Economists cast doubts on Federal Budget

John Dagge
May 15, 2013
Herald Sun

ECONOMISTS have questioned the Federal Government’s timetable for returning the Budget to surplus, saying Treasury figures are too optimistic.

Australia could be mired deeper in the red and for longer than outlined in the Budget, analysts say.

The warning came as Moody’s said the global recovery had lost momentum over the past three months – likely to undermine the Australian economy.

In research published yesterday, the ratings agency said the eurozone would experience a “deeper and lengthier recession” than earlier thought and the US pickup would slow as austerity measures bit.

Bank of America Merrill Lynch chief economist Saul Eslake said the Government’s push for a surplus by 2016 relied much more on an uplift in revenue than it did on reducing spending.

The Government expects tax receipts from business to rise by $17 billion over the next four years, while the total tax take is forecast to grow by a massive $105 billion.

Mr Eslake said his outlook for the terms of trade and nominal GDP growth were both weaker than the latest Treasury predictions.

“If our assumptions are right there is a very clear risk the Budget won’t return to balance in 2015-16 and a reasonable risk it won’t get into surplus,” he said.

“We are thinking that commodity prices could fall a bit more than what Treasury does and we are less optimistic about business investment and a rebound in housing.”

National Australia Bank chief economist Alan Oster warned the deficit for the coming financial year – forecast by Treasury to be $18 billion – could easily blow out to more than $25 billion.