Federal Budget 2017: Economist Chris Richardson warns budget insanity will create widening deficit

BUDGET “insanity” will create an ever-widening deficit and a decade of “cost hikes on the credit card”. Analysis released today will show $2.5 billion has been added to our spending bill every year for a 25 years.

Treasurer Scott Morrison says the Budget will distinguish between good debt and bad debt. Picture: AAP

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BUDGET “insanity” will create an ever-widening deficit and a decade of “cost hikes on the credit card”.

That’s the warning from one of the country’s most well-respected economists, with analysis to be released today showing $2.5 billion has been added to our spending bill every year for a quarter of a century.

“Young Aussies — as disengaged as they are — don’t realise the most prosperous generation this nation has ever seen is stiffing them with the bill for our decisions,” Deloitte’s Chris Richardson said yesterday.

His warning comes days after Treasurer Scott Morrison stuck a more optimistic tone about the economy, saying the federal Budget next week will begin to make a distinction about what is “good debt” and “bad debt”.

Mr Richardson said official Treasury figures were “crazy” optimistic, despite a 65 per cent surge in company profits last year.

“We’ve chosen to be a high-spending and low-taxing nation, but that’s unsustainable,” he said.

“If there’s a fail on the spending debate, we’d compound that if we didn’t look at raising taxes.

“The maths are inexorable — if spending won’t go much lower than 26 per cent of national income, then taxes need to lift from today’s 23.5 per cent ... that sure isn’t the best solution to our mess.”

With gross debt pushing $500 billion, Mr Richardson said the deficit would make the next recession “worse than it need be by making the treasurer of the day less likely to use the Budget to defend against that downturn”.

“(It is) unfairly passing the costs of this generation’s inability to come to a consensus on to the taxpayers of the future,” he said.

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But Mr Morrison said the government had already passed “over $25 billion in budget repair measures”.

“The government’s disciplined fiscal management and conservative and credible forecasts ensured that all three rating agencies affirmed Australia’s AAA status after the midyear update,” he said.

Mr Richardson, a Deloitte partner and chief forecaster, took particular aim at the government’s childcare reforms, which he said shuffled money from one area to another­.

Despite being a good policy, “boosting both fairness and prosperity”, it was stymied by a difficult Senate and “getting lost in new layers of compromise”.

While The Sunday Telegraph revealed yesterday that the government was preparing to tick off a plan to allow first home buyers generous tax breaks to buy properties, Mr Richardson said no one should believe that this will fix housing affordability.

“Affordability is through the floor because interest rates are through the floor … so although governments should do stuff, it worries us that elections will soon be fought on this, and that politicians are increasingly pretending to punters that ‘they’ can do something about it,” he said.

Originally published as Federal Budget 2017: Economist Chris Richardson warns budget insanity will create widening deficit