Victoria recorded one new case of COVID-19 on Monday, another fantastic result that suggests the coronavirus outbreak there is now being well controlled. Premier Daniel Andrews said on Tuesday the state was “well placed this weekend to be able to make very significant announcements about a further step to opening”.
It’s worth acknowledging what a fantastic job everyone has done in Victoria. Huge sacrifices have been made, people have done the hard yards in difficult circumstances, and now it’s time to step our way out.
Here are answers to common questions about emerging from lockdown and how to make sure you’re doing it safely.
When and how should the Victoria-NSW border reopen?
The Sydney Morning Herald reports the NSW-Victoria border could reopen within a month (and Andrews said he would like to see NSW reopen to regional Victoria as early as this week).
The Herald quoted NSW Premier Gladys Berejiklian saying:
We are very keen to see what happens in Victoria once further restrictions are eased because that’s the real test […] And if Victoria demonstrates that they’ve […] upped their contact-tracing capacity, that they’re able to demonstrate they’re not going to have uncontrolled outbreaks while they’re easing restrictions, well that will give us confidence to open the borders.
So there’s a bit of guesswork here but if you match her comments up with the current roadmap to ease restrictions, it sounds like there’s a chance the border could be reopening some time in the first half of November.
There will be a period of watching closely how well Victoria does as restrictions ease; this will be the real test of where Victoria is at in terms of suppressing transmission.
But once you have confirmation NSW and Victoria are pretty much tracking the same way, there’s no reason to keep the border closed. There are plenty of good economic and social reasons to have it open.
Even though the numbers look fairly similar between Victoria and NSW, the shape of the two outbreaks has been and remains slightly different. In NSW, most new cases are from overseas arrivals and the number of mystery cases is lower, as shown in this excellent breakdown published by the Sydney Morning Herald and The Age.
So, quite reasonably, there’s a bit of caution about letting Victorians into NSW; there’s more uncertainty around exactly where Victoria sits in terms of controlling the spread of the virus. But as long as things continue to go well in Victoria as it opens up, NSW can have greater confidence it’s safe to reopen the border.
How should the opening of the border be managed? Well, I don’t think you can attempt a staged opening of a border. The whole point of a border reopening is to allow free movement between the two states. Either you wait until you’re confident and then open the border, or you don’t do it at all. You can’t half open it.
Is fishing allowed in Victoria?
For Melburnians, the answer is basically yes, assuming there’s a fishing spot within your 25km radius and you’re sensible about it. As with all activities, it’s important to stick to the restriction changes announced this week and follow hygiene and distancing rules. (Use this ABC tool to find out what’s within 25km of your Melbourne home.)
For regional Victorians, you can go fishing as long as you’re being COVID-safe and following the restrictions (outlined in the Instagram post embedded above).
The Victorian Fishing Authority says:
When fishing or boating you must keep a 1.5m distance from other participants, wear a fitted face covering at all times (except for children under 12 or where an exemption applies), practice good hygiene and not share equipment.
I’m not much of a fisherman myself but, as an epidemiologist, I think fishing sounds like a lovely, low-risk, relaxing outdoor activity — if you don’t mind dealing with the fish.
When can Melbourne people travel to regional Victoria?
According to the Department of Health and Human Services, for Melburnians:
Travel to regional Victoria is still only allowed for permitted purposes even if this is within 25km. This means you cannot travel into regional Victoria for exercise or recreation.
This is the “ring of steel” you have heard so much about, the aim of which is to protect regional Victoria from the virus in metropolitan Melbourne.
The government’s Roadmap for reopening currently says when there have been zero new cases in the community for more than 14 days, the state can move to the roadmap’s final step. Then, travel within Victoria will be allowed (but you can’t enter any restricted area).
Can regional Victorians visit Melbourne?
According to the third step in the roadmap, regional Victorians:
…must not travel into metropolitan Melbourne under current restrictions, except to buy necessary goods and services, for care and compassionate reasons or permitted work or education. While in metropolitan Melbourne you must comply with the metropolitan Melbourne restrictions.
You can travel through metropolitan Melbourne on your way to a holiday in regional Victoria but shouldn’t stop unless it is for one of the three permitted reasons.
