MYEFO shows deficits will blow out by $10 billion over the next four years.
The release of the Mid-Year Economic and Fiscal Outlook (MYEFO) yesterday revealed that the Federal Budget deficit will increase by over $10 billion in the next four years, but the Government still maintains it will return to surplus in 2020/21.
Two-and-a-half years ago, former treasurer Joe Hockey claimed that the Coalition could return the budget to surplus by 2018/19. Now Mr Morrison says we won’t have that luxury for another two years beyond Mr Hockey’s projection.
Yesterday, Mr Morrison confirmed budget deficits of $36.5 billion for 2016/17 and $28.7 billion in 2017/18. In effect, the 2017/18 deficit will be six times larger than what was predicted by Mr Hockey.
The Government blames low wage growth and low non-mining company profits for the deficit blow out.
But the real failing seems to be a lack of income tax receipts, which are down by $3.7 billion this year and are estimated to be $30.7 billion lower over the next four years.
Cuts to welfare spending, as well as the scrapping of Tony Abbott-era policies, such as the Green Army program, child-care subsidies and the Assets Recycling Scheme and the shelving of the marriage plebiscite means the budget for this financial year shrunk by $600 million from $37.1 billion to $36.5 billion.
The Government also plans to save around $123.6 million over four years by scrapping the pension supplement for Australians who live overseas or have been out of the country for at least six weeks.
The abolition of these measures may be the reason the Government scraped through credit assessments to maintain our AAA credit rating, although Standard & Poor’s said it remains pessimistic about the Government’s ability to return the budget to surplus in the predicted timeframe.
Other key points about MYEFO:
- net debt as a proportion of GDP will peak at 19 per cent in 2018/19
- a Commonwealth penalty unit (used to describe the amount payable for fines under commonwealth laws) will increase by $30, from $180 to $210, which is expected to raise $90 million by 2019/20
- changes to the superannuation system will save around $3 billion over the next four years
- $21 billion of the Coalition's $40 billion proposed savings have passed Parliament since the July election.
MYEFO also revealed that, although many Australians will be asked to tighten their belts, our politicians will not, with between $35.8 million and $47.5 million over four years to be shared between MPs for extra staff, offices and parking.
There will also be $1.6 million put towards policing the ‘black economy’, tax avoidance and welfare fraud.
The Government has been called out for its perceived mismanagement of the budget, with Shadow Treasurer Chris Bowen saying the Coalition should adopt Labor’s proposed changes to negative gearing and capital gains tax and end corporate tax cuts.
On the other hand, Mr Morrison thinks corporate tax cuts are exactly what we need to stimulate economic growth.
"One of the important things that we need to see in the economy going forward is increased investment," said Mr Morrison.
The Australian Chamber of Commerce and Industry (ACCI) is also urging Labor and some crossbenchers to cease opposing the tax cut.
"They do need to happen, we can't afford not to do it," said ACCI's Jenny Lambert. "We are now 22nd in the competitiveness of the world economically, we need to improve our competitiveness and we need to make sure that company tax is one of those issues that all the political parties see the common sense with."
Regardless, if the Government can’t see its way back to surplus, Mr Morrison risks being the first treasurer in 30 years to have the nation’s credit rating downgraded during his tenure.
Read more at abc.net.au
What do you think of the job Mr Morrison has done so far? How will the scrapping of the pension supplement affect you? Do you think that slashing benefits for those who need them most is the way back to surplus? Is it time Mr Morrison accepted responsibility for his work instead of pointing the finger elsewhere? Has the Coalition delivered on its ‘Growth and Jobs’ mantra?