Australia can expect a decade of deficits between 2008 and 2019, and net debt is projected to peak at 18 per cent of GDP in 2017, according to a thinktank.
Fiscal challenges for Australia, a working paper by the Grattan Institute finds that both Coalition and Labor Governments have been hoping that bracket creep and favourable economic conditions will return the budget to balance.
And it finds that their short- and medium-term projections have all contained highly optimistic assumptions about revenue growth and spending restraint.
For six years budget outcomes have been worse than projections, and for six years the Commonwealth has run headline deficits, five of them larger than two per cent of GDP.
“Hope is not a budget management strategy: it simply justifies putting off hard decisions, and shifts the costs and risks of budget repair onto future generations,” said Grattan Institute CEO John Daley.
According to the paper, deficits are not likely to improve as the falling terms of trade and lower nominal economic growth drag on revenues at the same time as the Government needs to fund substantial new policy initiatives.
“Given the size of the task, Commonwealth and state governments will not be able to repair their budgets without both cutting costs and boosting revenues,’ said Daley.
The Grattan Institute will release further papers suggesting that deficits could be reduced through changes to property taxes, the GST, superannuation tax concessions, and capital gains tax and negative gearing arrangements.
However as the Guardian reports, superannuation tax concessions are not currently on the Government’s radar.
Prime Minister Tony Abbott (pictured) said on Wednesday the Government would “never ever” make such changes.