Pros and Cons of Private Lenders and Private Mortgages in Vancouver

It’s every citizen’s dream to be the owner of their own dream home. With the constant fluctuation in the retail market and country’s economy, it can be a real headache buying your own home. If you a...

News Company - avatar News Company

Health benefits of sauna

Imagine this. You come home tired after a very long working day. You were on your toes since morning, and now you only want to relax. You go to a small room and take a steam bath and relax your who...

News Company - avatar News Company

Homosexuality may have evolved for social, not sexual reasons

We propose same-sex attraction evolved to allow greater social integration and stronger same-sex social bonds. SHUTTERSTOCKHow did homosexuality in humans evolve? Typically, this question is posed as ...

Andrew Barron, Professor, Macquarie University - avatar Andrew Barron, Professor, Macquarie University

Russian government resignation: what's just happened and what's in store for Putin beyond 2024?

News came from Moscow overnight that the Russian government had resigned, followed by the announcement that Putin would be recommending the current prime minister Dmitry Medvedev be replaced by the he...

Graeme Gill, Professor, Department of Government and Public Administration, University of Sydney - avatar Graeme Gill, Professor, Department of Government and Public Administration, University of Sydney

How an Aussie invention could soon cut 5% of the world's greenhouse gas emissions

Australian-designed technology will soon be responsible for 50% of all solar energy produced globally.Glenn Hunt/AAPIn the 1980s, a global race was underway: to find a more efficient way of converting...

Andrew Blakers, Professor of Engineering, Australian National University - avatar Andrew Blakers, Professor of Engineering, Australian National University

Black Drop Effect review: infusing the present moment with layers of the past

When Indigenous elder Binno (played by William McPherson) teaches dances to three young men, a bigger plan emerges.Christopher WoeReview: Black Drop Effect, directed by Felix Cross for Sydney Festival...

Amanda Harris, Research fellow, Sydney Conservatorium of Music, University of Sydney - avatar Amanda Harris, Research fellow, Sydney Conservatorium of Music, University of Sydney

Moving the A-League to the winter would improve the play, but will it attract the fans?

The A-League is struggling to attract TV viewers and fans at matches. Would a move to the winter make any difference?Gary Day/AAPIn the past week, the Australian football players union has been pressu...

Jessica Richards, Lecturer Sport Business Management, Western Sydney University - avatar Jessica Richards, Lecturer Sport Business Management, Western Sydney University

Curious Kids: why does reading in the back seat make you feel sick?

Looking out the window instead might stop you feeling sick, but that doesn't work for everyone.Vadiar/Shutterstock, CC BYWhy does reading in the back seat make you feel sick? – Jane, aged 10, fr...

Wayne Wilson, Associate Professor in Audiology, The University of Queensland - avatar Wayne Wilson, Associate Professor in Audiology, The University of Queensland

The Dish in Parkes is scanning the southern Milky Way, searching for alien signals

The Parkes radio telescope can detect extremely weak signals coming from the most distant parts of the Universe.ShutterstockFor John Sarkissian, operations scientist at the CSIRO Parkes radio telescop...

Sunanda Creagh, Head of Digital Storytelling - avatar Sunanda Creagh, Head of Digital Storytelling

Why teen depression rates are rising faster for girls than boys

One-fifth of U.S. teen girls reported experiencing major depression in 2017.Tgraphic/Shutterstock.comWe’re in the middle of a teen mental health crisis – and girls are at its epicenter.Sin...

Jean Twenge, Professor of Psychology, San Diego State University - avatar Jean Twenge, Professor of Psychology, San Diego State University

Vital Signs: the end of the checkout signals a dire future for those without the right skills

Shops checkouts are predicted to disappear this decade. Customers will be able to take what they want and walk out, with payment done automatically.www.shutterstock.comThere has already been a fair n...

The Conversation - avatar The Conversation

Take care when examining the economic impact of fires. GDP doesn't tell the full story

It is possible to calculate the impact impact of fires, but not using GDP.Shutterstock/Andrew Brownbilll/AAPEstimates of the economic damage caused by the bushfires are rolling in, some of them big an...

The Conversation - avatar The Conversation

US and Iran have a long, troubled history

Benny Marty/Shutterstock.comRelations between the United States and Iran have been fraught for decades – at least since the U.S. helped overthrow a democracy-minded prime minister, Mohammed Moss...

Jeffrey Fields, Associate Professor of the Practice of International Relations, University of Southern California – Dornsife College of Letters, Arts and Sciences - avatar Jeffrey Fields, Associate Professor of the Practice of International Relations, University of Southern California – Dornsife College of Letters, Arts and Sciences

Why you need more Vitamin D in the winter

Vitamin D is sometimes called the sunshine vitamin. FotoHelin/Shutterstock.comWinter is upon us and so is the risk of vitamin D deficiency and infections. Vitamin D, which is made in our skin followi...

