MW30: Josh Frydenberg’s quest for a surplus holds a nation to ransom

by Michael West | Sep 19, 2019 | Finance & Tax, Government, MW30

The Morrison Government has put the entire economy at risk to get its “balanced budget”. Instead of spending to revive a floundering economy, the PM and Treasurer have sat on their hands for months to pull off a surplus and grab the political bragging rights over Labor, a licence to persist with the rhetoric of Liberal Party as “superior economic managers”. Critical drought relief delayed, infrastructure spending put off, Australia’s poorest stranded in the Newstart rut, an underspend in the NDIS.

Unlike the Budget, which is all about estimates, the deficit is historical, hard numbers, tax. The Treasurer has just announced the deficit is down to $690 million for 2018-19. They almost got there, but not quite.

The question is, will they now start managing the economy in a proactive way, or continue the holding pattern and hope to get a surplus next year? What is the price of this Surplus hubris? A small rise in unemployment announced today provides a glimpse at the cost of politics.


For the third time, we are publishing the MW30 today (below). These are numbers – social, political and economic – which reflect Australia now and the way the country is changing.

Some of the numbers result from decisions made by government. Others reflect market expectations. Many follow from the intersection of the two. All numbers are averages of three days around the 15th in the month of each quarter.

No bottom just yet

It has been widely reported that the data points to an economy losing momentum, decelerating. The direction is easy to see by running an eye down the table. Interest rates have halved since the beginning of the year. So has growth.

The franking credits you can buy with your $1.6million capped super fund have slowed its decline as equity markets faltered, following their brisk rise early in the year.

Iron ore and coal prices are not helping any more

Iron ore prices are interesting. This is the backstory behind the Government’s hands-off approach to economic management, its determination to wait for a surplus, and to watch the economy slide. You can see the upswing leading to June.

It is the rise in commodity prices on which the Treasurer has pinned his hopes; hopes that tax income will fill the government coffers and bequeath him the prize as the only treasurer to get a surplus in decades. Coal prices show the opposite story.

The economics is fading for those who want to build new mines, whether its thermal coal for power generation or coking coal to make steel.

What we’re watching

We are still watching the moves in the 2 and 10 year government bond yields. The yield on 10 year bonds sat stubbornly under 1% from the first week of August to the first week in September. Each and every maturity out to 10 years was less than the 1 year rate by the end of August.

That was not a good look. We now have negative 10 year yields pervasive in the non-English speaking developed world, with only the US, Canada, New Zealand, Australia and Britain (in that order) still in positive territory.


ASX website. Bloomberg LP website. Citibank website. S&P Dow Jones Indices LLC. Parliament of Australia website. Australian Taxation Office website. Australian Bureau of Statistics website. Fairwork website. Department of Human Services website. Qantas website. Four Sydney and Melbourne boys’ and girls’ schools websites. Association of Superannuation Funds of Australia website.


Tax-free threshold is calculated after the effects of LITO and LAMITO. Share prices and bond yields are three-day averages around the date. Four Bank Index: derived from capitalisation of the four major banks. MWI: is a weighted and smoothed index; predominantly derived from the GDP growth numbers, CPI and daily 2 year bond rate; and includes data periodically published Australian Banks and Bloomberg LP.

A franking credit pension: ASX20 – franking credits derived from last two dividends, percentage franked and share price; average of equally weighted and index weighted notional portfolios. Four banks – derived from average of two notional portfolios. Each portfolio holds $1.6 million (the pension-phase cap). Females on ASX boards: reported board membership.

School fees: average of four prominent Sydney and Melbourne non-government schools The Qantas fare is the return fare quoted on 15 September to fly on 15 December 2019.

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Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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