafes, which saw a 1 per cent jump in sales. • Clothing retailers have complained that the unseasonably warm autumn weather has dented sales of winter apparel, such as coats and jumpers.
11. Housing Market / Australia • "Our house price-to-income ratio now in Australia makes the American housing bubble in the lead up to 2007 look positively moderate," Jonathan Pain, publisher of investment newsletter, The Pain Report, told CNBC's "Street Signs." • The median housing price in Sydney was 12.2 times more than the median annual household income in the third quarter of 2015, up from 9.8 in all of 2014, according to data from the most recent Demographia International Housing Affordability Survey. In Melbourne, the median home price was 9.7 times median income in 2015's third quarter, up from 8.2 across 2014, the data show. • "Australian banks are heavily invested in probably one of the most inflated real- estate markets in the world and we now have an avalanche of residential housing supply hitting the market," Pain said. • He said that the Big Four banks had issued more than 80 percent of the country's residential property mortgages, adding that mortgages as a percentage of banks' assets were "extraordinary."
12. Australia / Trading Partners Australia's quarterly trade deficit narrowed marginally to $20.8 billion, the fifth worst result on record, while foreign debt kept growing above $1 trillion. Data released by the Australian Bureau of Statistics also showed Australia's net foreign debt continued to mount, up another 1 per cent over the quarter to a record $1.03 trillion. In volume terms - a key input into the quarterly economic growth figures - net exports rose 60 per cent to $4.7 billion, which the Australian Bureau of Statistics forecast would add a strong 1.1 per cent to the March quarter GDP figure to be released tomorrow. The surge in export volumes – iron ore, coal and fuel up 5.8, 4.9 and 11 per cent respectively – pushed export volumes to a record high of $96.7 billion.
13. Australia Tax System • Hong Kong topped the rankings in the 2016 IMD World Competitiveness Yearbook, followed by Switzerland and the United States, which dropped from first place. • Australia improved its ranking one notch to 17th out of 61 economies, helped by improvement in factors such as labour regulations, government decision-making and fuel prices. • The country’s most attractive feature continues to be an effective legal environment, according to a survey of business executives done as part of the ranking. • High education levels and skilled workforce also rank highly. The most attractive feature for overall leader Hong Kong — a competitive tax regime — was also ranked the least attractive feature about Australia. • Australia also ranks poorly over cost-competitiveness and effective labour relations. • In the Asia-Pacific region, Australia was outgunned by Hong Kong, Singapore, Taiwan and even New Zealand in the competitive stakes.
14. Banking Sector – Australia - Health • Canada’s banks were ranked the world’s soundest by the World Economic Forum for the eighth year in a row, even as rising housing prices may present a risk. • The country’s banking system, which includes Toronto- Dominion Bank, Royal Bank of Canada and Bank of Nova Scotia among others, ranked No. 1 in the Global Competitiveness Report released by the organization Wednesday in Geneva. Finland’s system ranked second of 140 countries surveyed and Australia’s third. The U.S. came in 39th place, compared with 49th a year earlier, according to the report. • Canadian banks are “considered sound, although exposure to a potentially overvalued housing market could become a risk,” the organization said in its report.
15. Sources • Contact: [email protected]