- Report includes proposals to accelerate return to surplus
- Expert panel includes former top bureacrats, S&P country head
Australia’s eight straight budget deficits and four more on the horizon are “alarming” for a growing economy that’s approaching 25 years without recession, a group of experts said as it released proposals to return the country to surplus by the 2019 fiscal year.
The Committee for Economic Development of Australia report, compiled by a panel that includes three former secretaries of the Department of Prime Minister and Cabinet, Reserve Bank of Australia board member John Edwards and the country head for credit ratings company Standard & Poor’s, suggested measures such as halving the capital gains tax discount, scrapping tax concessions on private pensions and increasing levies on alcohol, tobacco and luxury cars.
“Australia’s deficit problem is particularly alarming because despite a quarter century of sustained economic expansion, we have had eight years of deficit, with four more to go,” CEDA National Chairman Paul McClintock said in a statement. “Reform is much easier during periods of fiscal strength. Removing the deficit by 2018-19 will allow Australia to reset the conversation on economic reform.”
Australia posted its last surplus before the 2008 global financial crisis and since then both the former Labor government and the current Liberal-National coalition have pledged to rein in the deficit, with little success. The current government blames weak wage growth and plunging commodity prices for its failure to make headway, though it has also hamstrung efforts by insisting the shortfall should be made up by spending cuts rather than tax increases.
The report challenges that notion, setting out A$15 billion ($11 billion) in revenue measures and A$2 billion in spending reductions to bring the budget to surplus in three years.
“As a player in the global economy, running a large deficit means we have no flexibility to respond to unexpected economic shocks,” McClintock said. “Getting back to surplus won’t be painless -- some of it will be tough but we have tried to ensure almost all measures proposed will not affect the most disadvantaged in our society.”
McClintock noted the panel of experts was chosen based on “significant experience” working in economics and policy, having served under governments from both sides as public servants and leading economists.