Country’s cash deficit to improve by $100bn

THERE is good news and bad news when it comes to Australia’s cash deficit.

The good news is it is expected to be $100bn better off when the budget’s half yearly report card is handed down on Thursday.

The bad news is that it will still settle at about $239bn despite that.

New figures from Deloitte Access show the four years of deficits forecast by Treasury could fall from $342bn to $239bn.

The improvement is being driven by a faster-than-expected economic recovery.

But economists warn that the rapid budget repair does not leave room for “big promises” at the coming federal election.

“Our latest assessment is that Thursday’s budget update will reveal lower cash underlying deficits to the tune of $103bn,” Deloitte Access Economics partner Chris Richardson said.

“That’s remarkable, given everything that’s gone wrong in the seven months since the budget was released, including Delta’s dawn, iron ore’s collapse, and multibillion-dollar rescue packages,” Mr Richardson said.

The faster-than-expected economic recovery follows global trends, with tax receipts soaring in the wake of states reopening from Covid restrictions.

The Delta variant also didn’t cause as big of a hit, as the federal government called on states to contribute more to support struggling businesses.

Australia’s budget repair is also expected to be more reliable than other nations due to high vaccination rates.

While Treasury forecasts national income growing at an annual average rate of 2.8 per cent between 2019-20 and 2024-25, Deloitte estimates that it could be as high as 4.2 per cent.

However, Mr Richardson warned the government had a lot more cash it needed to splash to address issues in aged care, disability, mental health and defence.

“The budget will be under pressure for some years to come,” he said.

“If you’re hearing costly promises from politicians in the months ahead, they should be treated with considerable caution.”

IT’S REMARKABLE, GIVEN EVERYTHING THAT’S GONE WRONG IN THE SEVEN MONTHS SINCE THE BUDGET WAS RELEASED, INCLUDING DELTA’S DAWN, IRON ORE’S COLLAPSE, AND MULTIBILLION-DOLLAR RESCUE PACKAGES

DELOITTE PARTNER