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Treasurer Joe Hockey believes he could have gone much harder in his first budget.
This may shock Australians who will face the pinch from cuts and savings made over the next four years to help deliver a relatively tiny deficit in 2017/18.
But the economy is forecast to grow at below the trend rate of 3.25 per cent up to 2015/16, and the jobless rate is set to rise to 6.25 per cent.
“If we had have gone harder it (the budget) would have contracted from growth,” the treasurer told reporters during Tuesday’s federal budget lock-up.
However, doing nothing about the budget deficit wasn’t an option.
“If we had have gone harder it (the budget) would have contracted from growth.”
Mr Hockey has tried to spread the burden of repairing the budget, from tightening family benefits to imposing a temporary levy on high income earners.
From charging a co-payment of $7 when visiting the doctors, to reintroducing indexation on fuel prices for the first time in 13 years.
The government will also cut $845 million of assistance programs to business, but it will cut the corporate tax rate by 1.5 per cent in 2015 as promised to make industry more competitive in the global economy.
“It’s time for us all to contribute and build,” he said.
“The government’s focus will be on strengthening the overall business environment, so that enterprise, large and small, can create more jobs in Australia.”
Economic growth is expected to be lower in the 2014/15 financial year at 2.5 per cent, against 2.75 per cent this year.
It won’t pick up until after 2016, and only to 3.5 per cent, as the economy continues to transition from the mining investment boom to broader based growth.
Mr Hockey has further ratcheted up the budget deficit to $50 billion for this financial year, and it will be the second highest on record in dollar terms, from $47 billion in the December mid-year budget review.
— Tony Abbott (@TonyAbbottMHR) May 13, 2014
But he’s forecast a narrowing in the later years, with deficits of $29.8 billion in 2014/15 and just $2.8 billion in 2017/18.
The government is aiming for a sustainable budget surplus of one per cent of gross domestic product by 2023/24 – which is almost 10 years away.
Mr Hockey is also predicting government debt at just under $400 billion in 2023/24, rather than close to $700 billion.
He says without budget changes, there would never be a return to surplus and debt would never be repaid.
“So the time to fix the budget is now,” he told parliament.