Amid the gloom announced in yesterday’s Mid-Year Economic and Fiscal Outlook is the faint hope Treasurer Joe Hockey is broadcasting a worst case scenario to avoid economic surprises.
But on the face of it, the MYEFO forecasts hold bad news for the nation’s finances, with untrimmed deficits blowing out to $123 billion over four years.
Just last month the deficit was set to disappear by 2016-17, according to the Pre-Election Economic and Fiscal Outlook.
The MYEFO forecasts get worse to the tune of a $667 billion deficit by 2023-24.
Crikey federal politics correspondent Bernard Keane suggested one “interpretation” of the tighter MYEFO figures is that “[Treasurer Joe] Hockey has demanded Treasury slash its forecasts and give him the worst-case scenario for revenue” to avoid troubles that plagued the previous government as Treasury continually revised down revenue projections.
“The key reason is that forecasts for nominal GDP growth have been revised down, and revised down a lot,” he wrote yesterday.
Growth in nominal GDP as stated in PEFO was 4.5% in 2014-15, but MYEFO has revised that figure down to 3.5%, and in the following years nominal GDP is half a per cent lower than the PEFO forecasts.
“They are the lowest nominal GDP forecasts since the global financial crisis,” says Keane.
Rivkin investment firm chief executive Scott Schuberg has offered a similar sentiment to Keane’s, stating “while Labor played politics coming into the election by consistently downplaying the softening figures behind our economy, this outlook is designed to get the bad news out early so that expectations remain low before we next go to the polls”.
Schuberg said MYEFO was “more of an articulation of reality than a revelation”.
The Australian Chamber of Commerce and Industry has used the deficit number to call on Parliament to, literally, think of the children.
“Unless the budget is brought back into repair inside this budget cycle, our nation faces the unpalatable prospect that children born in 2007 will not see a government living within its means until they hit secondary school,” said ACCI chief executive Peter Anderson.
The challenge for Hockey’s team is to find a way to slice away the $123 billion forecast deficit.
But Anderson has a way, pare back the Coalition’s “excessive” paid parental leave scheme, and unwind expenditure related to carbon pricing and “expensive renewable energy schemes”.
The Australian National Retailers Association was not worried by the MYEFO news. Chief executive Margy Osmond was “slightly concerned” it would scare buyers out of shops and curtail the claw-back in Christmas retail spending.
The Institute of Chartered Accountants Australia reacted with a call to look at widening the GST tax base to address the variability in projected revenues seen over 2013.
Hockey spoke as the MYEFO figures were released yesterday when he said “taxpayers can no longer afford old government spending priorities,” as quoted in The Australian Financial Review.
“Australians will now have to adjust their expectations of what government can sustainably provide,” he said.
Expectations are that Hockey will cut from education, welfare and social spending, Phillip Coorey in the AFR states.