Mark 🇦🇺

@FinancialReview Ironic that Labor largely ignores the supply constraints at the heart of the problem, fuels demand through high immigration, then benefits politically by blaming the old and the rich for a crisis its own settings worsened.

Labor is confident it can count on younger voters’ anger about house prices to counter any backlash against rising prices. Meanwhile, as columnist Jennifer Hewett writes, the Liberals are confident they can win the argument on tax. ebx.sh/HFXEEm

New Zealand rents increased just 0.4% in the year to April. Note that this Stats NZ measure covers all rental properties, not just new listings.

@Michtull @TomisCrowley In plain English, the "extra money" in people's pockets won't add to demand because its purchasing power has been reduced by inflation. No extra purchasing power, no extra demand, no interest rate problem.

@Mark_Graph @TomisCrowley A plan that would pump big tax cuts in automatic response to high inflation might have an interest rate problem hey

Friday arvo scoop to cap off budget week: Coalition policy could cost billions more than first suggested over first four years and was not formally costed abc.net.au/news/2026-05-1…

@cjoye So if staff are only increasing by 2000, what is the almost $20b being spent on?

This is crazy: the federal government is using all the NDIS savings and almost all the NDIS savings + tax increases to pay itself due to a massive $19.6 billion cost blow-out on the bureaucracy over the next four years compared to forecasts in last year’s budget. Put another way, over the four overlapping Budget years from 2025–26 to 2028–29, the government has increased the cost of running the bureaucracy by $19.6bn — enough to consume virtually all (99%) of the $19.8bn in NDIS savings it claims, 93% of those savings plus its negative-gearing/CGT tax grab, and 14.5 times the property/investor tax increase itself... "The average staffing level increases from 215,900 this year to 217,300 in 2026-27. Since the Albanese government came to power in 2022, the size of the public service has ballooned by a quarter." afr.com/policy/economy…

@lachlanvass @AvidCommentator

@Mark_Graph @AvidCommentator I think they are

Some perspective on how catastrophically wrong Treasury and the Albanese government got budget migration forecasts. This shows initial estimates, updated estimates and then the final result.

The "cost" only looks large because Treasury's baseline bakes in years of unlegislated real tax increases. Measure against an honest baseline and indexation isn't a tax cut, it's the removal of a hidden tax hike. That's the discipline point: future governments would have to legislate revenue growth openly rather than bank it quietly through bracket creep. The extra dollars have already been devalued by inflation. That's what "neutral in real terms" means. Households end up with the same purchasing power they had before, not more. Bracket creep takes a slice of that nominal increase and converts it into a real tax rise. Indexation just stops the conversion. No one is better off, the government is simply prevented from being quietly better off at everyone else's expense.

GOOD POINT TOM The ABC’s @TomisCrowley makes an excellent point in this article Some journos asked me about the cost of the Coalition policy, and I (mostly) used the PBO’s Build Your Own Budget tool to come up with some numbers But Tom points out that PBO spreadsheet assumes a year’s delay, and he’s right When I use my own model, I get $m costs that look like this 2028-29 3,300 2029-30 6,500 2030-31 10,300 2031-32 15,800 2032-33 21,900 2033-34 28,600 2034-35 35,400 2035-36 43,100 And that’s essentially where Tom lands too Some quick thoughts: •That says the Coalition has a bigger hole to fill to pay for those cuts •It is also a reminder that the medium term budget is built on inflation •Or, to put that another way, governments rely on that ‘inflation tax’ to pretend the budget is in better long term health than it is See abc.net.au/news/2026-05-1…

