Ramifications of Parkinson’s speech
letter published in The Australian Financial Review, 9 March 2012
In his address to the Australia-Israel Chamber of Commerce, Treasury secretary Martin Parkinson dropped a bombshell on the government’s budget outlook. He said that since the global financial crisis tax revenues have fallen by 4 percentage points of GDP and that “this is not expected to recover to its pre-crisis level for many years to come”. Indeed he suggested there would be only muted growth in tax receipts for the next decade and that “significantly greater expenditure restraint” would be needed for sound economic management and repayment of debt.
In the Mid-Year Economic and Fiscal Outlook, tax revenue in 2012-13 was estimated to come in at about 22.5 per cent of GDP or $350 billion and the budget surplus at 0.1 per cent of GDP or $1.5 billion.
Parkinson’s revelation suggests that tax revenue is now expected to be only about $305 billion in 2012-13, or about $45 billion less than estimated only a couple of months ago.
It is surprising that, as the Minister responsible for the budget, Treasurer Wayne Swan did not make this important announcement on the revised budgetary outlook, the more so as it occurs at a time when the economy has slowed markedly and when employment continues to remain stationary.
Reports do suggest that Swan has foreshadowed a new round of spending cuts. But will tax increases to catch the billionaires also be necessary?
Des Moore
Institute for Private Enterprise
South Yarra Vic