Treasurer Scott Morrison has downplayed modelling by the Parliamentary Budget Office (PBO), which suggests that productivity will need to increase in order to ensure that a Budget surplus is sustained. The Federal Government has forecast that it will post surpluses equivalent to 0.3 per cent of GDP from 2020-21, although this is based on expectations that productivity growth will remain at the long-term average of 1.6 per cent. However, growth in productivity has averaged just 1.35 per cent over the last decade, and the PBO’s analysis has found that the Budget will be “broadly balanced” by 2027-28 unless productivity growth improves. From The Australian:
PBO modelling shows that if productivity continues rising at the rate it has averaged for the past decade, by 2027-28 receipts would be $13bn lower and spending would be $4bn higher. Personal income tax revenue would be $6.7bn lower, as a result of lower wages while company taxes would be $1.8bn lower. “Permanently weaker economic growth through lower labour productivity growth is projected to result in a broadly balanced budget position by 2027-28, albeit on a deteriorating trajectory, compared to a surplus of 0.3 per cent of GDP under the central projection,” the PBO says.
