Act now on budget problems urges Grattan Institute
The Federal Government could soon be facing budget deficits of up to $60 billion a year, according to a new Grattan Institute report into the health of the nation’s finances.
The Budget pressures on Australian governments report reveals that increasing costs, exorbitant spending promises by both political parties, likely tax shortfalls and the prospect of declining minerals prices have all contributed to the depressing outlook.
“Turning these problems around is an alarming task but not impossible,” says the report’s author, Grattan Institute CEO John Daley.
“But it will require tougher choices than those governments have made over the last decade.”
The report concludes that the greatest pressure on the nation’s financial position comes from growth in spending, particular in health which rose by nearly $42 billion in real terms over the past decade.
But contrary to widespread belief, it is not the ageing population that is driving health spending but the fact that people of all ages are seeing doctors more often, having more tests and operations and taking more prescription drugs.
Mr Daley says the current plight of many European countries is more evidence that balanced budgets over the economic cycle of boom and bust are much better than the alternative.
“Even in good times it is hard for governments to run a surplus. They are invariably tempted to raise voter expectations and spend money. Many voters prefer outcomes with no losers,” Mr Daley said.
Mr Daley says running balanced budgets is not necessarily about reducing the size of government.
“Around the world, there are small governments that run big deficits, and big governments that run surpluses,” Mr Daley said.
“For the past decade, though, successive Australian governments have squibbed the hard decisions. Now courageous leaders must step forward and ensure our prosperity for future generations.”
The full report can be found here