Tony Abbott’s promise to return the Federal Budget to surplus within a decade has met the wrath of a range of economists.
For instance, Stephen Anthony, head of budget forecasting firm Macro- economics, describes Abbott’s budget committment as “very troubling” given the “complete and utter lack of detail”.
“What we have here . . . is a further structural weakening in the foundation of the fiscal strategy”.
“Without a framework there’s no compass, so on the face of it, this sounds like a slippage, not an enhancement”.
In a similar vein, Saul Eslake, chief economist at Bank of America Merrill Lynch, described Abbott’s promise to return the Budget to surplus within a decade as an ”aspirational goal’‘ that would only be achieved if the economy grew rapidly. ”[Otherwise] there’s not a lot of scope for them to find these sacks of money that are going to deliver them the savings they need’.
The crux of the problem for the Coalition is that, instead of promising to wind-back entitlements implemented when Budget revenues were being juiced by the once-in-a-century commodity price boom, rising household debt, rising asset prices, and still-favourable demographics, the Coalition has doubled-down with policies like the paid parental leave policy, which locks the Budget into further recurrent expenditure without the prospect of achieveing any material enhancement in workforce productivity or labour force participation.
In fact, the Coalition’s stance on a range of Budget issues – such as the mining tax, the Fringe Benefits Tax, superannuation concessions to the well-off, and abolishing means testing of the private health insurance rebate – virtually guarantees that the Budget will remain in deficit unless the Australian economy experiences another miraculous boom (highly unlikely given the current trajectory of commodity prices, mining investment, and Australia’s ageing demographics).
At some point, the structural issues facing the Australian economy and Budget will need to be confronted by whoever is in Government. Hopefully, once the election dust settles, the new Government will start this long and painful (but necessary) process.