Being smart about it
As the pendulum shifts away from the government telling us what we can do, to us making our own decisions, it’s important to be COVID-safe in the way we navigate this new normal.
That means limiting your contact with people, wearing a mask, practising social distancing and hand hygiene, staying home when sick, and getting tested if you have symptoms.
The government has shaved its forecasts for both economic growth and the projected surplus for this financial year in its budget update released on Monday.
The Australian economy is now expected to grow by only 2.25% in 2019-20, compared with the 2.75% forecast in the April budget.
The projected surplus has been revised down from A$7.1 billion at budget time to $5 billion for this financial year.
By 2022-23 the surplus is projected to be tiny A$4 billion, a mere one fifth of one per cent of GDP, less than half the $9.2 billion projected in April.
Combined, $21.6 billion has been slashed from projected surpluses over the coming four years.
The revenue estimates have also been slashed, down from the pre-election economic and fiscal outlook (PEFO) by about $3 billion in 2019-20 and $32.6 billion over the forward estimates.
The changes this financial year reflect downgrades to superannuation fund taxes, the GST and non-tax receipts. The downgrade in later years reflects changed forecasts for individual taxes, company tax and GST.
The official documents sought to put as positive a spin as possible on the worse economic figures:
Australia’s economy continues to show resilience in the face of weak momentum in the global economy, as well as domestic challenges such as the devastating effects of drought and bushfires.
While economic activity has continued to expand, these factors have resulted in slower growth than had been expected at PEFO.
The revised figures forecast growth will be 2.75% next financial year.
The impact of the drought is reflected in the fact farm GDP is expected to fall to the lowest level seen since 2007-08 in the millenium drought.
The downgrades will fuel calls already being made by the opposition and some stakeholders and commentators for economic stimulus.
But the government, which since the budget has brought forward some infrastructure and announced spending on aged care and drought assistance, is continuing to resist pressure for stimulus now, wishing to hold out until budget time.
The budget update – formally called the mid-year economic and fiscal outlook (MYEFO) – contains more bad news for workers’ wages.
Wages are forecast to rise in 2019-20 by 2.5%, compared with the forecast of 2.75% in the budget.
Employment growth remains at the earlier forecast level of 1.75% for this financial year, but the unemployment rate is slightly up in the latest forecast, from 5% at budget time to 5.25% in the update.
In its bring forward and funding of new projects, the government is putting an extra $4.2 billion over the forward estimates into transport infrastructure projects.
Its extra spending on aged care will be almost $624 million over four years, in its initial response to the royal commission. This is somewhat higher than the $537 million announced by Scott Morrison in November.
While the projected surplus has been squeezed, the government continues to highlight the priority it gives it, saying that despite the revenue write downs, it expects cumulative surpluses over $23.5 billion over forward estimates.
Spending growth is estimated to be 1.3% annual average in real terms over the forward estimates. Payments as a share of GDP is estimated at 24.5% this financial year, reducing to 24.4% by 2022-23, which is below the 30 year average.
Treasurer Josh Frydenberg said the update showed “the government is living within its means, and paying down Labor’s debt”.
He said “the surplus has never been an end in itself, but a means to an end. An end which is to reduce interest payments to free up money to be spent elsewhere across the economy.”
The government’s economic plan was “delivering continued economic growth and a stronger budget position.
“MYEFO demonstrates that we have the capacity and the flexibility to invest in the areas that the public need most.”
Shadow treasurer Jim Chalmers said the update showed the government’s economic credibility was destroyed. At its core, there were “two humiliating confessions – the economy is much weaker and the government has absolutely no idea and no plan to turn things around”.
Chalmers said Morrison and Frydenberg “couldn’t give a stuff that Australians are facing higher unemployment and weaker wages and slower growth.
“If they cared enough about the workers and families of this country, they would stop sitting on their hands and they would come up with an actual plan to turn around an economy which is floundering on their watch.”
The latest Windows 10 update has basically trashed my computer. The update was installed automatically, so I wasn’t expecting it to happen. I had just turned the computer on and when I returned to it after allowing it to boot, there it was ‘installing.’ Anyhow, it failed and the computer is now unusable.
So what this means is that I will not be able to post in the ‘usual’ way for some time – very disappointing.
Here’s how the budget is looking at the mid-year mark, in seven charts.
