Forget Treasurer Joe Hockey’s prediction of a balanced budget in 2017/18 because it’s “well and truly toast”.
That’s the assessment of Deloitte Access Economics economist Chris Richardson, who is predicting bigger budget deficits across the forward estimates in the mid-year economic and fiscal outlook.
Richardson, who has long criticised both sides of politics for their handling of the budget, expects the 2014/15 deficit to blow out to $34.7 billion, about $5 billion more than forecast.
Deficits will be $10 billion larger in each of the following three years.
“Red ink will once again be the new black,” Richardson said about the MYEFO on Monday.
This is largely the result of another round of revenue write-downs on income tax and company tax, as well as increased spending on national security and military action, and Senate deals to secure support for the government’s legislative agenda.
“This is an unwelcome combination of factors for a government hoping for budget repair,” Richardson said.
Most notable was the deal struck with the Palmer United Party to scrap the mining tax, which involved postponing the abolition of the income support bonus, the low income superannuation contribution and the schoolkids bonus.
This and additional security costs add up to $2.5 billion in 2014/15 and $2.9 billion in 2015/16.
More worrying still, Richardson’s forecasts do not include saving measures that are likely to be or are already stuck in the Senate, some of which have very little chance of seeing the light of day, he says.
It was clear that something was wrong with Australia’s political processes when even the Greens oppose sensible fuel tax policy such as restoration of fuel excise indexation.
“If our nation can’t make the easy choices, how are we going to make the hard ones?” he said.
DELOITTE BUDGET DEFICIT FORECASTS VS MAY BUDGET
2014/15 – $34.7 billion ($29.8 billion)
2015/16 – $27.2 billion ($17.1 billion)
2016/17 – $21.5 billion ($10.6 billion)
2017/18 – $12.4 billion ($2.8 billion)
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