Latest news with #SaulEslake
ABC News
3 days ago
- Business
- ABC News
Tasmanian government's road to budget surplus appears built on dreams and optimism
It's the Tasmanian government's yellow brick road — a pathway that will lead to all wishes coming true or, in this case, a surplus. But just like the one in the famous tale The Wizard of Oz, Treasurer Guy Barnett's "sensible pathway to surplus" appears almost fantastical, or at least extremely optimistic. It is built on the dream of selling public companies that may not be worth selling (or possible to sell); arguably unrealistic cuts to spending and a vague plan to reduce the public service. Perhaps it would be more believable if the government had not promised to reduce spending in the past, only to fail dramatically. But here are the undeniable facts. Tasmania's net debt is expected to reach $7.3 billion in the upcoming financial year. In four years, that debt is projected to balloon to almost $10.8 billion, at which point the interest repayments are expected to rise to almost $650 million a year. Labor says that is more than we spend on ambulance and emergency services combined. The forward estimates continue to see Tasmania operating in deficit, albeit reducing to $236 million in 2027-28. And those forward estimates have not proven to be reliable. Last year, the government planned to cap spending at $9.7 billion — and then out-spent that by another half a billion dollars, despite having an efficiency dividend and hiring freeze in place. Independent economist Saul Eslake did not hold back in his assessment of the budget, describing it as presenting an "upbeat view" of the economy that "may not come to pass". "The government is in the financial pickle it's now in because it kept increasing spending without giving any thought as to how that spending (however justified) should be paid for," he wrote. "And this budget shows it still hasn't been able to break that habit." The Tasmanian Chamber of Commerce and Industry likewise pointed out the pathway to surplus was only achievable if the government stuck to its spending promises. "In recent years, the final budget result each financial year has proven to be much worse than the budget estimate," TCCI chief executive Michael Bailey said. "At the very least, the Tasmanian government needs to at least stick to its budget and ensure it shows the fiscal discipline to make sure the final result is not worse than the already significant deficit forecast for 2025-26. The problem with the government's plan to cut spending is, it may not always be realistic. Take health — the main reason the government blew its budget this financial year. There is growing demand on the health system, but the budget assumes next year's spending will be roughly the same as this year's, which rarely happens. It also assumes in three years' time, overall government expenses will be less than they are this year. And it leaves little room for surprise events like state elections. Tasmania could barely afford big campaign promises back when elections were held every four years, let alone when they are called early. Part of the government's plan to cut spending is through the recently announced Efficiency and Productivity Unit (EPU). It will oversee the productivity and efficiency measures that will replace the efficiency dividend in 2027-28. The EPU's task is to find $150 million in savings each year from then. The difference is the way it will approach these efficiencies. The dividend required every department to make cuts, whereas the new approach, which the EPU will drive, will apparently be a more targeted "evidence-based" one. That received praise from Mr Eslake, although it came with a qualifier: "Assuming that EPU isn't a Tasmanian version of Elon Musk's DOGE." The problem is, while the government is relying on efficiencies to help it get back on track, it has no clue where it will find them and is optimistically hoping to exceed its targets. It wants to cut the number of public servants by 2,500, bringing the sector back to 2022-23 levels, a measure announced in last year's budget. Unsurprisingly, it drew the ire of Jessica Munday from Unions Tasmania. "It is just completely fanciful. If the government were looking for a road map to take Tasmania forward, this is not it. "If you have tried to access one [of] our public hospitals, if you've got a kid in one of our public schools, despite the best efforts of workers, you know how much pressure they are under. When asked about plans to cut staff, Mr Barnett spoke in the press conference largely about the COVID-19 pandemic, as though there are a spare 2,500 staff still hanging around on the public dollar with little to do since 2021. He pointed out that in the past five years, the Tasmanian population had grown by just 5 per cent, and the public service by 18 per cent. "We do need a right-size public service," he said. "We've obviously been through COVID, we had to save lives, we had to save livelihoods, we did the job and I think most in the community would say we got there. Selling assets is another part of the plan — but it is unclear which ones will be sold or if it is even possible. Mr Eslake is no doubt relieved that the government has taken his advice on board this time, ruling out selling the same list he had in the 'no' pile, plus TT-Line and Hydro Tasmania. He is now taking a closer looking at the potential sale of the remaining government business enterprises (GBE). That does not mean he will suggest they are worth selling — there could very well be another 'no-go' list to come out of this report. Assuming he can identify some that may do better in public hands, and benefit the budget, the government then has that pesky issue of being in minority. That is a problem because many of those GBEs will need parliamentary approval to be sold and Labor, plus most of the crossbench, are dead-set against that idea. There are some, including Aurora, that do not need parliamentary approval to be sold off — though Labor has plans to try and change that. And it is not just GBEs on the chopping block. The government will fill the coffers through the sale of Crown Land, not to mention the Treasury building. The sale of all these, of course, may provide little more than a sugar hit. But perhaps this is all a bit too cynical. Maybe it will work out? There are likely a lot of inefficiencies that can be found in the public service (the problem is solving them will cost money up-front). Maybe there are programs and jobs that are no longer needed and are just waiting to be cut? Maybe companies like Metro and Aurora will be better off in private hands and the government will somehow convince the crossbench of that — and then the state will make a mint? But it seems that only when we get to the end of this road (in 2029-30) will we know if that surplus was a mirage all along.
