This week's Australian political news

Funding programs for Defence AI, space capability

Federal Minister for Defence Industry Melissa Price has announced two significant initiatives to strengthen Defence capabilities in artificial intelligence and in space technology. First, the Government will contribute $10 million in artificial intelligence capability, to support new AI applications across Defence’s Information and Cyber, Maritime, Air, Space and Land domains. It forms part of the $32 million allocated over the next two years through the Defence Innovation Hub. In addition, the Next Generation Technologies Fund is seeking submissions to develop a space qualified radio frequency sensor payload as part of the space capabilities priority area. The fund will contribute up to $6.6 million to support ideas and proposals from industry and academia to identify and pursue research, design and testing aspects of any sensor payload.

Retirement review canvasses shifts in superannuation contributions

A Federal Government review of retirement incomes has laid the groundwork for a pause in the projected increase in compulsory contribution rates to superannuation. The review noted that a rate of compulsory superannuation may lift living standards in retirement but may involve an “unacceptable reduction in living standards prior to retirement", particularly for lower-income earners. It cited evidence that increases in the superannuation guarantee rate - now 9.5 per cent and proposed to be 12.5 per cent - result in lower wages growth.

Victoria jacks up state debt in Covid-19 Budget response

Victoria has substantially increased public sector debt to fund capital infrastructure projects and kickstart economic growth. Treasurer Tim Pallas brought down a Budget that forecasts an operating deficit of $23.3 billion for 2020-21, up from a $6.5 billion deficit for 2019-20. Net debt is forecast to rise from $44.3 billion in 2019-20 to $86.7 billion in 2020-21, rising to a forecast $154.8 billion in 2024. Relative to the state’s economy, the level of net debt will rise from 9.6 per cent of gross state product to almost 29 per cent of GSP in 2024. Included in the budget is a $5 million contribution to a pilot scheme that would provide sick leave and carer’s pay for casual and insecure workers.

State economies vary on Covid-19 effects

Australia’s economy contracted by 0.3 per cent in 2019-20 as Covid-19 restrictions took hold from March, but the level of economic growth varied markedly across the states and territories. The Australian Bureau of Statistics reported that the restrictions had their greatest impact in New South Wales, Victoria, Queensland and South Australia. While NSW (-0.7 per cent) and Queensland (-1.1 per cent) recorded their first ever contractions in gross state product, joining Victoria (-0.5 per cent) and SA (-1.4 per cent), Western Australia recorded annual growth of 1.4 per cent and Northern Territory, 5.3 per cent, thanks to the impact of mining and oil and gas production. The ACT recorded economic growth of 2.4 per cent in 2019-20, and Tasmania 0.3 per cent, both attributable to public sector investment. Summer bushfires contributed to negative growth in NSW, Victoria and SA, while tourism spending during Covid-19 slumped in Queensland.

Iron ore exports break records

Latest monthly trade figures released by the ABS reinforce the importance of resource exports in cushioning the domestic effect of Covid-19, with iron ore exports - mostly bound for China - reaching a record $10.9 billion in October. Exports of gas, meat and thermal coal also increased, as total exports rose six per cent to $30.5 billion. Imports also rose, up eight per cent to $25.7 billion in October, headed by major lifts in the importation of road vehicles and of telecommunications and sound equipment.

Treasurer extends expensing rule to larger companies

Federal Treasurer Josh Frydenberg has announced an extension of the full expensing rule, to allow larger companies to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed. The current legislation applies to companies with an aggregated turnover of less than $5 billion to access the deduction measures. Under proposed legislative amendments, the Treasurer said businesses with an aggregated turnover of more than $5 billion due to the income of an overseas parent or associate would qualify, provided they met new additional investment requirements.