DELOITTE: The Federal Government Will Talk Big But Act Small In The Budget

Sultan Kosen, the world’s tallest man. Mark Thompson/Getty Images

The Federal Government is likely to repeat the mistakes of the Labor government by failing to tackle the structural problems in the budget to the extent required, according to Deloitte Access Economics.

“So chances are that May’s Budget may be one in which the Government talks big but acts rather smaller than its own rhetoric,” says Chris Richardson in his latest Business Outlook report.

He says the government looks like it will cut back less than it should and justifying such a softly, softly approach on the grounds that the economy is too fragile to withstand larger cuts.

“That approach would merely repeat the experience that Australia had under the previous Government, who also liked to talk big but act small,” Richardson says.

“To be clear, we wouldn’t argue for big cuts tomorrow: that would indeed unnecessarily hurt the economy.”

Yesterday it emerged the government is considering a “deficit levy” – a short-term increase in income tax – on higher-income earners. Other proposals known to be on the table include $6 cash payments for every GP visit, tighter means testing of family payment benefits and the age pension, and an increase in the retirement age from 67 to 70.

More will be known when Treasurer Joe Hockey releases the Commission of Audit report on Thursday.

Richardson says the government needs to make its case to the electorate for cuts and tax increases, announce those measures in May’s Budget, and have them taking effect over a number of years.

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