West Australian
4 days ago
- Business
- West Australian
‘Stop giving concessions': Major warning on first-home handouts
Potential first-home buyers are falling further behind due to the very schemes designed to get them into a home. Independent economist Saul Eslake said the best thing the government could do to help first-home buyers would be to remove concessions that allow them to buy a home. 'The question isn't what they should be doing, it's what they should not be doing,' he told NewsWire. 'What they have to stop doing is things that needlessly inflate demand for housing. 'Stop giving out what I call second-home vendor grants as I call them because that is where the money ends up.' 'Stop giving stamp duty concessions, all they do is allow people to pay the vendor what they would have paid to the state government and back away from the mortgage deposit guarantee schemes and shared equity schemes,' he said. Mr Eslake said these policies, which are designed to help first-home buyers, simply end up inflating house prices. 'While a shared equity scheme sounds like a good idea, in practice, if you're willing to buy a $400,000 house and the government says 'hey, we will give you 20 per cent', then buyers say 'oh good, I can now afford a $500,000 house'. 'So a $400,000 house becomes a $500,000 house, so it's more a matter of just stop needlessly inflating demand.' One of the key election policies the Albanese government ran on was its expansion of the First Home Guarantee scheme, which is sometimes called the 5 per cent deposit scheme. This program allows first-home buyers to purchase property with a deposit as little as 5 per cent, with the government effectively guaranteeing the other 15 per cent, allowing first-home buyers to avoid paying lenders' mortgage insurance. But in an updated version of the scheme to come into effect at the start of 2026, caps of $125,000 for singles and $200,000 for couples will be removed. The PropTrack April Home Price Index showed national house prices hit a new record high over the month of April, increasing by 0.2 per cent monthly or 3.7 per cent compared with the same time last year. Australia's Cash Rate 2022 Helia chief executive and managing director Pauline Blight-Johnston said the main risk to the latest policy was the removal of the income caps to get government help. 'Our belief is that we will achieve the most as an economy if the government help is directed towards those that need it the most, and those that are able to help themselves through private enterprise do so without the taxpayers' dollar,' she told NewsWire. 'At the end of the day, our view is that taxpayers' dollars should go to those that really need the help to get into the market, such as essential workers or others that are really struggling.' Ms Blight-Johnston said expanding the HGS didn't address the fundamental underlying issue for those struggling to buy their first home – a shortage of affordable supply. She fears that the government's housing schemes just worsen housing affordability by fuelling demand and driving up prices. Instead, she pointed to first-home buyers using lenders' mortgage insurance as a 'really powerful tool' that is often misunderstood. 'People think of it as a fee …. But if you think of it differently as a wealth creation tool and it allows you to get into a home earlier, on average people that use LMI get in around nine years earlier and around $100,000 better off after five years because they got into the market earlier,' she said. Ms Blight Johnston said mortgage holders would typically pay 1 to 2 per cent as a premium above their usual repayments if they took on LMI. 'If you think property goes up on average 4 or maybe 5 per cent a year, if it is going to take you more than six months to save the deposit, the extra 15 per cent — as LMI takes the deposit down from 20 to 5 per cent – you're going to be ahead by getting into the market earlier and paying the premium.' Mr Eslake said LMI could increase demand for property if it acted like a reduction in interest rates. 'We know whenever interest rates go down, people borrow more and pay more for the house they buy which results in higher prices,' he said.