Margherita T. Cantorna, Distinguished Professor of Molecular Immunology, Pennsylvania State University - avatar Margherita T. Cantorna, Distinguished Professor of Molecular Immunology, Pennsylvania State University

On Monday the Australian government will release the Mid-Year Economic and Fiscal Outlook (MYEFO). This will – as required by the Charter of Budget Honesty – provide an update on the key assumptions made in this year’s budget, and track the implications of decisions made since the budget for the projected surplus.

There are two things you can count on about MYEFO.

First, the government will have to pare back its forecasts for economic growth, wages growth and employment growth.

Second, no matter what the economic reality is, the forecast for a budget surplus will remain.

Read more: More mirage than good management, MYEFO fails to hit its own targets

The government has made economic management – as measured by the rather dubious criterion of budget balance – the central plank of its electoral strategy. As the Australian National University’s 2019 Australian Election Study revealed, voters preferred the government’s economic policies to Labor’s by a wide margin (47% to 21%, with 17% thinking there was no difference). On the management of government debt, the margin was 44% to 18%.

But the economy isn’t doing very well. GDP annual growth is 1.7%, not the 2.75% forecast in the budget. The unemployment rate is 5.3%, compared to the forecast of 5.0%. Wage growth is 2.2%, not the 2.75% forecast.

Iron ore supplements

The forecast budget surplus for the fiscal year to June 2020 will be made to hang together, thanks to a higher-than-forecast iron ore price.

That price – which determines the dollar value of Australia’s biggest export and hence the tax revenue it generates – is not reflected in the GDP figure, which only takes into account volumes.

The iron-ore price is now US$92.50 a tonne. The budget assumed the average price would be $US88 for the 2020 budget year, thanks to a reduction in the international supply of iron ore caused by a tailings dam bursting in January at the Córrego do Feijão mine near the town of Brumadinho in southeastern Brazil.

The dam’s collapse released a tsunami of sludge that destroyed farms, houses, roads and bridges, and killed 272 people.

The river of sludge released by the dam spill in Brumadinho, Minas Gerais, Brazil, January 26 2019. Antonio Lacerda/EPA

Ensuing mine shutdowns reduced iron ore output from operator Vale (the world’s biggest iron ore miner) by about a third. This in turn led to the price of iron ore this year being very high, as the following chart illustrates.

Iron ore price (US$/MT) tradingeconomics.com, CC BY-NC-SA

The Australian government sensibly assumed the Brazilian mine would come back online and the ore price would revert to $US55 per tonne by March 2020.

But just think about the 2020-21 fiscal year. The government’s own sensitivity analysis shows for the full 2020-21 budget year a difference in the iron ore price of US$10 a tonne translates to a A$3.7 billion difference in the budget bottom line.

That has helped this year, but it also shows how dependent the budget’s relatively small A$7.1 billion “underlying cash balance” is on a commodity price that’s out of our control.

Yet, given the political non-negotiability of the surplus, we can expect assumptions that stretch credulity to maintain a surplus forecast.

Some action?

This is all against a backdrop of calls for fiscal stimulus from the governor of the Reserve Bank of Australia, the Business Council, every mainstream economist and recently Australia’s top chief executives.

But any stimulus meaningful enough to boost the ailing economy would blow the budget surplus. And the assumptions have already been stretched to breaking point, so there’s very little room for the government to manoeuvre.

The government will probably announce some sort of “investment allowance” – where companies get a modest tax break for specific types of investments in the short term. As I have argued before, this will do something to boost investment and the economy generally, but not nearly as much as a full-scale reduction in the company tax rate to 25% for all businesses.

But the government can’t afford to do a proper tax cut because of its devotion to a wafer-thin surplus.

The danger of too little action

In the end, what the government ends up announcing will really be an allocation of responsibilities. It will determine how much of the work of economic recovery it will do itself, and how much it will want to palm off to the Reserve Bank.

The downside of the former is losing the budget surplus.

The downside of the latter is that the Reserve Bank will have no choice but to cut the cash rate to 0.25% in early 2020 and then embark upon a bond-buying program – i.e. “quantitative easing” or “QE”.

Read more: Now we know. The Reserve Bank has spelled out what it will do when rates approach zero

As even Reserve Bank governor Philip Lowe has himself admitted, more aggressive monetary policy brings with it the (further) risk of asset-price bubbles and financial instability.

Right now the government is putting all its chips on the surplus. Will that turn out to be a good bet? Time will tell.

2020 will reveal much about the future of the Australian economy and whether we manage to escape dramatic problems like a recession.

We live in interesting times – but perhaps more in the “Ancient Chinese curse” kind of way than any of us would like.

Authors: The Conversation

Read more http://theconversation.com/vital-signs-australias-wafer-thin-surplus-rests-on-a-mine-disaster-in-brazil-128705