Above is an interesting interview on Switzer TV with Chris Richardson from Deloitte Access Economics discussing the outlook for the Federal Budget.
According to Richardson:
- Australia should have stronger public finances in the wake of the once-in-a-century commodity boom.
- Spending problems go back more than a decade. Both sides took a temporary commodity boom and assumed it was permanent, and committed to unsustainable recurrent spending.
- Revenues are difficult to forecast due to swings in commodity prices, etc. But most expenditures are not, which is where most of the problems lie.
- On China, there was never going to be a supercycle in prices and iron ore and coal prices are likely to trend lower. And while the Budget was a big beneficiary as commodity prices rose, it will suffer as they decline.
- The Australian Dollar is likely to trend lower as the terms-of-trade declines and quantitative easing tapers in the US and elsewhere.
- Interest rates will remain low for a prolonged period in order to support growth as mining investment unwinds.
- Housing is likely to see a “shake-out” in the even that Australia experiences a recession.
Overall, a sensible assessment.