Perth Now
4 days ago
- Business
- Perth Now
‘Just stop': Surprise act hurting homebuyers
Potential first-home buyers are falling further behind due to the very schemes designed to get them into a home. Independent economist Saul Eslake said the best thing the government could do to help first-home buyers would be to remove concessions that allow them to buy a home. 'The question isn't what they should be doing, it's what they should not be doing,' he told NewsWire. 'What they have to stop doing is things that needlessly inflate demand for housing. 'Stop giving out what I call second-home vendor grants as I call them because that is where the money ends up.' Australia's housing market has almost instantly reacted to interest rate cuts. NewsWire/ Nadir Kinani Credit: News Corp Australia 'Stop giving stamp duty concessions, all they do is allow people to pay the vendor what they would have paid to the state government and back away from the mortgage deposit guarantee schemes and shared equity schemes,' he said. Mr Eslake said these policies, which are designed to help first-home buyers, simply end up inflating house prices. 'While a shared equity scheme sounds like a good idea, in practice, if you're willing to buy a $400,000 house and the government says 'hey, we will give you 20 per cent', then buyers say 'oh good, I can now afford a $500,000 house'. 'So a $400,000 house becomes a $500,000 house, so it's more a matter of just stop needlessly inflating demand.' One of the key election policies the Albanese government ran on was its expansion of the First Home Guarantee scheme, which is sometimes called the 5 per cent deposit scheme. This program allows first-home buyers to purchase property with a deposit as little as 5 per cent, with the government effectively guaranteeing the other 15 per cent, allowing first-home buyers to avoid paying lenders' mortgage insurance. But in an updated version of the scheme to come into effect at the start of 2026, caps of $125,000 for singles and $200,000 for couples will be removed. The PropTrack April Home Price Index showed national house prices hit a new record high over the month of April, increasing by 0.2 per cent monthly or 3.7 per cent compared with the same time last year. Australia's Cash Rate 2022 Helia chief executive and managing director Pauline Blight-Johnston said the main risk to the latest policy was the removal of the income caps to get government help. 'Our belief is that we will achieve the most as an economy if the government help is directed towards those that need it the most, and those that are able to help themselves through private enterprise do so without the taxpayers' dollar,' she told NewsWire. 'At the end of the day, our view is that taxpayers' dollars should go to those that really need the help to get into the market, such as essential workers or others that are really struggling.' Ms Blight-Johnston said expanding the HGS didn't address the fundamental underlying issue for those struggling to buy their first home – a shortage of affordable supply. She fears that the government's housing schemes just worsen housing affordability by fuelling demand and driving up prices. As Australian house prices hit record highs for a fifth consecutive month, it is harder for first-home buyers to get into the market. NewsWire/ Gaye Gerard Credit: News Corp Australia Instead, she pointed to first-home buyers using lenders' mortgage insurance as a 'really powerful tool' that is often misunderstood. 'People think of it as a fee …. But if you think of it differently as a wealth creation tool and it allows you to get into a home earlier, on average people that use LMI get in around nine years earlier and around $100,000 better off after five years because they got into the market earlier,' she said. Ms Blight Johnston said mortgage holders would typically pay 1 to 2 per cent as a premium above their usual repayments if they took on LMI. 'If you think property goes up on average 4 or maybe 5 per cent a year, if it is going to take you more than six months to save the deposit, the extra 15 per cent — as LMI takes the deposit down from 20 to 5 per cent – you're going to be ahead by getting into the market earlier and paying the premium.' Mr Eslake said LMI could increase demand for property if it acted like a reduction in interest rates. 'We know whenever interest rates go down, people borrow more and pay more for the house they buy which results in higher prices,' he said.
