Following Macroeconomics’ forecast earlier this month that Federal Budget revenues would be slashed by $52 billion over four years courtesy of slumping commodity prices, falling mining investment, and weak income growth, analysis by the Parliamentary Budget Office (PBO) has released a new report predicting big increases in the Budget deficit if labour productivity is not improved and if world commodity prices fall by 30%.
Key extracts from the report, which analyses the “sensitivity” of three main drivers of the Australian economy – labour productivity growth, the labour force participation rate, and the terms of trade – are presented below.