First home buyers would be able to withdraw money from superannuation for a deposit on the condition they put it back later and save more quickly for deposits by having their pay directed into superannuation-like accounts under proposals being considered for next Tuesday’s budget.
Scott Morrison and Malcolm Turnbull’s second budget is set to forecast a surplus in 2020-21 using a new measure of budget balance called “net operating balance” that will exclude extra spending on infrastructure, however Australia’s preeminent budget forecaster questions this, saying it won’t return to surplus for the foreseeable future.
Scott Morrison’s second budget, to be handed down next Tuesday, is set to forecast a surplus in 2020-21. Photo: Louise Kennerley
Deloitte Access Economics, the so-called “treasury in exile” run by former budget official Chris Richardson, says that forecast looks doubtful because it assumes tens of billions of dollars of cuts in projected grants to the states will stay in place and that the Senate will pass cuts it has shown no interest in passing.
“The budget simply won’t whirr back into surplus,” he said ahead of the publication of the Deloitte Access Budget Monitor on Monday.
Chris Richardson says a surplus forecast looks doubtful because it assumes tens of billions of dollars of cuts in projected grants to the states will stay in place. Photo: AAP
Any loss of Australia’s AAA credit rating would be a “tax on growth”. It would penalise the parts of the economy that needed capital to grow.
Labor’s finance spokesman Jim Chalmers said the government should lock in the AAA rating by ditching their “unaffordable tax handouts for big business” and adopting Labor’s proposed cuts to negative gearing and capital gains tax concessions.
Mr Morrison said if Labor was serious about risks to the AAA rating they wouldn’t have proposed increases in spending at the last election and stood in the way of the Government’s measures to strengthen the Budget.
The budget would boost revenue by creating economic growth that would mean “higher wages and more hours of work for Australians”.
Mr Richardson said the economy was healthy, and that would boost the budget outlook for the next financial year. But beyond that, projected spending would weigh it down.
He was predicting a smaller than previously expected deficit of $27.5 billion in 2017-18, followed by larger than expected deficits of $20.9 billion in 2019-20 and $14.2 billion in 2019-20.
The new measure to be highlighted on budget night, “net operating balance” would remain in deficit at $5.5 billion by 2019-20, which is the end of the Deloitte Access forecasting horizon.
“A large chunk of what they say will be an improvement in the deficit is the $80 billion cut in projected grants to the states for health and education announced in the 2014,” Mr Richardson said. “We know it is politically unsustainable because just before last year’s election the prime minister toned some of it down. I am not saying the states can’t budget better, but I am saying the Commonwealth straitjacket is unrealistic.”
As traditionally measured, the budget won’t whir into surplus for the foreseeable future.
Deloitte Access Economics director Chris Richardson
“As a nation, we need to have a serious conversation. We’ve voted ourselves extra spending but not a way to pay for that spending. The government’s approach seems to do little other than promising that she’ll be right.”
One of the schemes being considered for first homebuyers would allow the diversion of pre-tax income into superannuation-style deposit-saver accounts that would be lightly taxed or matched with government contributions, along the lines of a little-used Labor scheme axed by the Coalition after taking office. Another would allow the withdrawal of superannuation savings for home deposits on the condition they were replaced later after the homeowners’ finances improved.
On Sunday backbencher John Alexander, who chaired the parliament’s inquiry into housing affordability, continued to push his idea of allowing superannuation funds to take equity in houses, saying: “When’s the penny gonna drop? We actually have a tax-effective savings system: it’s called superannuation.”
Deloitte Access is forecasting a lift in economic growth to 3.5 per cent in 2017-18, followed by 3 per and 2.6 per cent in 2018-19 and 2019-20. It is forecasting boost in company tax revenue of $11.7 billion in 2017-18 followed weaker growth of $3.8 billion and $4.4 billion in 2018-19 and 2019-20.
– with James Massola, Adam Gartrell