I have read it carefully. The paper largely asserts neutrality from balance-sheet identities, but does not really engage with announcement effects, portfolio-balance channels, term premia, or the asset-price response observed during QE periods. Your position goes further than the MMT framework requires. You are arguing QE is irrelevant, QT is irrelevant, and Fed remittances to Treasury are irrelevant. At that point I think the burden is on the paper to explain why markets, yields, and asset prices repeatedly moved around these programs. When asset prices collapse during financial stress, real economic activity stops. Construction halts because finished buildings sell for less than they cost to build. Investment freezes because expected returns no longer justify capital deployment. Banks stop lending against collateral that is losing value. Workers lose jobs as orders dry up. The cascade from financial collapse to production collapse can take years or decades to reverse, as Japan demonstrates. The 2008 to 2009 interventions and the March 2020 response prevented this cascade. Construction kept building, banks kept lending, markets kept functioning when they would otherwise have frozen. The MBS purchases specifically supported housing prices when private buyers had withdrawn, which kept the construction sector alive. These are real effects through real channels that the asset swap framing does not address. What specific evidence in the paper do you think should change my mind?

@Mark_Graph @kit_lowe Read the paper . Happy ro argue specific points rather than “i just dont feel it”. BTW, CBs do way more that that. They are very necessary.

Warsh starts as Fed chair today. looks like he has a battle on his hands with Barr. BARR SAYS SHRINKING FED'S BALANCE SHEET IS THE WRONG GOAL

@real_bedwah @kit_lowe If QE is a placebo and QT is irrelevant and remittances are pointless and taxes do not fund spending, then most of what governments and central banks do is either unnecessary or theatrical. I am not persuaded.

@Mark_Graph @kit_lowe Treasury pays fed - fed bonds holdings fall, reserves (cash) rise. Total fed assets unchanged. Treasury get cash from new issuance to banks (unless gvt running surplus). So in effect there is a swap. Nothing changes in private sector. The whole process is irrelevant.

@lachlanvass @AvidCommentator Fair point - I was scanning budget paper 1

@lachlanvass @AvidCommentator Not in budgets papers before then

@Mark_Graph @AvidCommentator To be fair, the COVID shock is hard to forecast, including its flowthrough impacts over time. What were the forecasts like pre-2020?

@real_bedwah @kit_lowe Shrinking happens through passive runoff. Bonds mature, Treasury pays the Fed from the TGA, balance sheet falls. No new issuance to banks, no swap. The mechanism does not require what you describe.

@Mark_Graph @kit_lowe To make it smaller he would have to issue securities to the banks (a swap) which increase payments to the banks as the slope of yld curve is positive. He cant jsut make it smaller in isolation- there needs to be a transaction. Also, additional remittances to tsy is irrelevant

@AvidCommentator Not a great forecast record.

@real_bedwah @kit_lowe Warsh would say a smaller balance sheet restores Fed remittances to Treasury because interest is not being paid to banks. Tens of billions per year that would now flow back to taxpayers. Why is that not a good goal?

@Mark_Graph @kit_lowe I dont- but it is the wrong goal (due to its irrelevance.)

@real_bedwah @kit_lowe Why are you opposed to the Warsh unwind if it is immaterial to the economy?

@Mark_Graph @kit_lowe It doesn’t matter - just as my paper highlighted

The media should engage with the Opposition's framework and its implications, not chase costing detail as a gotcha. Months of iteration produce robust costings, and innovative policy requires new models. The PBO does what it can in two days, but that's not a budget figure. Taylor may also not want to show his hand yet. None of that means he doesn't know what he's doing. And a question that unpicks policy intent or reveals negative consequences is much better than a did you memorise the costings question.

@Mark_Graph @TMFScottP The PBO costed things for us in the two day period between budget and budget reply when I worked in the opposition leader's office...

Sarah Ferguson: "What is it going to cost the Budget?" Taylor: "The biggest question is what it means for Australians" He doesn't seem to know. #BudgetReply2026

@real_bedwah @kit_lowe If QE is just an asset swap with no real effects, why does unwinding it matter? The same logic that makes QE neutral should make QT neutral.

@Mark_Graph @kit_lowe No - Warsh is not correct. At best QE is a placebo. See mechanics of QE in paper attached quaygi.com/insights/artic…