Australia's Ever-Growing Debt Pile Set to Peak Within Six Yearsby
Budget to show deficit narrowing in coming years: Morrison
Government hasn't achieved a fiscal surplus since 2007-08
Australia’s drive to balance the books will see the federal government’s debt pile top out within about five or six years and then start to shrink again, according to Treasurer Scott Morrison.
Speaking in Canberra just ahead of his first budget on Tuesday, Morrison said he expects the fiscal deficit to narrow over the government’s four-year forecast horizon and pledged to keep expenditure under control.
“To start reducing the debt you’ve got to get the deficit down. To get the deficit down you’ve got to get your spending down,” Morrison said in a Channel Nine television interview on Sunday. “The deficit will decrease over the budget and forward estimates and we will see both gross and net debt peak over about the next five or six years, and then it will start to fall.”
The Australian budget was last in surplus in 2007-08 and attempts to rein in the deficit have been stymied by a slump in revenue as commodity prices fell. Morrison’s challenge is to maintain Australia’s public finances on a sound footing without increasing risks to the economy as it reduces its reliance on mining. He must also contend with the prospect of an upcoming election, which Prime Minister Malcolm Turnbull is expected to call for July 2.
Total outstanding federal debt is now more than seven times larger than it was before the 2008 global crisis and net debt is predicted to increase to 18.5 percent of gross domestic product in 2016-17, according to the median forecast in a Bloomberg survey of economists. The underlying cash deficit is expected to reach A$35 billion ($27 billion) next fiscal year, A$1.3 billion more than the government had forecast in its December fiscal update, according to the survey.
While the government confirmed on Sunday it would provide an additional A$1.2 billion of funding for schools over the forward estimates period, Morrison said that it was not a time to be throwing money around. He said the government was looking at measures related to retirement savings and also planned to crack down on tax avoidance by multinational companies, although he declined to confirm media reports of a possible reduction in income tax. Any additional spending measures in the budget will be offset by reductions elsewhere and the tax burden on the economy won’t be increased, he said.
“You don’t get a sustainable path back to budget balance by increasing the tax burden on the Australian economy,” Morrison said. “That just retards growth over the longer term and it punishes the economy at a time when we need it to perform at its best.”