$50 Billion Budget blowout mocks Govt’s “Superior Economic Managers” Claim
Following the runaway success of last year’s Federal Budget, everyone’s favourite National Living Treasurer, Smokin’ Joe Hockey, is staring down the barrel of a $50 billion Budget blowout that will leave Federal finances deeply in the red well into the next decade.
With only days remaining until Mr Hockey is due to deliver his next Budget, Deloitte Access Economics has delivered a scathing assessment of Joe Hockey’s performance as Federal Treasurer and predicts that the nation’s finances are set to deteriorate further.
According to Deloitte, which last year accurately predicted the problems that would face Mr Hockey today, said a combination of falling commodity prices, stagnating wages and stalled spending cuts were all plunging the Budget into a precarious position.
Deloitte believes the current deficit will hit $45.9 billion this year and barely improve in the coming 2015-16 Budget.
Coupled with much bigger deficits in coming years, it leaves Government debt climbing well above $500 billion by the middle of next decade.
SUPERIOR ECONOMIC MANAGERS
With no end to the red ink in sight, Opposition Leader Bill Shorten will today warn in his main pre-Budget speech Australia cannot afford a “dull” Budget – as Prime Minister Tony Abbott has tried to characterise this year’s document — because the global economy is changing faster than ever.
“We need a Budget planning for the next 10 years, not a plan for Tony Abbott to survive to the end of the year,” he will say. #Zinger.
He will say Labor’s three part test for Budget measures will be if they honest and responsible, fair and the right thing for the future.
The Prime Minister yesterday used the words “responsible and fair” to describe the Budget, pledging it would boost jobs, growth and opportunity.
“Our economy is strengthening and I think people will be more confident and optimistic on Budget night,” he said.
Oh how we laughed.
But Access director Chris Richardson said next week’s Budget was akin to a fiscal horror movie.
“2015-16 looks like it has been written by Stephen King,” he said.
The fall in iron ore prices has been cited as one of the biggest hits to the Budget but Joe Hockey reckons it is likely to stay above the $US35 a tonne mark that had been forecast by some analysts.
But Access found that the slowdown in wages was looming as one of the biggest threats to the Budget bottom line.
Slow wages growth delivers fewer tax dollars and ultimately feeds a long-term Budget hit.
Trouble in China was also running into the Government’s failure to get measures from last year’s Budget through the Parliament.
There had also been backtracking on previous commitments that ultimately left the Budget in a poor shape.
“Politics is cruelling efforts at Budget repair, while the economy is hurting the fiscal outlook further. That says the repair task has grown but the appetite to tackle it has faltered,” Mr Richardson said.
The pain continues long into the future and well beyond the next election that is due in the second of next year.
In last year’s Budget, Mr Hockey forecast the nation would be running a deficit of just $2.8 billion in 2017-18.
That was revised downward to $11.5 billion in the mid-year update. Access believes it will be closer to $24 billion.
Late last month the Government changed its language around the return to surplus, saying that as a proportion of GDP the deficit would shrink.
Even on the pessimistic numbers painted by Access, the Budget improves in terms of GDP.
Access are the most pessimistic forecasts for the Budget yet released although some analysts are not expecting much better.
ANZ is forecasting Mr Hockey to reveal a deficit of $39 billion next week and an overall $20 billion deterioration to the nation’s finances.