VICTORIA’S DEBT LEAPS; STUDY LOANS RELIEF

State budgets: Victorian debt leaps, WA heads for another surplus

Victoria is banking on stronger economic growth in the state to achieve a budget surplus and stabilise its debt position, as outlined in its 2024-25 State Budget. Treasurer Tim Pallas has handed down a budget that forecasts an operating deficit of $2.2 billion in the year ahead, followed by a $1.5 billion surplus in 2025-26. Budget papers show that Victoria’s net debt will rise by 20 per cent from $156.2 billion in 2024-25 to $187.8 billion in 2027-28, with the ratio of net debt to gross state product levelling out at around 25 per cent. Real economic growth, fuelled by higher consumer spending, is forecast to rise from two per cent in 2023-24 to 2.75 per cent in 2025-26. Meanwhile, Western Australia is on track for its sixth successive state budget surplus, with Treasurer Rita Saffioti handing down her first Budget. In 2024-25, WA is forecast to post a budget surplus of $2.6 billion, with net debt-GSP ratio edging up to 9.7 per cent by 2027-28. Net debt is expected to finish at $28.6 billion in 2023-24, with 5.2 per cent growth in WA’s domestic economy this year.

Clare moves to slash student loan indexation rate

Education Minister Jason Clare has announced major reforms to the fee repayment regime for tertiary students, which he says will wipe around $3 billion in student debt. Mr Clare said that in response to the Universities Accord review, the Federal Government would cap the Higher Education Loan Program (HELP) indexation rate to be the lower of the Consumer Price Index or the Wage Price Index. The relief would be backdated to all HELP, vocational education and training, and apprentice support loan accounts that existed on 1 June, 2023. Mr Clare and Skills and Training Minister Brendan O’Connor said HELP debtors had in 2023 been forced to pay the CPI indexation rate of 7.1 per cent; they said the wage price indexation rate would have been only 3.2 per cent. The Ministers said an individual with an average HELP debt of $26,500 would see around $1,200 wiped from their outstanding HELP loan this year, pending the passage of legislation.

United States leads the ranks in foreign investment

The United States remains both the largest investor in Australia and the largest destination of Australian investment, latest annual figures show. In 2023, Australia recorded an international investment liability of $836.6 billion, with foreign investment in the nation rising to $4,659.5 billion and Australian investment abroad rising to $3,823 billion. US interests invested $1,170 billion in Australia, while Australian investors directed almost $1,200 billion to the US. Australian Bureau of Statistics figures show that after the US, the United Kingdom, the European Union and Japan were the largest source investor countries; besides the US, Australians invested primarily in the UK, the EU and New Zealand. While foreign investment in Australia was led by portfolio investment debt, overseas outbound investment was led by equity investors, also via portfolio investment.

Federal Government banks on big future for gas

Resource and Northern Australia Minister Madeleine King has given a strong endorsement of the role of gas in the national energy transition and as an export commodity. Releasing the Future Gas Strategy, Ms King said new sources of gas supply were needed to meet demand during the economy-wide transition to the 2050 net zero emissions target. The Minister affirmed that Australia was, and would remain, a reliable trading partner for energy, including liquefied natural gas (LNG) and low emission gases. Ms King said the Strategy would move to prevent gas shortfalls by working with industry and state and territory governments to encourage more timely development of existing gas discoveries in gas-producing regions. According to the Minister, gas supplied 27 per cent of Australia’s energy needs and represented 14 per cent of the nation’s export income.

RBA’s pre-Budget inflation warning on wages growth, fuel costs

In a pre-Budget warning, the Reserve Bank of Australia has cautioned that inflation would remain higher due to rising domestic fuel costs and higher-than-expected services inflation. The RBA Board now forecasts that the rate of inflation will only return to the target range of 2-3 per cent in the second half of 2025. In its monthly monetary policy statement, the RBA also attributed higher inflation expectations to a tighter employment market and the growth in unit labour costs. The RBA said wages growth appeared to have peaked but was still above the level that could be sustained, given trend productivity growth. The Consumer Price Index grew by 3.6 per cent over the year to the recent March quarter, down on the 4.1 per cent to December 2023.