The big-ticket items for the Federal Government on Thursday included a major boost to the housing market, with Treasurer Scott Morrison’s budget promising to boost household debt to $50 trillion by the end of the decade.
But some economists were not happy with the Government’s numbers, warning the debt would be much higher than projected and that it would be hard to avoid a debt crisis in the long term.
“The Coalition’s claim that debt will fall from $50 to $55 trillion is disingenuous, given the $35 trillion of debt that households are facing,” the Reserve Bank’s Andrew Haldane said.
“In fact, the debt burden is rising faster than the economy is growing.”
Mr Morrison said he was aiming to raise the debt-to-GDP ratio from about 90 per cent to about 90.5 per cent by 2023 and cut the corporate tax rate from 20 per cent down to 12 per cent.
Mr Haldanes point of contention was a forecast of the impact of the Government providing the $5.5 billion a year in debt relief to banks.
The Treasurer said the Government was still working out the details of the loan and would not commit to the total amount in the budget.
He said he expected the Coalition to announce a “significant package” of debt relief by the middle of the year, including a $500 million increase to superannuation, which would also apply to all existing superannuates.
“I expect the government to announce further measures to provide relief to households and to address the structural causes of the current credit crisis,” he said.
Meanwhile, Federal Opposition Leader Bill Shorten accused the Coalition of “playing politics” by threatening to introduce a Labor-only budget if Mr Morrison did not deliver his plan.
In a speech to a rally of supporters in Melbourne, Mr Shorten said the Coalition had “taken advantage of a crisis in global markets and made the worst possible choices in their short-term fiscal policy”.
“What will happen if you don’t get your act together?
What will happen to the economy?
We are all looking at the same thing: a global crisis,” Mr Shortens speech said.
Mr Morrison’s announcement came as the Reserve bank’s chief economist, Tim Flannery, warned the debt could grow to over $80 trillion in a decade.
It comes as the economy appears to be on a recovery, despite the fact it has suffered a significant blow to its confidence rating.
After the latest quarterly economic figures showed a slowdown in spending, the Reserve said the slowdown in the mining sector was likely to continue.
However, the bank also said that the downturn in mining production and investment was likely partly to be the result of the sharp fall in demand for construction.
That has left the mining industry struggling to absorb the losses.
Labor is warning that the Government may have a tough job in the Senate if it fails to pass the measures it wants to introduce.
Treasurer Scott Morrison says he wants to boost housing prices.
Photo: Andrew Meares”The Government is proposing to boost house prices by $5 billion over the next four years, but this is going to be a lot of money that is going straight into the pockets of the richest of Australians,” Opposition Leader Justin Fisher said.
“That is a lot more than we’re talking about in a national housing budget.”
It’s not just a financial transaction tax, it’s a tax that will be on the wealthy.
“The Coalition needs to have a plan for a housing crisis in Australia.”
“We have got to have something that looks at the long-term implications of how we build houses and that’s what the Treasurer is proposing.”
He needs to do something in the next few weeks or months.
“”He should have done this a long time ago.
We need to get this right, we need to fix this crisis.” “
[It’s] not just the middle-class Australians who need help, it is the young, the disabled and the poor, too.”
We need to get this right, we need to fix this crisis.
Aboriginal and Torres Strait Islander peoples make up about half of Australia’s population but have struggled to secure housing. “
The housing market is already under strain,” said the report, which said Australia’s unemployment rate had now surpassed 50 per cent for the first time in six years.
Aboriginal and Torres Strait Islander peoples make up about half of Australia’s population but have struggled to secure housing.
With unemployment in Australia currently above 10 per cent, the Government has been warning of the need to boost the supply of housing.
“It is critical that all Australians are able to afford to buy a home, not just those who can afford to put their children up for school,” Mr Morrison said.