Marie Diron, senior vice president at Moody’s Investors Service, made the following comments after Australian Treasurer Scott Morrison handed down a federal budget that forecasts a A$37.1 billion ($28 billion) deficit in the 12 months through June 2017, wider than he predicted six months ago.

The comments were sent by e-mail:

“The government’s commitment to fiscal consolidation illustrated in a projected return to fiscal balance by 2020-21 is positive. However, the budget projects somewhat wider deficits than expected last year, continuing a succession of revisions in the last five years. These revisions highlight the challenges facing the government in curbing spending and raising revenues in a lackluster nominal growth environment.

“If successful, the announced Ten-year Enterprise Tax plan will contribute to sustain robust growth in Australia, relative to other advanced economies. The budgetary impact is likely to be protracted as the fiscal benefits of support to SMEs will take time to materialize.

“The budget includes a limited number of revenue-raising measures, consistent with the objective of maintaining Australia’s tax burden at low levels.

“The projected increase in revenues as a share of GDP is based on a return to robust nominal GDP growth which generally comes with a higher revenue-intensity of growth. Our forecast for nominal GDP growth is somewhat more muted than the government’s. We estimate that the adjustment to an environment of lower commodity prices is still underway and will continue to weigh on corporate profitability and wage growth. As a result, improvements in the government’s revenues may be somewhat more muted than currently budgeted.

“The current projections for expenditure as a share of GDP are broadly unchanged from last year’s budget, in contrast with previous upward revisions. While this denotes the government’s commitment towards curbing spending, the projected fall in spending over the 5-year horizon of the budget is very small. This highlights the challenges in achieving significant spending restraint as commitments on education, health, social security and welfare absorb a large part of overall spending.

“Despite rising debt levels, the government’s fiscal strength is supported by high debt affordability. However, a slower pace of fiscal consolidation will leave public finances vulnerable to negative shocks, in particular a potential marked downturn in the housing sector and a reversal in currently favorable external financing conditions.”

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