Looking at the finer details, the economic assumptions look reasonable over the coming four years. There has been little change to the structural budget balance estimates already in place.
"Policy changes give this year’s budget a much warmer glow than last year’s effort."
Warren Hogan, ANZ Chief Economist
The estimates have unemployment peaking at 6.5 per cent in 2015-16 and real GDP growing to 3.5 per cent in 2017-18. It’s unrealistic to project GDP to maintain those levels beyond then, against a backdrop of an aging population, unless the three Ps (population, participation and productivity) are boosted.
Tax receipts are projected to rise to over 25 per cent of GDP in the next 10 years, which suggests no tax cuts at all are being considered as bracket creep boosts revenue.
Revenues from the goods and services tax are expected to remain low, drawing questions over moves to cut spending to the states for public hospitals and schools.
Priority one: Putting government finances on a long-term sustainable footing: C
Priority two: Supporting the economy through ‘the transition’: B+
Priority three: Building fiscal policy credibility: B-
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
08 May 2015