Deloitte Access Economics partner Chris Richardson has released his influential, twice-yearly Budget Monitor, which paints a pretty picture for Australia’s “red-hot” recovery from the economic impact of the CCP virus pandemic.
As a result, smaller deficits than forecast are expected when Treasurer Josh Frydenberg hands down his budget on May 11. This puts Australia tens of billions of dollars better off than was expected just a few months ago.
“Our red-hot recovery is helping the budget get better,” Richardson said.
Deloitte said this was the result of jobs returning after last year’s recession faster than Treasury assumed, soaring iron ore prices, and households’ willingness to spend.
In fact, there are more jobs now than prior to the pandemic, and far fewer businesses made losses than Treasury expected.
That said, the economy is still under pressure, but just not as much as was previously forecast.
All up, Richardson expects deficits will be almost $100 billion better off over the four financial years to 2023/24 in the budget papers.
He is now forecasting a budget deficit just over $30 billion smaller than the $197 billion predicted in December—$167 billion.
For 2021/22, he expects a deficit of $86.8 billion rather than $108.5 billion.
Even smaller deficits are predicted by consultants PwC Australia which projects $144.4 billion in 2020/21 and $43.8 billion in 2021/22.
This trajectory could see the budget back in surplus seven years sooner than predicted in last year’s October budget, in 2034.
PwC chief economist Jeremy Thorpe said the government can increase spending and still bring in a bottom line that is below the 2020 budget projections.
Shadow treasurer Jim Chalmers said the Deloitte report attributed much of the economic and budget improvement to factors unrelated to the Morrison government.
This includes the substantial and selfless sacrifices of Australians to suppress the virus, the re-opening of state economies and remarkably high global commodity prices.
“Instead of a comprehensive plan to create secure, well-paid jobs, the Morrison government’s vaccine debacle, cuts to support, ideological attacks on job security and superannuation, and a budget riddled with rorts and waste, will only make things worse,” Chalmers told AAP.
AAP contributed to this report.
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