The chief economist of the nation’s biggest retail bank is forecasting a $12 billion improvement in the budget deficit over the next three years, aided by an improved economic outlook and rising commodity prices.
But the Commonwealth Bank’s Michael Blythe is also quick to say while every bit helps, such an improvement needs to be put in context.
Treasurer Scott Morrison prepares the budget from his office in the Treasury building in Canberra. Photo: Andrew Meares
“The $12 billion looks like a rounding error relative to projections showing total spending of $1.4 trillion over the next three years,” Mr Blythe says in his pre-budget preview.
Other economists are also predicting smaller deficits since December’s mid-year review.
The Education Minister, Simon Birmingham, insists the government is making inroads into budget repair.
“Overall the budget needs to wash its face in terms of making sure that if we are going to continue to steadily reduce the level of the deficit and get ourselves back to balance, then new spending proposals have to be offset elsewhere,” he told Sky News on Wednesday.
But the Opposition Leader, Bill Shorten, has mocked Treasurer Scott Morrison’s approach to repairing the budget and paying down debt, saying it takes more than “accounting trickery”.
This was a reference to the Treasurer’s emphasis on “good” and “bad” debt in the May 9 budget.
“It requires more than changing the adjective in front of debt from ‘bad’ to ‘good’,” Mr Shorten told the McKell Institute in Sydney.
He used the address to lay out Labor’s “fair dinkum action” on multinational tax evasion.
This included tightening debt-deduction loopholes used by multinational companies, increased compliance activity by the Australian Taxation Office, and a $100 million threshold for public reporting of tax data for private companies from the present $200 million.
He said the new measures to make multinationals pay their fair share will deliver a budget improvement of $5.4 billion over the decade.
“That’s not money ripped from the vulnerable or cut from higher education – these are tax dollars legally owed to this country by wealthy corporations,” he said.
“Malcolm Turnbull is only interested in delivering a $50 billion tax handout to big business and the banks.”
Mr Morrison has already flagged he will be reintroducing the remainder of his 10-year corporate tax cut plan when Parliament sits for the budget.
However, a new survey by KPMG Enterprise found nearly two-thirds of small businesses that have already had a tax cut legislated believe it will make no difference to their firm or the cut needed to be bigger to be truly effective.
KPMG tax partner Brett Mitchell said he was taken aback by the result.
“It was the government’s hope that this would act as a stimulus to SMEs to invest in technology or hire more staff, but this hasn’t been perceived as such,” he said.
Although Mr Blythe believes there should be positive benefits from these tax cuts, he says these would be enhanced if they were part of an integrated package, including personal income tax and the GST.