Treasurer Joe Hockey has delayed the federal government's return to surplus by another year, forecasting that the country will be not be in the black until 2019-20 and meaning the Commonwealth will extend its run of seven deficits to 11.
Treasurer Joe Hockey has delayed the federal government's return to surplus by another year, forecasting that the country will be not be in the black until 2019-20 and meaning the Commonwealth will extend its current run of seven deficits to 11.
The budget outlook for the coming financial year is a cash deficit of $35 billion, falling gradually to $6.9 billion in 2018-19.
The driving force behind the borrowing is federal government spending, which will rise to almost half a trillion dollars by 2018-19, around 25.3 per cent of the national economy.
For clarity when reading the above chart, the gap between revenue and expenses does not always equal the cash deficit.
Meanwhile, bracket creep in income taxes will support revenue surging to around 25.2 per cent of GDP.
Mr Hockey argued that, in a decade’s time, gross debt will be $110 billion lower than under the settings the government inherited
"Australia’s budget position is getting stronger each and every year," Mr Hockey said.
"From a $48 billion deficit we inherited, to $35 billion next year, down to a $7 billion deficit in another three years’ time.
"And over the same period, we are reducing the size of government as a share of the economy."
The latter task is proving difficult, with blockages in the Senate and policy backflips putting the government’s fiscal strategy in very new territory.
Bankwest chief economist Alan Langford outlined the government's reasons for its approach.
"The political reality of the difficulty in getting last year’s budget through the Senate clearly played its part, but so too did the equally significant reality that another tough budget in the face of the steep decline in commodity prices would run the significant risk of tipping the economy into its first recession in 23 years," Mr Langford said.
"So while last year’s budget squashed consumer sentiment and in time weighed on business confidence as measure after measure got blocked by the upper house, households this time are less likely to get even more pessimistic.
"Small businesses at least are the big winners, although those that rely on public infrastructure projects will be disappointed - particularly if their business is in any way reliant on new public transport."
Down the track, the government projected a dramatic increase in welfare spending driven by the National Disability Insurance Scheme.
In 2018-19, social security and welfare expenditure will be around $187 billion, an increase of almost 10 per cent on the 2017-18 year alone.
At that level, welfare would make up around 44 per cent of federal spending (excluding the $69 billion GST distribution payment).
Spending on the NDIS is anticipated to be $19 billion in the 2017-18 year.
A reduction of around $6 billion in welfare is planned across the forward estimates, thanks to integrity measures and changes to pension thresholds, a figure which pales in comparison to that targeted in last year’s alterations to indexation of aged pensions and family tax benefits.
There are also new spending initiatives.
To fund an additional $3.5 billion in childcare payments announced in the lead up to the budget, the government intends to push forward with changes to the FTB and will crack down on what it claims is double dipping into paid parental leave.
Initial responses from the Senate crossbench, six of whom will be required to support the package for it to become law, generally indicate the government might be facing another battle to pass that legislation.
Other spending items in this year's budget include the reversal on reductions to GP rebates, worth $3 billion, and $1.5 billion for new medicine listings in the pharmaceutical benefits scheme.
As previously announced, WA will receive $499 million for infrastructure projects.
