Overwhelmingly, Australia’s top economists would rather the budget funds measures to cut carbon emissions than cuts income tax or company tax.
The Conversation’s pre-budget survey of a panel of 46 leading economists selected by the Economic Society of Australia finds almost half want a budget deficit smaller than the A$99.2 billion expected for 2021-22 and the $98.9 billion forecast for 2022-23 in the December budget update.
Higher commodity prices and lower than expected unemployment – which is lifting tax revenue while also cutting spending on benefits – is set to produce a deficit tens of billions of dollars lower, perhaps as low as $65 billion, absent new spending.
But a substantial chunk of those surveyed (41%) want an unchanged or bigger deficit to boost spending in other areas, including an accelerated transition to net-zero carbon emissions and Australia’s defence.
Saul Eslake said “gimmicks” such as cuts in beer or petrol excise failed to address the reality that Russia’s invasion of Ukraine had serious economic consequences for Australia, including reducing national income. Governments can’t “pretend this hasn’t happened”.
Instead, what governments could do was ensure Australia’s lowest earners don’t bear the brunt of that economic pain.
The best ways to do this were temporary increases in social security payments, or a one-off special payment, and tax rebates for genuine low earners.
Eslake would fund them from the extra tax that will flow from the companies and shareholders who will benefit from the higher commodity prices following Russia’s invasion.
UNSW Sydney’s Nigel Stapledon was sceptical about higher social security payments. Given Australia’s experiencing a near five-decade low in unemployment, and unprecedentedly high number of job vacancies, he said it was hard to justify a higher rate of JobSeeker.
Also high on the list of measures panellists felt should not be adopted were further company tax cuts (21.7%) and bringing forward the Stage 3 tax cuts income tax cuts directed at high earners and due to start in July 2024 (21.9%).
- ^ petrol tax (thenewdaily.com.au)
- ^ tax on beer (www.couriermail.com.au)
- ^ $98.9 billion (budget.gov.au)
- ^ $65 billion (www2.deloitte.com)
- ^ Top economists expect RBA to hold rates low in 2022 as real wages fall (theconversation.com)
- ^ CC BY-ND (creativecommons.org)
- ^ Top economists see no prolonged high inflation, no rate hike in 2022 (theconversation.com)
- ^ To really address climate change, Australia could make 27 times as much electricity and make it renewable (theconversation.com)
- ^ Frydenberg targets budget at cost of living and attacking debt (theconversation.com)
- ^ Tuesday night (ministers.treasury.gov.au)
Authors: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University