Just as Treasurer Scott Morrison is crunching the numbers to deliver his Mid Year Economic and Fiscal Outlook (MYEFO), which is due to be released in two weeks time, analysis by Deloitte has declared that the budget is floundering and will never be in surplus.
Rather than being in deficit by $35.1 billion, the Deloitte Access Budget Monitor has found that the figure will be closer to $40.3 billion, and will blow out considerably over the next three years, making it near impossible to return the country’s budget to surplus any time soon. Deloitte forecasts the economy will shrink by 2.5 per cent, resulting in a deficit of $48 billion by 2018-19.
The decline in the Chinese economy and the drop in commodity prices will result in lower company tax receipts. These will have the greatest impact on the deficit, with revenue $4.4 billion less than expected in 2015-16.
The continued low interest rates will have an impact on revenue collected from interest, while the increase in tax deductions through negative gearing will also have an adverse effect. Superannuation tax collections will also be lower than expected, $2.2 billion less than forecast.
Wage growth, or lack thereof, will hit the revenue from pay as you go tax, and as a double blow, will also result in less bracket creep, whereby individuals find themselves in the next, higher, tax bracket.
On the plus side, an increase in revenue from capital gains tax is expected, as the real estate market delivers impressive growth.
Deloitte Access partner Chris Richardson said, “That line on the budget graph that shows the deficit disappearing, it never gets there on our projections.”
According to Mr Richardson, both sides of politics had “strikingly mismanaged” the country’s finances.
Read more at TheAge.com.au
So we’re told the budget deficit is likely to be worse than expected – cue headlines screaming of the blowout in welfare payments being to blame, but is this really the case?
The last three Social Service Ministers, Kevin Andrews, Scott Morrison and now Christian Porter have all cried poor when it comes to Australia’s welfare budget, with “unsustainable” being the consistent buzzword. And while on paper the cost may continue to increase, it’s important to look at the reasons for this and whether or not simply cutting payments is the answer.
And this is exactly what Peter Whiteford, Professor in the Crawford School of Public Policy at the Australian National University has done. In an article, ‘Is welfare sustainable?’, published by Insidestory.org.au, Mr Whiteford looks at the basis the Government uses for claiming that welfare is indeed, unsustainable, and applies different factors, such as welfare figures predicted in 10 years being compared to tax revenue of today, to determine how much of a burden welfare actually is for the Government.
While popular current affair shows on television will decry those claiming welfare payments as ‘dole bludgers’ and being out to ‘rort the system’, it’s worthwhile keeping things in perspective and remembering that the majority of people claiming benefits do so as a last resort. Those who can’t work due to a disability, because they’re caring for someone else or, because they don’t have enough in retirement savings, very few would be delighted at the prospect of having to front Human Services to make a claim.
It’s time to stop playing politics and start looking at the economy as a whole. Manufacturing in Australia has been consistently eroded, with no backup plan to replace the jobs or revenue. We’ve hung our hat on the hopes of China’s continued economic growth and lo and behold, it’s about to backfire. We know that the superannuation system is unfairly skewed for those with big balances and high salaries, yet we don’t do anything about it. And negative gearing, well, need I say any more?
And so we wait with bated breath to see what type of MYEFO Scott Morrison will deliver and whether or not those on welfare, those who can usually least afford to pay, will be made to do so.
Does the increasing budget deficit concern you? Do you agree with Chris Richardson that both sides of politics have “strikingly mismanaged” the country’s finances? Should revenue be increased rather than costs reduced as a means to manage the deficit?