Announcing that the “budget is badly bend, but not broken”, Deloitte has urged the government to stop fearing debt, noting the need to let “the growth in the economy shrink the debt, rather than letting attempts to shrink the debt hold back the economy”.
“Taxpayers’ money is always precious. But taxpayers’ money is also doing a more effective job today than it’s ever done before. In ordinary times, we would worry about the debt. Yet these aren’t ordinary times,” Deloitte’s Chris Richardson said in the firm’s latest Budget Monitor.
Mr Richardson explained that moving forward, the government should spend money on creating jobs, transitioning out from the current gear of protecting old jobs. And, according to Deloitte, there are a few ways to do this, including offering “time limited money” to the states for infrastructure.
Other possibilities are in play, too, Mr Richardson explained, including the adoption of a business investment allowance and the delay or axing of the planned lift in the SG.
The first approach, he said, tries to keep as much as it can of the incentive effects of a company tax cut, but to deliver that rather more cheaply. As for the second, Mr Richardson asked, “is this the best time to promote a policy that boosts saving at the expense of spending?”
Touching on a particular policy that looks likely to be announced on budget night — bringing forward personal tax cuts — Mr Richardson called the cuts “entirely fair”, but warned that they’re not as effective as stimulus as some alternatives.
Although Deloitte predicted that the tax cuts could pump billions into the economy, it warned that the “stimulus is effective only if that money is then spent”.
“The very fact that the top 1 per cent of taxpayers pay 17 per cent of all personal tax is a reason why personal tax cuts work less well as stimulus — as they are more likely to be saved,” Mr Richardson said.
“That’s why we wouldn’t want any bring forward of the personal tax cuts to happen instead of other forms of stimulus.”
Over the past several weeks, the Prime Minister has answered many questions about the upcoming budget, but just this week he assured “it’s going to be a great budget”.
Speaking to media in Canberra over the weekend, Scott Morrison announced: “It’s going to be a budget that is going to have the most unprecedented investment in Australia’s future that this country has ever seen.
“It will be a titanic effort that we’re involved in to ensure this country can get back onto the growth path that we want to be on. And that means we’re going to have to do some very heavy lifting in this budget. And that comes at a significant cost.
“But I can assure Australians that particularly the Finance Minister and I and the Treasurer have been over every dollar, and every dollar we’re spending is targeted and it’s proportionate,” the PM said.