The prime ministerial “musical chairs” may have ended but that hasn’t changed the tune of a respected economist who says the risks to revenue remain the same.
Chris Richardson from Deloitte Access Economics also says government spending is at levels usually only seen during recessions, which will only increase as disability insurance costs mature.
“The personnel have changed but the problems haven’t,” Mr Richardson says in his latest business outlook released on Monday.
He says someone has to not only sort out the unlegislated measures stuck in the Senate and the funding between the Commonwealth and states, but also introduce genuine growth-enhancing tax reform.
“Until then it’s business as usual and that means budget deficits for the foreseeable future,” Mr Richardson says.
His concerns come at a time when the negatives facing Australia are “big and growing”.
Australia’s No.1 trading partner, China, is “throwing the kitchen sink” at its economic slowdown but even that hasn’t been enough to halt the slide in global commodity prices.
However, there are also two positives for Australia from interest and exchange rates.
The fall in the Australian dollar has already thrown support to the economy, and there’s more to come as it takes two years for a lower currency to have its maximum positive impact.
Interest rates, too, will keep generating good news with their “lower for longer” profile.
Even so, Mr Richardson expects economic growth to remain below its long-term average until 2017.
Deloitte Access Economics business outlook for states
Looking good across a number of indicators and there’s more good news to come from a falling currency and low interest rates. But “crazy house prices have a sting in the tail” and the state will eventually hit population growth.
Businesses have been cheering the fall in the Australian dollar, while lower interest rates and the strongest population growth in the nation add to the good news. But there are lingering negatives in manufacturing and concerns about the sustainability of housing construction.
Prospects in gas have been dealt a blow from falls in energy prices, drought is hitting farmers, and population growth is poor. But housing construction is up, falls in the Australian dollar will be good for tourism, and Sydney’s housing prices will send “Blues supporters” northwards.
It has the highest unemployment in the nation, and both car-making and defence manufacturing are in trouble. But lower interest and exchange rates are helping. There are signs of life in housing and retail, while the state’s population growth is holding up.
The party is over as mining-related construction slows and so does its major trading partner, China. While Deloitte isn’t expecting the state to “crash and burn” while rising export volumes output keep growth ticking over, things could get worse before they get better.
Low interest rates and a falling exchange rate are helping housing construction, retail and tourism. The economic pain of the past decade is dissipating. But the state’s demographics remain dire.
Approaching the tail-end of its mining-related construction boom. There are signs the economy is slowing and population growth has dropped to the nation’s weakest, but construction work done will lift exports soon.
The job losses have stopped and housing construction has some momentum. But the pressures on the federal budget are just the same under the new prime minister, and that will keep lingering question marks over the ACT’s medium term outlook.