Australia's deficit will be up by $38 billion in 2019, says Deloitte report: Economy doing fine, affirms Morrison

Australia’s problem of falling revenue and rising expenditure will make “the budget boom of the past decade continues to become a budget bust,” noted a study.

The study -Deloitte Access Economics report said, a combination of factors such as China’s slowdown, and fall in commodity prices and weak wage growth have already destroyed revenues by $4.6 billion in 2015-16, and the trend will continue and may double revenue loss to $8 billion in fiscal 2016, reports The Guardian.

Projecting a bleak budget outlook, Deloitte called for immediate spending cuts to salvage the worsening bottom line—in which 90 percent of the fault lies with the slowing Chinese economy and the rest with the unhelpful stand of the Senate.

Deficit beyond estimates

According to the study, Australia’s budget deficits for fiscal 2018-19 would go beyond $38 billion, breaking all estimations. The report authored by economist Chris Richardson blames the China slowdown for most of the economic woes.

Apportioning the blame to the Senate as well, Richardson said the Senate is “sitting on” expenditure savings proposal worth $67 billion for the last 10 years.

“China may dominate these dollars but the gridlock in parliament house is also making the task of budget repair harder rather than easier,” Richardson noted in the report.

Deloitte refers to the problems such as an ageing population and the expensive government programs as the main deficit breeders. The programs include the National Disability Insurance Scheme (NDIS), Medicare, school and hospital funding, pensions and defence.

Noting that budget repair is not “urgent,” yet the report concludes with a caution. “We have time. But both sides of politics strikingly mismanaged our national finances through the boom years and the repair task keeps getting harder.”

Increase GST

Deloitte’s prescription for checking deficits include slashing the funding of National Disability Insurance Scheme (NDIS) and repairing the budget with an “overall tax take” and changing the tax mix. It strongly recommends increase in the GST, replacement of stamp duties and clearing anomalies in superannuation tax sops.

The opposition Labour blamed the Coalition for the ballooning deficit. “What they’ve delivered is the opposite with blow-out in deficits and growth forecasts that continue to be slashed in every Budget update. Labor is never going to approve spending cuts that came about as a result of the Coalition’s broken promises,” said Labor’s shadow treasurer, Chris Bowen.

Treasurer Upbeat

Meanwhile, the newly released quarterly GDP results have excited Treasurer Scott Morrison, who said the figures are a proof that the economy was making the transition from resources boom to broader growth.

The official figures said Australia's economy grew by 0.9 percent in the September quarter, and there was 2.5 percent growth in economy in 12 months to September. It was a better-than-expected result compared to the past quarter where the economy expanded by a measly 0.2 percent.

“The key drivers of economic growth in the September quarter were net exports, household consumption and housing construction, more than offsetting the expected fall in business investment as we move through this transition period,” Morrison said in Canberra, reports AAP. The exports of goods and services in September quarter was a record and it rose 4.6 percent -- the strongest in 15 years.

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