Treasurer Scott Morrison has presented his first mid-year economic and fiscal outlook.
It wasn’t an auspicious start for the new treasurer who is already demonstrating that the job is pretty much beyond him.
One of Joe Hockey’s perceived problems was his inability to sell the budget message. So far, Morrison is no improvement.
The imaginative measures that Morrison announced to rein in expenditure included health cuts, tougher means testing for childcare and a crackdown on welfare payments which is expected to raise $2b over three years. Morrison suggested on 7.30 that the government would claw back money from people who had been overpaid.
Getting the $2b back is going to be difficult.
We can safely assume that people who are engaged in welfare fraud or have been overpaid, probably don’t have a lot of money in the bank so recovering the money could be a difficult, messy and time-consuming business.
And then there’s the size of the task.
That $2b equates to $12m per week, every week, for three years. They’re going to have to catch a lot of welfare cheats to meet that target.
Scott Morrison thinking up some clever ways of reducing the deficit
Meanwhile in a galaxy not far from here, The Age reported that about half the nation’s 1300 public companies did not pay any tax largely because they had offsets against profits that reduced their tax to zero.
But, like his predecessor, Morrison was strangely silent on how these companies could be required to lift rather than lean.
Demonstrating an optimism shared by few economists, Morrison has predicted that the deficit would swell to $33.7 billion in 2016-17, before reducing to $23 billion in 2017-18 and $14.2 billion in 2018-19.
This graph shows just how improbable those projections are.
This will constitute a most remarkable turnaround in Australia’s economic fortunes and will require a number of things to happen amongst them:
- The Chinese economy will go into overdrive and begin importing iron and steel from Australia.
- Iron ore and coal prices will increased dramatically from their current low levels.
- The American economy will surge.
- Massive wage growth in Australia which increase tax revenue.
In 1987, Finance Minister Peter Walsh spoke of the fairies-at-the-bottom-of-the-garden school of thought.
Nearly 30 years later, it appears to be alive and kicking.