The A$5.8 billion drop in the 2017-18 underlying cash deficit compared with the original May budget is due more to higher revenue than lower spending. Receipts are higher by A$3.6 billion and payments are lower by A$2.1 billion.
The higher receipts reflect the stronger economy, which implies higher company tax (up A$3.2 billion) and superannuation fund taxes (up A$2.1 billion).
Receipts would have been even higher if not for stubbornly weak wages growth which, despite stronger employment growth, has tended to dampen individuals’ income tax receipts. These are in fact down by A$0.5 billion.
The estimates of GST and other taxes on goods and services remain unchanged since the budget.
The lower payments of A$2.1 billion are driven by several changes having opposite effects. Some of these are:
A$1.2 billion (over four years) lower welfare payments to new migrants due to longer waiting times;
A$1 billion (over four years) lower payments to family daycare services due to more stringent compliance checking; and
A$1.5 billion (over four years) lower disability support payments due to lower than expected recipient numbers.
There is not much change in the net debt projections relative to those in the 2017-18 budget. Net debt is A$11.2 billion lower at A$343.8 billion in 2017-18 (around 19% of GDP). Debt stabilises in 2018-19 and starts to steadily decline thereafter to about 8% of GDP in the next ten years.
The lower deficits as a share of GDP are obviously reducing debt, but one factor tending to increase debt is student higher education loans. These are projected to increase by 32% from A$44.4 billion to A$58.8 billion over just the next four years.
The economic outlook continues to be a puzzle. National output of goods and services, real GDP, is expected to grow slightly slower in 2017-18 than the budget forecast – 2.5% compared with 2.75%.
However this is an improvement on the 2% achieved in 2016-17. And it is expected to increase further to 3% in 2018-19.
The economy is being driven by strong global growth and strong domestic business investment. Australia’s major trading partners are forecast to grow (meaning real GDP growth) at a weighted average of 4.25% in each of the next three years.
Wages and household consumption are the puzzle – they are not growing as fast as expected from the stronger than expected employment growth (up 0.25% on the budget to 1.75%) and lower than expected unemployment rate (down 0.25% on the budget to 5.5%).
Household consumption growth is down 0.5% on the 2017-18 Budget forecast to 2.25%. This has in fact become a global phenomenon due to higher costs and job insecurity from the forces of globalisation and automation.
Commodity prices are notoriously volatile and hard to predict, yet they are critical to the budget forecasts because they impact the revenue of resource companies which feeds into company taxes and other taxes.
Iron ore prices are assumed to remain flat at US$55 per tonne over the forecast period, as in the budget. This forecast is almost certain to be wrong because iron ore prices never stay flat for long – the problem is that we can’t say in which direction it will be wrong.
The same applies to thermal coal prices which are assumed to be flat at US$85 per tonne which is again consistent with the budget forecast.
Australian taxpayers continue to bear most of the burden of budget repair. The government can claim with some justification that their efforts to reduce payments further have been thwarted by the Senate.
Excluding the effect of Senate decisions, new spending has been more than offset by reductions in other spending. The gap between the revenue and payment is reducing at the rate of about 0.6 percent per year.
As a share of GDP payments are expected to be 25.2% in 2017-18, falling to 24.9% of GDP by 2020-21 which is slightly above the 30-year historical average of 24.8% of GDP.
Wage growth has been revised down from an already low 2.5% in the budget to 2.25% in MYEFO. With the Consumer Price Index forecast to grow at 2%, wages are barely keeping pace with inflation – growing in real purchasing power by only 0.25%.
This provides a meagre compensation for labour productivity growth which is implied to be about 1% in MYEFO. Wage growth is expected to pick up by 0.5% next year to 2.75%.
This is important because it underpins government revenue growth, yet it’s brave to expect the deep forces that are keeping wages down in Australia and around the world to turn around and exactly match the 0.5% growth in real GDP expected to occur next year.
New measures since the budget have increased the deficit on both the revenue and expenditure sides of the budget. On the revenue side, for example, higher education changes reduced revenue by A$76 million and the GST by A$70 million.
On the expenses side, needs-based funding for schools has cost an additional A$118 million and improving access to the Pharmaceutical Benefits Scheme costs A$330 million. The roll-out of the NDIS in Western Australia adds another cost at A$109 million, and Disability Care Australia at A$362 million.