News.com.au
4 days ago
- Business
- News.com.au
‘Stop giving concessions': Major warning on first-home handouts
Potential first-home buyers are falling further behind due to the very schemes designed to get them into a home. Independent economist Saul Eslake said the best thing the government could do to help first-home buyers would be to remove concessions that allow them to buy a home. 'The question isn't what they should be doing, it's what they should not be doing,' he told NewsWire. 'What they have to stop doing is things that needlessly inflate demand for housing. 'Stop giving out what I call second-home vendor grants as I call them because that is where the money ends up.' 'Stop giving stamp duty concessions, all they do is allow people to pay the vendor what they would have paid to the state government and back away from the mortgage deposit guarantee schemes and shared equity schemes,' he said. Mr Eslake said these policies, which are designed to help first-home buyers, simply end up inflating house prices. 'While a shared equity scheme sounds like a good idea, in practice, if you're willing to buy a $400,000 house and the government says 'hey, we will give you 20 per cent', then buyers say 'oh good, I can now afford a $500,000 house'. 'So a $400,000 house becomes a $500,000 house, so it's more a matter of just stop needlessly inflating demand.' One of the key election policies the Albanese government ran on was its expansion of the First Home Guarantee scheme, which is sometimes called the 5 per cent deposit scheme. This program allows first-home buyers to purchase property with a deposit as little as 5 per cent, with the government effectively guaranteeing the other 15 per cent, allowing first-home buyers to avoid paying lenders' mortgage insurance. But in an updated version of the scheme to come into effect at the start of 2026, caps of $125,000 for singles and $200,000 for couples will be removed. The PropTrack April Home Price Index showed national house prices hit a new record high over the month of April, increasing by 0.2 per cent monthly or 3.7 per cent compared with the same time last year. Helia chief executive and managing director Pauline Blight-Johnston said the main risk to the latest policy was the removal of the income caps to get government help. 'Our belief is that we will achieve the most as an economy if the government help is directed towards those that need it the most, and those that are able to help themselves through private enterprise do so without the taxpayers' dollar,' she told NewsWire. 'At the end of the day, our view is that taxpayers' dollars should go to those that really need the help to get into the market, such as essential workers or others that are really struggling.' Ms Blight-Johnston said expanding the HGS didn't address the fundamental underlying issue for those struggling to buy their first home – a shortage of affordable supply. She fears that the government's housing schemes just worsen housing affordability by fuelling demand and driving up prices. Instead, she pointed to first-home buyers using lenders' mortgage insurance as a 'really powerful tool' that is often misunderstood. 'People think of it as a fee …. But if you think of it differently as a wealth creation tool and it allows you to get into a home earlier, on average people that use LMI get in around nine years earlier and around $100,000 better off after five years because they got into the market earlier,' she said. Ms Blight Johnston said mortgage holders would typically pay 1 to 2 per cent as a premium above their usual repayments if they took on LMI. 'If you think property goes up on average 4 or maybe 5 per cent a year, if it is going to take you more than six months to save the deposit, the extra 15 per cent — as LMI takes the deposit down from 20 to 5 per cent – you're going to be ahead by getting into the market earlier and paying the premium.' Mr Eslake said LMI could increase demand for property if it acted like a reduction in interest rates. 'We know whenever interest rates go down, people borrow more and pay more for the house they buy which results in higher prices,' he said.
ABC News
5 days ago
- Business
- ABC News
US dollar dive threatens Australian superannuation
Sabra Lane: When Australia's Reserve Bank cut official interest rates last week, it did so because it was partly worried about the risk of a severe downside scenario for global trade. Economists say that risk has just increased with a steep fall in the value of the US dollar that we might all feel the fallout. Business correspondent David Taylor explains. David Taylor : The US dollar, the world's reserve currency, is flirting with a three-year low and its steep decline has veteran economist Saul Eslake worried. Saul Eslake : The reason for the decline in the US dollar is that financial markets are becoming increasingly apprehensive about a number of aspects of the US economy as a result of things that the Trump regime is doing. David Taylor : That apprehension is also showing up in higher long-term US interest rates, including the 30-year government bond rate, now roughly 5%. Saul Eslake : I mean, apprehension is probably putting it at its mildest. In some quarters, there is, if not panic, then certainly alarm. David Taylor : The distress relates to the connection between elevated long-term bond interest rates and the rising cost of millions of American mortgages. Saul Eslake : And with the 30-year bond yield in the US now higher than at any time since before the global financial crisis, that means that mortgage rates are going up. David Taylor : This, he says, could seriously harm the world's biggest economy. Australian mortgage borrowers on fixed interest rate loans, Saul Eslake says, are also in the firing line. Saul Eslake : Fixed rates for mortgages and for business loans, the longer out you go, the more influenced they are by US government bond yields. David Taylor : The falling US dollar, analysts say, is also pushing the Australian dollar higher. While that's good news for Australian travellers, FN Arena's Danielle Ecuyer says it's a risk for anyone holding US investments, and that includes Australians with superannuation. Danielle Ecuyer : We know that a lot of Australian investors have been piling into US stocks. And this is just one of the aspects of, I think, probably where people go, well, that's great. US assets are going up. But the problem is the US dollar is going down. So in Australian currency times, you're not doing as well. David Taylor : Saul Eslake sees the financial dangers for the US economy rising. That's because, he says, the cost of US government debt is higher than America's economic growth rate, which he points out can make servicing government debt incredibly challenging. Saul Eslake : And at its most extreme example, that's what happened to Greece 13 years ago. David Taylor : Official inflation data will be released later today, which, if low enough, could open the door to some additional relief for Australian mortgage borrowers on variable interest rates.
