A leading economist has predicted the government is unlikely to deliver a budget surplus by 2021 as promised
THE Government might not reach the Budget surplus it wants by 2021 for one simple reason. You’re not getting the pay rise you want.
That’s the pre-Budget assessment by leading economic consultants who expect growth in 2016-17 will be projected at close to six per cent in the May 9 statement.
Corporate profits are “roaring back”, according to the report by consultants Deloitte Access Economics released today.
But the benefit is yet to land in your wages.
And that, plus lacklustre fulltime employment, “trims $1.7 billion from official (tax revenue) forecasts in 2016-17 and a further $600 million in 2017-18”, the report said.
The debt-troubled Turnbull government will get extra revenue, but: “If you were looking for more of a tax windfall from the national income surge at the moment, you’re looking in vain.”
The assessment expected growth in 2016-17 to be close to 5.7 per cent in the May 9 statement, with the Government keen to haul in boosted tax revenue.
“National income has a spring in its step for the first time in years,” said the Deloitte Access Economics report, “but that renewed vim and vigour is all about profits rather than wages.”
While the Government will enjoy the extra tax revenue from the profit surge, it will not get much additional cash from individuals who are keeping their money close, so aren’t boosting “spending taxes” such as the GST.
“So the net news is good, but not as good as it otherwise would be, because there’s some darkness in the heart of the Budget,” said Deloitte Access Economics.
“The largest single tax — that on wage and salary earners — is disappointing official expectations.
“ Partly that is because wages growth is lower than a snake’s belly, and partly because job growth has been lacklustre, especially among fulltime workers.”
Tax revenue is now $550 million below the midyear forecast delivered late last year, said the report.
The good news for wage earners is that the report sees a jump in pay coming from late 2017.
Deloitte Access Economics said in 2011 wage growth was close to four per cent but then went into a remarkable slide to 1.9 per cent through 2016.
In the private sector growth was just 1.8 per cent, compared to 2.3 per cent in the public sector.