The surge of good news on revenues is temporary. The bad news on spending isn’t, writes Chris Richardson.
Yet, not all the spending news is bad. In fact, I think the budget will announce some good news on spending, much of it due to sharply lower than budgeted interest costs.
That combination is set to save more than $12 billion over the next few years, with that saving reaching about $5 billion in 2025-26 alone.In fact, net interest payments this year look set to be the smallest share of national income in more than a decade, while the matching average over the four years to 2025-26 sits comfortably below the average over the past three decades.
But wait, there’s more. Remember Treasury has massively underestimated national income because it keeps assuming commodity prices will do an immediate face-plant.The bottom line is that spending may be one percentage point of national income higher than it was in the past – not two. How hard? To date, the government’s decisions have added to deficits. Those decisions had already worsened the bottom line through to 2025-26 by $10 billion as at the October budget, and that figure has probably doubled since then.
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