AIST Young Super Network 2020 21 Budget Briefing Stephen Anthony Chief Economist ISA SAnthonyMacro Tuesday 13 October 2020 Disclaimer The information provided in this presentation is g ID: 843213
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1 âItâs all about jobsâ AIST Young S
âItâs all about jobsâ AIST Young Super Network 2020 - 21 Budget Briefing Stephen Anthony â Chief Economist, ISA @SAnthonyMacro Tuesday, 13 October 2020 Disclaimer ⢠The information provided in this presentation is general in nature. It does not constitute personal fi
2 nancial advice, investment advice or le
nancial advice, investment advice or legal advice and should not be construed as such. ⢠The opinions expressed in this presentation are solely those of the presenter and are not those of Industry Super Australia. 2 - 6.3 % - 7.0 % -20 -15 -10 -5 0 Early 30s WWII 1953 Early 8
3 0s Early 90s 2019-20 1975 Early 80s Earl
0s Early 90s 2019-20 1975 Early 80s Early 90s Q2 2020 Per cent (%) Peak - to - trough declines in GDP Financial year Quarterly â¼ Historical data â¼ Latest outcome COVID - 19 Hit â Output Declines Source: RBA, ABS, ISA Analysis 3 The Governmentâs COVID - 19 Challenge 4 Sour
4 ce: SBS ⢠Engineer a recovery free of
ce: SBS ⢠Engineer a recovery free of new outbreaks ⢠Build on low growth trajectory ⢠Reality and timing of vaccine ⢠Without vaccine early recovery unlikely ⢠Virtuous policy reform to release the economic âhand - breakâ Budget â Economic Target Source: Budge
5 t Paper No.1 2020 - 21 5 0% 2% 4% 6% 8%
t Paper No.1 2020 - 21 5 0% 2% 4% 6% 8% 10% 12% 14% 16% Per cent Effective Unemployment Rate 'Effective' unemployment rate Unemployment rate 4% 5% 6% 7% 8% 9% Per cent Unemployment Rate FORECAST 2020 - 21 Budget - COVID - 19 Output Hit Source: ISA Analysis, ABS Cat.5206.0, Budge
6 t Paper No.1 2020 - 21 6 440 450 460 47
t Paper No.1 2020 - 21 6 440 450 460 470 480 490 500 510 520 530 $ Billions Australia Real GDP (Quarterly) Post COVID-19 Projection (Budget) Pre COVID-19 Projection 4% FORECAST Economic Outlook Budget 2020 - 21 Outcome Forecasts Projections 2019 - 20 2020 - 21 2021 - 22 2022 - 23
7 2023 - 24 Nominal GDP 1.7 - 1 ¾ 3 ¼ 4
2023 - 24 Nominal GDP 1.7 - 1 ¾ 3 ¼ 4 ½ 5 Terms of trade 1.0 - 1 ½ - 10 ¾ - - Real GDP - 0.2 - 1 ½ 4 ¾ 2 ¾ 3 Consumer price index - 0.3 1 ¾ 1 ½ 1 ¾ 2 Wage price index 1.8 1 ¼ 1 ½ 2 2 ¼ Compensation of employees 3.7 1 ¾ 4 4 ¼ Employment - 4.3 2 ¾ 1 ¾ 1 1 ¾ Pop
8 ulation 1.2 0.2 0.4 0.8 1.3 Source: Budg
ulation 1.2 0.2 0.4 0.8 1.3 Source: Budget Paper No.1 2020 - 21 7 2020 - 21 Budget Reconciliation Table Source: Budget Paper No.1 2020 - 21 20 - 21 21 - 22 22 - 23 23 - 24 Total $b $b $b $b $b 2019 - 20 MYEFO cash balance 6.1 8.4 4.0 14.9 33.4 All policy decisions - 159.8 - 53
9 .9 - 22.2 2.6 - 233.2 All parameters/var
.9 - 22.2 2.6 - 233.2 All parameters/variations - 59.9 - 66.5 - 69.7 - 84.5 - 280.6 2020 - 21 Budget cash balance - 213.7 - 112.0 - 87.9 - 66.9 - 480.5 Change in the cash balance - 219.8 - 120.4 - 91.9 - 81.8 - 513.9 (per cent of GDP) - 11.3% - 6.0% - 4.4% - 3.7% 8 COVID - 19 Poli
10 cy Spending So Far 9 19 - 20 20 - 21 2
cy Spending So Far 9 19 - 20 20 - 21 21 - 22 22 - 23 23 - 24 Total $b $b $b $b $b $b Estimates Policy decisions to JEFU - 58.4 - 118.4 - 7.5 0.2 3.9 - 180.2 Policy decisions since JEFU 0 - 41.4 - 46.4 - 22.4 - 1.3 - 111.5 Total policy decision impact - 58.4 - 159.8 - 53.9 - 2
11 2.2 2.6 - 291.7 Source: Budget Paper No.
2.2 2.6 - 291.7 Source: Budget Paper No.2 2020 - 21 10 Source: The Age 2020 - 21 Budget Big Measures -30% -20% -10% 0% 10% 20% 30% 40% -6% -4% -2% 0% 2% 4% 6% 8% YoY % Change in Payments Change Underl
12 ying Cash Balance (Inverted) Underlying
ying Cash Balance (Inverted) Underlying Cash Balance (Inverted) Payments (Real) FORECAST Policy Stimulus 11 Source: ISA Analysis with Budget Paper No.1 2020 - 21 -12% -10% -8% -6% -4% -2% 0% 2% 4% Percentage of GDP â¼ Actual â¼ Budget Estimates â¼ Budget Medium - Term Pro
13 jections Underlying Cash Balance ⦠12
jections Underlying Cash Balance ⦠12 Source: ISA Analysis with Budget Paper No.1 2020 - 21 Gross Debt Over a Century 13 Source: ISA Analysis, Budget Paper No.1 2020 - 21, Barnard (1986), ABS, RBA Statistics 75% (Corporate) 119% (Households) 0% 20% 40% 60% 80% 100% 120% 140% 190
14 7-08 1910-11 1913-14 1916-17 1919-20 192
7-08 1910-11 1913-14 1916-17 1919-20 1922-23 1925-26 1928-29 1931-32 1934-35 1937-38 1940-41 1943-44 1946-47 1949-50 1952-53 1955-56 1958-59 1961-62 1964-65 1967-68 1970-71 1973-74 1976-77 1979-80 1982-83 1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012
15 -13 2015-16 2018-19 2021-22 2024-25 2027
-13 2015-16 2018-19 2021-22 2024-25 2027-28 2030-31 Per cent of GDP Australian Government Gross Debt â¼ Actual â¼ Estimates Support equity valuations 14 Credit: The Register Who buys the debt? Support equity valuation Massive stimulus liquidity Thank you Stephen Anthony @SA