Federal treasurer Scott Morrison today warned Australia is potentially facing years of lower economic growth than has been the norm, and that the task of repairing the budget will take years as a result.
Morrison said fixing the budget was “a Test match, not a 20Twenty big bash”, and that there were “budgets and budgets and budgets required” in order to deliver economic reforms to adjust to a “lower-growth world”.
“We’re growing and we are transitioning,” Morrison said an address to the National Press Club in Canberra. “From a growth point of view, at 2.5% that’s below the long-term trend, (and) you’ve got to start asking what the long-term trends are, I think, in this new global economic environment.”
The speech was filled with details on some of Australia’s current economic challenges but Morrison did not provide any further detail on tax changes or proposals for major economic reforms as some anticipated.
He did signal a broad aim to deliver tax relief to “earners” in the economy. “Itâ€™s the people that are out there earning that we really have to focus on in terms of economic policy,” Morrison said.
“Our pace of fiscal consolidation in this low-growth environment around the world has been a much tougher road,” Morrison said, “and that’s not going to change in the years ahead.”
Australia would “continually going to be faced by the sorts of (challenging) economic global circumstances” that have developed over recent years. “The message in that is this is a long road. Our fiscal challenge that we inherited – there is no quick fix to us, there is no one statement, there is no one budget. There are budgets and budgets and budgets and budgets that are required to fix that problem.”
The treasurer, who is preparing the Turnbull government first budget to be handed down in May, said that last year’s revisions to revenue in the budget forecasts were a matter of “us calling it out ourselves” by “revising down growth targets”.
In the December mid-year economic and fiscal outlook (MYEFO), Treasury revised down its GDP growth target by 0.25% to 2.5% in the current financial year. Further out, growth is forecast at 2.75% in 2016/17, a huge reduction on the 3.25% level in the federal budget in May.
“I should remind you that in MYEFO, the biggest impact on revenue was actually not commodity prices. It was the government deciding to blow the whistle on forward projections on growth…. It was us calling it out ourselves, because we think that as you prepare a budget, you’ve got to give the most candid assessment you can of these measures that are going to frame it.”
Australia’s fiscal position has been smashed by declining national income over recent years, driven chiefly by the falls in global commodity prices and weaker Chinese demand. Morrison admitted that by savings in the budget had been closely followed by new spending measures: while $80 billion in savings had been found, some $70 billion in new spending had also come on line.
The speech underlined what has been a fundamental shift in the Coalition’s strategy on economic policy since the 2013 Abbott government, which came to office promising to put an end to “debt and deficit”. The Coalition’s core economic message is now about spending restraint and deficit reduction.