The 2017-18 Mid-Year Economic and Fiscal Outlook (MYEFO) is another reminder – if one is needed – that the relationship between the budget and the economy runs in both directions. While we mostly ask the question, “how will the budget affect the economy?”, this update shows the economy can also have (and has often had) a significant impact on the the budget.
The highlights of this year’s MYEFO, as far as the government is concerned, are the A$9.3 billion improvement in the underlying cash balance over the four years to 2020-21 (compared with what had been forecast in the May budget), and the consequential A$11 billion reduction in the forecast peak in net debt (from A$366 billion to A$355 billion) in that year.
These improvements are the result of revisions to economic assumptions and other so-called “parameter variations” since the budget, which in total have improved the four-year bottom line by more than A$11 billion. The biggest of these came from reductions in payments to people with disabilities, students, single parents and age pensioners (totalling A$4.6 billion over four years) due to lower-than-expected recipient numbers.
Personal income tax cuts seem possible
There is no additional detail in MYEFO regarding the government’s foreshadowed personal income tax cuts ahead of the next election. But if the forecast surplus for 2020-21 of A$10.2 billion is credible, then there’s arguably some scope for the government to fund personal income tax cuts beginning in that year.
Although the cost of more significant tax cuts would escalate substantially over the medium term, there is actually more scope for these cuts than generally realised (provided the government succeeds in keeping growth in spending under control).
That’s because the projected moderate surpluses, averaging about 0.5% of GDP out to 2027-28, incorporate an arbitrary assumption that taxation revenue will be capped at 23.9% of GDP. If that assumption wasn’t made, the projected surpluses would rise to 1.6% of GDP by 2027-28.
In dollar terms that would imply a surplus of around A$55 billion, compared with one of around A$15 billion if the surplus were only 0.5% of GDP. Over the period 2021-22 to 2027-28, relaxing the assumption that tax revenues are capped at 23.9% of GDP results in almost A$90 billion of additional budget surpluses. This is over and above what is projected with that “tax cap” in place.
Presumably, some of those “additional surpluses” are absorbed, in the government’s internal figuring, by the promised phased reduction in the company tax rate for businesses turning over more than A$50 million per annum by 2025-26 – which according to the last publicly available estimate would reduce revenues by some A$65 billion over ten years.
However, that would still leave a considerable amount “left over” to pay for personal income tax cuts, and allow the government to continue to project surpluses of around 0.5% of GDP out to the second half of the next decade.
That’s assuming, of course, that we are able to clock up 36 years of uninterrupted economic growth, and that all the other projections come to pass, including for a return to more “normal” rates of wages growth.
Economic indicators in MYEFO
Treasury has revised downwards its forecast for economic growth in the current financial year, from 2.75% to 2.5%. A large part of this revision comes from stronger growth in public spending, which is now forecast to rise by 4% in real terms in 2017-18, up from 2.5% at the time of the May budget.
This reflects faster growth in both government spending (on the NDIS) and investment (NBN and state government infrastructure investment). The forecast for business investment has also been upgraded, from flat at budget time to growth of 2%, the result of both stronger growth in non-mining business investment and a smaller decline in mining investment.
This is largely the result of a downward revision to the forecast for growth in household consumption spending which has been lowered from 2.75% to 2.25%: and this carries over into a 0.25 percentage point reduction in the forecast for 2018-19, to 2.75%. Even these require a further decline in the household saving rate.
The forecast for dwelling investment spending has turned around from 1.5% growth to a decline of 1.5%, with the “softening in dwelling investment occuring slightly earlier than expected”.
Longer term, the government is still anticipating that economic growth will average 3% per annum from 2018-19 through 2023-24, by which time all the “spare capacity” in the labour market will have been absorbed. That is, the unemployment rate will be down to 5% and underemployment (workers not being able to get enough hours at work) returned to more normal levels.
The longer-term projections also assume that wages growth accelerates significantly from 2019-20. This represents the greatest risk to the goverment’s promise of a return to surplus by 2020-21.
The 2017-18 budget update shows an improvement in the deficit forecast for this financial year but predicts lower economic growth and a smaller increase in wages than was expected in the May budget.
