Deloitte Access Economics thinks a deficit levy makes sense if the government is serious about getting the budget back in good shape.
Imposing a deficit levy would show the Abbott government is serious about repairing the budget.
So says economist Chris Richardson, a long-time critic of government spending by both sides of politics, who believes a levy targeted at the top end of town makes sense.
The Deloitte Access Economics partner thinks while the bulk of getting the budget back into shape should come from cutting spending, raising taxes shouldn’t be ignored.
“The government will have hated having a deficit levy, which says to us they are serious about budget repair,” Mr Richardson said in his Budget Monitor on Thursday.
Taking the levy into account at an estimated $4.2 billion – and no other potential policy changes – Mr Richardson expects a marked recovery in the budget position in the coming years as other revenue streams also improve.
However, for the current financial year (2013/14) he expects a deterioration of $1.4 billion to a deficit of $48.4 billion, making it the second largest on record in dollar terms.
Flat company tax revenue and a shortfall in federal rent taxes, like the mining tax, will have offset an improvement in the tax take from individuals.
And while 2014/15 won’t be a great year for company tax collections either, it will at least see an “end to the bleeding”.
Deloitte estimates a “no policy change” budget position improvement of $5 billion to $6.5 billion in each of the the next three financial years to stand at $11.2 billion in 2016/17.
But the May 13 budget will take in 2017/18 for the first time and will illustrate the “Everest” the budget must climb because it will show big additional dollar costs for the likes of disability insurance, Mr Richardson says.
“Unless budget night reveals some much needed fiscal medicine, the deficit will worsen notably.”