Damaged budget not permanent: Deloitte

Deloitte Access Economics Partner Chris Richardson says the budget is bent but not broken.
Deloitte Access Economics Partner Chris Richardson says the budget is bent but not broken.

Deloitte Access Economics expects Treasurer Josh Frydenberg will hand down a deficit of $198.5 billion in his October 6 budget for 2020/21 financial year.

Its partner and economist Chris Richardson expects smaller deficits of $45 billion in 2021/22 and $25.6 billion in 2022/23.

"The budget has therefore taken enormous damage, but it probably isn't permanent damage, " Mr Richardson said releasing his budget monitor on Monday.

"The budget is badly bent, but it's not broken."

Mr Richardson's figuring does not take into account any new policies the government may announce on budget night.

But he says if the economy gets better, then the budget will too.

Responding to Deloitte's budget monitor, Mr Frydenberg said: "That is why our renewed fiscal strategy focuses on bringing hundreds of thousands of more Australians back to work which will underpin a stronger medium-term fiscal position."

"The Morrison government will continue to support Australians through COVID-19 and next week's budget will focus on our economic recovery and creating jobs to secure Australia's economic future."

Opposition finance spokeswoman Katy Gallagher said the report also highlights the merits of pro-jobs policies, including investments in social housing and aged care, a permanently higher unemployment benefit and a business investment allowance, "as suggested by Labor".

"New spending needs to get bang for buck, protect jobs, create secure jobs, train and up-skill Australians and support families doing it tough," she told AAP.

The government has signalled it may bring forward already legislated tax cuts as one measure in the budget.

Mr Richardson does not agree with the argument doing the rounds that the cuts would be unfair, but he always thought they were too big.

"They aren't as effective at creating jobs as some other programs. But if they are in addition to other stimulus measures, then you should welcome them with open arms," he said.

But Greens Leader Adam Bandt said it would be cheaper to keep JobKeeper going until March until the country is out of the worst of this pandemic, rather "than to fast track tax cuts to Clive Palmer".

"I know where I would rather spend the money," he told ABC television's Insiders program on Sunday.."

Australian Associated Press