News

Pre-budget analysis predicts deficit will be $10.9b

Deloitte agreed with predictions of a $12 billion hit to tax revenue, but that was before Finance Minister Penny Wong confirmed on Tuesday it was likely to be more like $17 billion.
Deloitte agreed with predictions of a $12 billion hit to tax revenue, but that was before Finance Minister Penny Wong confirmed on Tuesday it was likely to be more like $17 billion. Inga Williams

LEADING economic group Deloitte Access Economics has expressed concern about a "sudden lack of urgency" from both sides of politics to balance the budget.

In its pre-budget analysis released on Wednesday, Deloitte predicts the deficit in next week's Federal Budget will be $10.9 billion in the current financial year before increasing to $13 billion the following year - $12 billion and $15 billion worse respectively than the forecasts contained in the government's Mid Year Economic and Fiscal Outlook.

The outlook is better for the 2014-15 and 2015-16 financial years, with Deloitte predicting narrowing deficits of $6.6 billion and $5.7 billion respectively.

Interestingly Deloitte agreed with predictions of a $12 billion hit to tax revenue, but that was before Finance Minister Penny Wong confirmed on Tuesday it was likely to be more like $17 billion.

While not concerned about the size of the underlying cash deficit, which would still reflect a $33 billion improvement in the budget bottom line, Deloitte calls on both parties to outline their plans for returning the budget to health.

But it fears neither side has an "appetite" for the task.

"The focus is still on what the budget can do for Australia, rather than what Australia now has to do to get the budget back in the black," the Deloitte analysis reads.

"Both sides are still talking of the importance of returning to surplus, but neither are even hinting about the tough decisions they'd take to do it."

Deloitte says treasurers for a decade have been "pulling rabbits out of a hat" by delivering better than expected budgets despite tax cuts and a range of middle class welfare measures.

"But now the rabbit is dead" the analysis reads."In the last few years the nation has simply been on a promise that the budget would get better: surpluses have been forecast rather than delivered."

The Deloitte report makes the point Labor decided at the end of last year to abandon its desire to leave a legacy of budget surpluses as well as funding big ticket reforms like the national disability insurance scheme and Gonski, the report read.

It is instead pursuing its ambitious policy agenda, which in turn will create problems, or "poison pills", for a future Coalition government.

"The government will only be funding Gonski and DisabilityCare through to 2016-17, the last year of budget projections," Deloitte explains.

"By that year, these schemes will still be costing rather less than their mature versions will do.

"That will allow the Labor government to get credit for these policies, while leaving an incoming Coalition government to have to find ways to finance them."

Topics:  deloitte access economics federal budget 2013 penny wong



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