Macroeconomics, a Canberra based economic consultancy firm, has released a report to clients yesterday showing that Treasurer Joe Hockey’s budget is facing a fresh hurdle due to the collapse of iron ore and the blockage in the Senate.
The report told clients that the Budget now has a $51 billion black hole over the next few years. Treasury’s expectation of a $29.8 billion deficit this financial year will become $47.8 billion deficit, the report said. In the out years, Australia will print a deficit of $24 billion in 2017/18.
A big part of the revenue deficiency is the fact that iron ore was sitting above $100 a tonne but is now down in the $70s which has wiped off $10 billion in revenue.
But Stephen Anthony, former Treasury economist and now chief forecaster at Macroeconomics, took aim at the “unfairness” of the budget saying that it precipitated a “confidence-sapping political deadlock”.
Dr Anthony has some advice for the Treasurer on how to fix the budget, according to the SMH.
“The Treasurer should focus on a few major savings battles that are worth winning and abandon the rest which are political death by 1000 cuts… Any savings shortfall can be funded by winding back superannuation concessions,” he said.
Interestingly, given the uncertainty that moving superannuation around has on the confidence of those nearing retirement and those who are saving for retirement, Dr Anthony says that super contributions should be taxed at the marginal tax rate of the contributor.
We know the budget is in trouble when the prescription for one set of confidence-sapping measures is the imposition of yet another uncertainty-boosting change to superannuation.
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