The deficit for 2017-18 is now expected to come in at A$23.6 billion, an improvement of A$5.8 billion from the May forecast, according to the Mid-Year Economic and Fiscal Outlook released by Treasurer Scott Morrison and Finance Minister Mathias Cormann.
Growth for this financial year is forecast to be 2.5% compared with the budget’s 2.75%, reflecting recent lower-than-expected growth in household consumption.
Nevertheless Morrison and Cormann said Australia’s growth story “remains a compelling one, and although real GDP growth has been slightly tempered in 2017-18, the trajectory is upward”. Real GDP is forecast to grow at 3% in 2018-19, the same as the budget number.
Budget update on wages
The update notes that wage growth “remains low by historical standards in both the public and private sectors and has been more subdued than expected since budget”.
Wages are forecast to increase by 2.25% through the year to the June quarter 2018 and 2.75% through the year to the June quarter 2019.
This is 0.25 of a percentage point lower in both years compared with the budget – vindicating the scepticism that economists expressed about the budget forecast being too optimistic.
The flat wages situation reflects a serious political pressure point for the government, as many people struggle with high power prices and other squeezes on their cost of living.
“Wage growth is forecast to lift as the economy strengthens, inflation picks up and excess capacity in the labour market is reduced,” the update says.
Budget receipts have been revised upwards by about A$3.6 billion in 2017-18 and A$2.8 billion over the forward estimates compared with budget time – driven mainly by company tax and superannuation tax. The company tax forecasts reflect increased profitability and enforcement activity by the Australian Taxation Office.
But “over the forward estimates, lower forecasts for wages and unincorporated business income are expected to weigh on individuals’ income tax receipts,” the update says.
The half yearly revised numbers confirm that the budget is on track to have a surplus in 2020-21. The projected surplus of A$10.2 billion in that year is A$2.7 billion better than estimated in May.
Savings measures on education and welfare
The government has announced in the update a new welfare crackdown to save money and also an alternative higher education savings package after it could not pass its earlier proposals.
Savings of A$1.2 billion over four years will be reaped by broadening the criteria for waiting periods for new migrants before they can get various welfare benefits.
The changes will extend the present two-year waiting period for a range of payments, such as Newstart, to three years, and introduce a consistent new three-year waiting period to apply to a further number of benefits such as Family Tax Benefit and Paid Parental Leave.
Social Services Minister Christian Porter said the measures “will reinforce the foundational principle that Australians’ expectation of newly arrived migrants is that they contribute socially and economically for a reasonable period before having access to our nation’s generous welfare system”.
The higher education package includes a freeze on total Commonwealth Grant Scheme funding from January 1, set at 2017 levels, and a combined limit for all tuition fee assistance under all HELP and VET Student Loans.
The government will also pursue an alternative set of HELP repayment thresholds from July 1 next year, with a new minimum repayment threshold of A$45,000, higher than the A$42,000 in the original plan. At present the threshold is A$55,000.
Most of the new higher education package doesn’t have to be legislated, thus avoiding the Senate hurdle. The previous higher education package was set to save A$2.7 billion over the forward estimates; the new one saves A$2.1 billion.
Real growth in payments over the budget period is expected to be an annual average of 1.9%. Compared with the budget, nominal payments are lower in every year of the forward estimates.
The payment to GDP ratio is expected to fall to 24.9% of GDP by 2020, slightly above the 30 year historical average.
Morrison told a joint news conference with Cormann: “As we push into the new year, there is still more work to be done but we are on the right track.
“Jobs and growth will continue to be our mission and our focus. Helping the lives of the thousands of Australians, millions of Australians, and their families and returning the budget back to balance.”
Cormann said: “This is a good set of numbers in all of the circumstances.”
Shadow treasurer Chris Bowen said the government remained committed to increasing the tax paid by working Australians. He said there was no mention of personal tax cuts – which Malcolm Turnbull has foreshadowed – in the update. People only got a tax rise.
He condemned the revised higher education package, saying it would particularly hit those from a lower socioeconomic background.
The chair of Universities Australia, Professor Margaret Gardner, said the package would leave university funding “frozen in time”. She said the blow would be hardest in areas where university attainment was lowest, such as regional areas.
The link below is to an article reporting on persecution news from the Democratic Republic of Congo.