Government faces Budget embarrassment

Treasurer Scott Morrison will hope Australia can keep our AAA credit rating after he delivers a midyear Budget review. Picture: Jack Tran

A SURVEY has found two out of three Australians think budget deficits are okay in certain circumstances.

Treasurer Scott Morrison will be hoping global credit rating agencies will be just as forgiving when he hands down his midyear budget review on Monday. However, economists believe there is a 50/50 risk of the nation losing its triple-A rating if the budget has deteriorated since May as to delay a projected surplus in 2021.

A downgrade would hit confidence, raise borrowing costs and be a huge embarrassment for the government.

Finance Minister Mathias Cormann won’t say whether the surplus prediction still stands.

“We have been working for sometime to get spending under control, to get the budget back into balance as soon as possible and we have been making progress at every budget and budget update,” he told Sky News on Sunday. Credit rating agencies have repeatedly warned Australia’s top-tier rating would be at risk if sufficient headway is not made in repairing the nation’s finances. Senator Cormann conceded the potential revenue boost from a surge in iron ore and coking coal prices won’t be enough to offset the decline in tax receipts through slow wage and company profits growth.

It suggests the forecast 2016/17 budget deficit of $37.1 billion will be even bigger Economists also believe the 2016/17 economic growth forecast of 2.5 per cent will be lowered after the recent national accounts showing the economy went backwards, postings its worst performance since the 2008-2009 global financial crisis.

A survey by Chartered Accountants Australia and New Zealand found 66 per cent of respondents said budget deficits were acceptable.

However, the polling suggests people think the government’s strategy of cutting spending to reduce the deficit is the wrong.

Two in five (42 per cent) said it should be addressed by removing existing tax breaks, while just 21 per cent favoured spending cuts.

“People want to see meaningful reform of tax breaks over simply cutting funding from major programs,” Chartered Accountants head policy leader Geraldine Magarey said.

Chartered Accountants have previously called for an independent monitoring of the budget, such as through the Parliamentary Budget Office. Mr Morrison and Senator Cormann will jointly release the midyear economic and fiscal outlook at midday.

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