Scott Morrison has counted cuts already rejected by the Senate in his budget update, which campaigners say undermine the government’s budget message

This article is more than 4 years old

This article is more than 4 years old

The Turnbull government is “banking” $13.9bn in Abbott-era savings rejected by the Senate in a budget update that still shows the deficit blowing out by $26bn over four years since the May budget.



Myefo: Scott Morrison reveals budget deficit to blow out by $26bn over four years – politics live Read more

The government announced new savings in the midyear economic and fiscal outlook (Myefo) on Tuesday – including cutting bulk-billing incentives for pathology services and tightening a welfare “crackdown” – to pay for already announced new spending on innovation, the special Syrian refugee intake and processing asylum seekers in Australia.

But a slump in revenue, partly as a result of falling commodity prices, saw the 2015-16 deficit climb from $35.1bn predicted at the time of the last budget to $37.4bn now.

And included in that deteriorating bottom line are old savings included in policies that the Senate has steadfastly refused to pass – which means the budget update counts “savings” that are “wholly unrealistic”, according to the Australian Council of Social Service (Acoss).

Among the “savings” still counted in the budget update despite being rejected are:

* The $4.8bn that would be saved by the latest version of proposed cuts to family payments, even though Labor has only passed $500m of them;

* $3.2 bn from increasing the interest rate for student loans and requiring that they be paid back sooner;

* $1.1bn from cutting university funding;

* $1.3bn for the proposed $5 hike in the PBS co-payment that was supposed to start in January;

* Over $600m in rejected welfare savings, including forcing under-25s to wait a month to receive the dole, which was rejected by the Senate in September.

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“Those 2014 budget measures were stalled in the Senate for good reasons,” said Acoss chief executive Cassandra Goldie.

“If the government wanted to give us a realistic assessment of the budget, they should not be booking savings that are wholly unrealistic,” she said.

The chief executive of Universities Australia, Belinda Robinson, said she believed “the community will be concerned that the government, despite one year’s reprieve, intends to pursue the cuts to university funding announced in the 2014 budget”.

And Labor’s health spokeswoman, Catherine King, criticised the government for counting the “savings” from the PBS co-payment despite health minister Sussan Ley saying in May she was not going to “waste time” putting them back to parliament because they would be voted down.

The Myefo does remove $5.8bn from the budget bottom line to account for delays in the Senate and concessions the government has made to try to get legislation through, but still counts the savings from the stalled legislation.

It shows total revenue will be $33.8bn lower than expected over four years, partly as a result of declines in commodity prices since Joe Hockey handed down his final budget in May.

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Economic growth has also taken a hit, with the treasurer, Scott Morrison, predicting a lift in real GDP of 2.5% this financial year, compared with 2.75% forecast in the budget. The government has also cut half a percentage point from the expected figure in each of the next few years, with growth now tipped to be 2.75% in 2016-17 before firming to 3% after that.

“The inclusion of this more realistic outlook on domestic growth should be seen for what it is; that is, a statement of confidence in our economy,” Morrison said as he joined the finance minister, Mathias Cormann, in Perth on Tuesday to announce the new figures.

Morrison pointed to improvements in the forecast unemployment rate, which has been revised down from 6.5% to 6% this financial year and is expected to fall to 5.5% by 2018-19.

The government is continuing its budget rule of not cutting to make up for revenue writedowns, but has found offsets for new spending announced since the last budget.

The new cuts in the health portfolio include $650m over four years by cutting bulk-billing incentives for pathology and MRI services, $595m from “streamlining” health workforce programs, and $472m from adjusting aged care funding formulas.

Morrison is also banking on $1.3bn by expanding the welfare payment integrity measure announced in the last budget, which was already slated to achieve $1.7bn, with an increased focus on pursuing discrepancies between the employment income they declare to Centrelink and the “pay-as-you-go” information provided to the tax office.

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A further $695m is to be saved from the welfare system by increasing other forms of data-matching. The government will also gain $318m from a new cap on the number of green army projects.

Myefo represented the first major test for the new financial team installed after Malcolm Turnbull ousted Tony Abbott from the top job in September on the grounds the country needed better economic leadership.

The underlying cash deficit is expected to be $37.4bn in 2015-16, a deterioration from the $35.1bn estimated at the time of the budget. The expected deficit increased from $25.8bn to $33.7bn in 2016-17, increased from $14.4bn to $23bn in 2017-18, and increased from $6.9bn to $14.2bn in 2018-19. The new figures represent a cumulative hit to the budget position of about $26bn over four years.

The government is now projecting a return to surplus in 2020-21, one year later than tipped at the time of the last budget.

Morrison and Cormann said the government was not rushing back to surplus because extreme measures “would place a handbrake on household consumption and business investment growth and unnecessarily threaten the fresh new momentum emerging in our transitioning economy”.

The treasurer said: “Despite revenue writedowns of almost $34bn caused by falling commodity prices, a declining terms of trade, weaker global growth and the adoption of more realistic domestic growth outlook, we continue patiently and responsibly on the path to budget balance.”

Morrison stressed it was “a budget update, not a budget” so bigger changes would be considered in May and in the lead-up to the federal election. Decisions on tax changes have also been deferred until next year.

The Labor leader, Bill Shorten, said the government’s budget was “on a road to nowhere with no prospect of improving”.

“Instead of looking at multinational taxation, or superannuation tax concessions, the Liberals are at it again. They are proposing the harshest cuts to the people least able to protect themselves,” he said.

The shadow treasurer, Chris Bowen, said Turnbull and Morrison had “presided over a budget deficit blowing out at the rate of $120m a day since the last budget”.

Bowen said: “Deficit reduction and returning to surplus was at the heart of this Liberal government, and it begs the question: if they have no plan to return to balance, what is the point of the Turnbull government?”

Greens MP Adam Bandt said Morrison was following Hockey’s lead by “taking the axe to the old, the sick and the poor while letting the very wealthy off scot-free”.