A return to budget surplus is unlikely anytime soon as the government’s revenue falls and savings measures are tied up in a political deadlock, according to a detailed analysis of Treasurer Joe Hockey’s first budget.
There are now around $11 billion in annual budget savings held up in the Senate.
On top of that, the Treasurer faces up to $10 billion in unfavourable adjustments a year by 2017-18.
“Right now it appears a return to budget surplus is unlikely anytime,” writes Stephen Anthony of Canberra consultancy Macroeconomics in his Commonwealth and State Government 2014-15 Mid-Year Budget Bulletin.
He says Hockey’s budget contains many worthwhile savings measures but it has produced a
“confidence-sapping” political deadlock.
“Down are both earnings for businesses and wages growth for households, resulting in a reduced revenue take,” Anthony says.
“Not even bracket creep will help return the Budget to surplus with such low wages growth.”
The budget black hole, according to reports today, will be $51 billion deep over the next few years. Treasury’s expectation of a $29.8 billion deficit this financial year will become $47.8 billion deficit.
This is how Anthony sees the budget over the next decade:
The real problem with the first Hockey Budget is that it is seen as unfair.
Anthony says it imposes too much of the adjustment burden on the disadvantaged rather than wealthy Australians who would benefit most from a resurgent economy driven by structural budget repairs.
“This has allowed a veritable Greek chorus of budget criers – otherwise-known as the fiscal girly men – to howl down the best aspects of the document,”Anthony says.
These include: reforming age pension indexation; tightening family tax benefit B eligibility; and ending of senior health card benefits.
Anthony recommends Hockey focus on a few major savings battles which are worth winning and abandon the rest including health co-payments, tighter eligibility for unemployed benefits and university funding.
“Any savings shortfall can be funded by winding back superannuation concessions,” Anthony says.