An Assessment on the 2017-18 Federal Budget

30 May 2017

A group of economists will assess the macroeconomic forecasts and projections contained in the May budget to determine whether or not it is on a path back to surplus, especially with the present tax mix.

The forum will then move onto microeconomic aspects of the Budget: transport, education and health policies.

Business and Economics · An Assessment of the 2017-18 Federal Budget

Bob Gregory, Emeritus Professor, Research School of Economics, ANU: The looming tax mix crisis

The longstanding but unannounced policy of recent Treasurers to close budget deficits primarily by tax revenue increases seems unsustainable with the current tax mix. The strategy is to close the deficit by substantial increases in personal income tax rates, until they reach the highest level in two decades, and by a substantial trend reversal for company tax to fall as a proportion of GDP. Yet government is now flagging or implementing tax rate cuts to apply to both these revenue sources. The presentation will outline why there is a looming “tax mix crisis” and then focus on the implications of wage inflation as a policy instrument to restore budget balance.

John Daley, Grattan Institute: Why budget projections have been so wrong for so long and what Treasury should do about it

All predictions are wrong. But Australia’s budget projections have been particularly wrong for the last eight years. Each year since 2010, the Federal Treasurer has announced a substantial deficit in the current year, but projected a happy return to near surplus in four years’ time. There is a built-in optimism generator in Treasury’s budget methodology. It effectively assumes that if economic growth is slow in the current year, then it will be unusually fast in the fourth year of the budget’s forward estimates. These projections about the future have real-world consequences: they justify avoiding the hard work of budget repair. What reforms would generate less-wrong predictions and encourage better budget policy?

Tim Robinson, Research Fellow, Macroeconomic Research Program, Melbourne Institute: Assessing the May Budget’s short-term forecasts

Dr Robinson will review the short-term forecasts in the Budget, and assess what difference it would make if forecasts were substituted for the projections in the third and fourth years.

Marion Terrill, Grattan Institute: The Budget’s transport announcements

Author of the Grattan Institute Report, Roads to Riches, Marion Terrill will analyse the May 2017 budget’s transport announcements. How much of the $70 billion is new money? Is Victoria missing out again? What’s the case for the Western Sydney airport and Inland Rail decisions, and should greater rigour be introduced into decision making about Commonwealth-funded infrastructure projects?

Chris Ryan, Associate Professor, Melbourne Institute: Implications of the changes to student loans

The Program Director of the Economics of Education and Child Development Research Program at the Melbourne Institute, Chris Ryan will assess the effects of the May 2017 budget changes to the repayments of student loans on graduates’ incentives to work.

Anthony Scott, Professor, Melbourne Institute. From co-payment, to fee freeze, to indexation (and back).

What should we do with Medicare? Professor Scott, Program Director of the Health Economics Research Program, will discuss the implications of the budget for Medicare, and its potential impact on patients, doctors and the healthcare system.