Budget Monitor: Surplus – so near, yet so farDOWNLOAD
7 November 2011: With the Federal Treasurer to release updated Budget forecasts in the near future, Deloitte Access Economics has released its second and final Budget Monitor for calendar year 2011.
According to Deloitte Access Economics Partner Chris Richardson: “Recent economic developments will tell the Treasurer that the dream is over – that the 2012-13 surplus has slipped back into deficit,” he said.
“But the politics of that announcement are horrendous, with a fired up Opposition no doubt set to remind the public that no Labor Government has run a surplus since 1989-90.”
So will the Treasurer opt for good economics on decision day?
“Will he tell the public that fading global prospects and weak markets here at home have delayed the return to surplus – possibly not for one but for two further years until 2014-15?” Chris Richardson said.
“Or will he go for it, deciding the looming 2012-13 deficit is small enough – at $1.9 billion, it’s less than the price of 200 Kardashian weddings – that he should tighten policy despite rising economic risks?
“Don’t get us wrong. We think the Australian Budget is in worse shape than people realise, and that it needs a fair amount of repair to stand up to the pressures from rising health care costs and an ageing population in coming decades.
“That’s why we’ve encouraged all governments over the past decade to fight a better fight: there’s a need to watch industry welfare, which is set to be boosted in the carbon tax package, and middle class welfare, wwhere the last Budget made some progress, but only made a small dent in a big cost.
“Plus there’s a need to plug holes in the tax system, including via indexing petrol taxes and winding back super tax concessions for high income earners that won’t help save much on pension costs.
“Yet for 2012-13 at least, we’d counsel caution. As we’ve said all along, a surplus next year was a line in the sand drawn by the politicians, not by the economists.”
Highlights of the Budget Monitor include: