It is worth noting that the so-called structural deficit is not due to low tax receipts, which are historically high due to low unemployment and high commodity prices, but due to rampant Government spending.
Receipts are forecast to reach the highest in over half-a-century (26% of GDP in 2032-33) due to rising immigration and inflation driven bracket creep; if the Government drops the ‘Stage 3' personal tax cuts as speculated, this will rise significantly higher.
Driving total payments is a sharp uplift in the forecast costs of the NDIS, spending on which is expected to rise by an average of 13.8% per annum each year over the next decade to an annual cost of $102 billion a year. The other noteworthy item is the higher interest payments on debt which is set to more than double as a percentage of GDP from 0.7% to 1.8%, reaching $70 billion a year.
Overall, this Budget continues the fiscal largess of the previous government but at a time when the rationale for less fiscal impetus is warranted. Recent history has shown addressing spending in a meaningful way to be politically challenging; with both voters and crossbench senators viewing this unfavourably. This leaves tax creep, potentially through a levy, as the more likely pathway for budget repair.
