A report from Deloitte economist Chris Richardson says Australia’s budget deficit problem is bigger than we think.
According to Mr Richardson, Australia’s deficit from now until 2018/19 will total $129 billion – $21 billion worse than Treasurer Scott Morrison predicted in December, 2015.
He said the deficit for the year 2015/16 would be $41.7 billion – $4.3 billion greater than predicted.
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In the report, Mr Richardson called for bravery on the part of politicians, saying there was a need for both spending cuts and tax increases should Australia want to keep its AAA credit rating.
“At some stage politicians from all sides need to be more honest about the need for spending cuts and tax increases,” he said.
The report claimed even the recent surge in the iron ore price would potentially only save half the $30 billion revenue write-off Australia is currently facing.
Mr Richardson told the ABC that over-spending should shoulder much of the blame for the past few years of deficit increase.
“Most of the mistakes in the budget in Australia over the last decade have actually been in spending and we’d be comfortable to see the bulk of budget repair done on the spending side,” he said.
“Equally, you cannot ignore the revenue side. Taxes have to go up too.”
Currently, slow wage growth in Australia means slow income tax revenue growth, while a rising Aussie dollar will do little to help the rising iron ore price.
According to the Deloitte report, federal debt as a proportion of national income will rise to 20 per cent – putting Australia at real risk of losing its AAA credit rating.
Mr Richardson said both sides of politics would be given one change at delivering some harsh truths at the May 3 budget.
– with AAP, ABC