Budget deficits will grow, economist warns

Written on the 21 November 2016

Treasurer Scott Morrison's budget is facing significant deterioration, with a private forecast tipping bigger-than-expected deficits over the next four years.

The closely-watched budget monitor from Deloitte Access Economics predicted this year's deficit would blow out by $3.4 billion to $40.5 billion, and $24 billion over the forward estimates.

The monitor warned a recent surge in iron ore and coal prices was a "blip" and would not be enough to make a dent in the deficit, while slow wages growth fuelled by low inflation would hurt any recovery in tax revenue.

Deloitte partner and former Treasury official Chris Richardson said evidence of the slowest wages growth on record, revealed in the most recent Wage Price Index, meant the Government would have difficulty in meeting its budget forecasts.

"The biggest chunk of the economy and the biggest chunk of the budget is the wages we earn and the taxes we pay on them," Mr Richardson told the ABC's AM program.

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Source:  ABC