Aussie Austerity

Generali

G'Day.

I have a couple of stories for you from Down Under to digest:

http://www.radioaustralia.net.au/international/2012-06-06/australian-gdp-ahead-of-expectations/956278

Australia's economic growth surged by 1.3 per cent in the first quarter of the year, more than double economists' expectations, driven by household spending, business investment and mining construction.



The Bureau of Statistics figures show the economy grew by 4.3 per cent in the 12 months to the end of March on a seasonally adjusted basis, its highest level in 4.5 years.

http://www.tradingroom.com.au/apps/view_breaking_news_article.ac?page=/data/news_research/published/2012/6/157/catf_120605_092500_5442.html

As the Reserve Bank of Australia (RBA) board prepares to consider making another cut to the official interest rate, federal Treasurer Wayne Swan again has stressed the importance of a budget surplus.
Returning to surplus, as the government plans to do in 2012/13, provided more room for the central bank to move on the cash rate, he said on Tuesday morning ahead of the RBA's decision.


"I don't intend to pre-empt, but this is where strong budget management really matters," Mr Swan told reporters in Canberra.

So Australia is seeing austerity (rising taxes and falling Government spending as a proportion of output) and rising GDP. The trick is not to have massive Government spending that you can't cover with taxes rather than trying to borrow your way out the the mess that the above creates.

Before anyone comes up with the 'mining boom' canard, only 0.2% of the GDP growth (less than 1/6th) can be put down to increasing mining output.

ILW

Basically, "live within your means" is a pretty good long term strategy.

Wonder why nobody else thought of it.

mystic_trev

I see the Aussies are having a Housepricecrash Gen!

http://www.moneymorning.com.au/20120604/with-falling-australian-house-prices-we-should-sue-the-bankers.html

Generali

mystic_trev wrote: »

I see the Aussies are having a Housepricecrash Gen!

http://www.moneymorning.com.au/20120604/with-falling-australian-house-prices-we-should-sue-the-bankers.html

House price crash is probably a little strong but prices are on the slide pretty much everywhere.

Places where people tend to own holiday places or investment farms have been very badly hit: prices are down 20-30% in many holiday towns up and down the coast from the state capitals.

In the big cities where almost all Aussies live (Sydney, Melbourne and Newcastle contain more than half the country's population between them) prices have fallen by a few percentage points. My belief is that there are a lot more falls to come but time will tell.

The big prop to house prices over here is that people want to live in a massive place. 1/4 acre of land with a 2,500-3,000ft^2 house is considered a normal thing to expect to own in Sydney. If you live in a country town you'd expect at least 1/2 acre and a 4,000ft^2 house. A continent the size of Europe with a population of 23,000,000 has a housing shortage!!!

The sledgehammer looking to remove that prop is that banks in Aus are highly reliant on funding from abroad. It's kinda like Northern Rock squared: requiring massive money market funding and wanting to get the money from foreigners.

grizzly1911

Somone posted "here" in the last day or so average personal tax take for various countries and I was interested to see that Australia was the highest 40 something percent along with Norway.

UK and many others were in the 30 somethings.

Generali

grizzly1911 wrote: »

Somone posted "here" in the last day or so average personal tax take for various countries and I was interested to see that Australia was the highest 40 something percent along with Norway.

UK and many others were in the 30 somethings.

GST (VAT) is 10%. Direct taxes on petrol are low too (I pay about the same number in $ as you do in £ for fuel, ie you pay about 50% more). There's no inheritance tax and Capital Gains Tax is low (half your income tax rate). You can also claim a lot of relief against PAYG (PAYE as it is known in the UK) on things like home utility bills, educational supplies for the kids and even child care.

The top rate of income tax is 45% but that's only payable on incomes of well over £100,000. Up to £50,000 you pay 30% and there's no employees National Insurance.

Overall the Aussie Government spends about 30% of GDP. The UK Government about 45%. That tells you where taxes are likely to be in the long term.

MacMickster

Generali wrote: »

G'Day.

So Australia is seeing austerity (rising taxes and falling Government spending as a proportion of output) and rising GDP.

Sounds very Keynesian. Perhaps what the last UK government should have done when the economy was growing rapidly.

HappyMJ

Generali wrote: »

GST (VAT) is 10%. Direct taxes on petrol are low too (I pay about the same number in $ as you do in £ for fuel, ie you pay about 50% more). There's no inheritance tax and Capital Gains Tax is low (half your income tax rate). You can also claim a lot of relief against PAYG (PAYE as it is known in the UK) on things like home utility bills, educational supplies for the kids and even child care.

The top rate of income tax is 45% but that's only payable on incomes of well over £100,000. Up to £50,000 you pay 30% and there's no employees National Insurance.

Overall the Aussie Government spends about 30% of GDP. The UK Government about 45%. That tells you where taxes are likely to be in the long term.

30% or 37% or 45% tax plus 1.5% medicare levy plus 1% medicare levy surcharge if private health insurance not held plus 0.5% or 1% flood levy plus compulsory superannuation contributions at 9% of salary plus 5.45% payroll tax. It all equals out at about the same as the UK.

Kennyboy66

Generali wrote: »

G'Day.



Before anyone comes up with the 'mining boom' canard, only 0.2% of the GDP growth (less than 1/6th) can be put down to increasing mining output.

Is it really a 'canard' though ?

Engineering construction (on the back of mining) contributed more than half of GDP growth year ended March 2012.

http://www.theaustralian.com.au/national-affairs/treasury/miners-dig-economy-out-of-hole/story-fn59nsif-1226386849745


Mate out in WA is earning $7k for 5 x 12hr shifts.

Wookster

How much has credit grown in Australia Generali?

Australia has been through an enormous housing bubble hasn't it?

Generali

HappyMJ wrote: »

30% or 37% or 45% tax plus 1.5% medicare levy plus 1% medicare levy surcharge if private health insurance not held plus 0.5% or 1% flood levy plus compulsory superannuation contributions at 9% of salary plus 5.45% payroll tax. It all equals out at about the same as the UK.

It does if you only look at one sort of tax. Ultimately Government spending levels tell you what taxes are likely to be overall in the long term.

Super isn't really a tax so much as an enforced savings scheme. It also means that Australia is actually putting away money to pay for retirement which most countries fail to do.