Finance Federal Budget Budget 2017: Scott Morrison coy on returning to balance

Budget 2017: Scott Morrison coy on returning to balance

negative gearing morrison
Treasurer Scott Morrison refused to be drawn on plans to balance the federal budget. Photo: AAP
Twitter Facebook Reddit Pinterest Email

Treasurer Scott Morrison has refused to say if the federal government is committed to returning the budget to balance in 2020/21.

“We’ll update the projections on the budget balance next week,” he told ABC radio on Monday of Tuesday’s week’s budget.

“That’s the time we’ll do that, not today.”

Mr Morrison’s comments came after a prominent economist warned the government to get spending under control or face the prospect of having to raise taxes.

Chris Richardson from Deloitte Access Economics warns Australia’s pursuit of “bad” spending will catch up with it.

“We have a bunch of bad spending now well and truly cemented in place,” he told AAP.

“If we are really not going to do something about spending we are going to have a look at taxing.”

Deloitte Access’ last budget monitor projects the deficit for 2016/17 will be $1.8 billion wider than the government’s December’s mid-year review figure of $38.3 billion.

While company profits are helping to boost Treasury coffers, slow wage growth has hit income tax revenues.

But Mr Richardson expects the budget can still return to balance in 2021.

Mr Morrison said it was important to keep control of recurrent expenditure while driving the economy forward, especially given signs of global economic improvement.

The government needed to ensure the budget put Australia in the best possible position to take advantage down the track, he said.

Finance Minister Mathias Cormann says this means pursuing wider company tax cuts.

“None of this should be a reason for us to walk away from our efforts to make our business tax arrangements internationally competitive,” he told ABC radio.

“In the end, if we want to continue to grow our economy, if we want to continue to see improvements in real wages, we’ve got to ensure that we can attract additional investment into Australia to boost productivity.”

Mr Richardson believes Australia can retain its triple-A rating given China’s recovery and low domestic interest rates that have “botoxed the budget”.

However, a ratings downgrade remains a risk given rising household debt.

Australian household indebtedness has passed Denmark to be the second highest in the world, Mr Richardson said.

A downgrade in Australia’s credit rating would shave 0.5 per cent off living standards as borrowing costs increased, he estimated.

Mr Morrison said his second budget would be well received by the credit agencies.

Labor finance spokesman Jim Chalmers said government “accounting tricks” won’t deal with the blowout in net debt.

“It’s no wonder the rating agencies are circling when you consider that the Liberals have tripled this year’s deficit and blown out net debt for this year by $100 billion,” he said in a statement.