Prime Minister Morrison welcomed the budget numbers. He also suggests that a vote for Labor at the next election will be a vote for higher taxes. It is an odd claim, which according to his government’s own budget papers is based on perception, not facts.
The 2017-18 budget numbers confirm that the tax to GDP ratio jumped to 22.7 per cent of GDP, a level of tax that is higher than in every year of the previous Labor administration.
The tax take was around 1.5 percentage points higher than the average annual tax take of the previous Labor government. In today’s dollar terms, the tax take in 2017-18 is around $30 billion higher per annum than under Labor. That is a lot of extra tax we are all paying.
Which begs the question, which is the party of high taxes?
The picture on net government debt is more disconcerting.
The level of net debt hit 18.6 per cent of GDP which is the highest since the last 1950s and a time when the government was dealing with the debt build up that occurred in from the cost of fighting World War 2. By way of a further comparison, the level of net debt was just 10.4 per cent of GDP in 2012-13, the time the Coalition won the 2013 election. Suffice to say, the path of budget repair tracking more slowly than the Coalition promised when it took office 5 years ago.
It is still expecting a return to surplus next year or two, aided by the continuation of unexpectedly high iron ore and coal prices. The return to budget surplus also relies on extra tax revenue flowing from an acceleration wages growth and GDP continuing to grow at a 3 per cent plus pace. Many economists remain concerned that the commodity price level is vulnerable to a dip as the Chinese economy slow and global supply continues to rise. There is also a serious question about the wage pick up Treasury is hoping to see.
If there is any downside to these critical aspects of the budget numbering, the move to surplus will be delayed another year or two and with that, government debt will still rise.
Let’s hope commodity prices remain high and wages growth does eventually pick up and by this time next year, a strong economy has seen a long awaited return to a budget surplus.