Migration collapse makes Australia older, economy smaller: Treasury boss

Dr Kennedy said that despite the sharp increase in government borrowing during the pandemic, debt as a share of the economy was still low by international standards.

“There is still fiscal leeway to respond again with fiscal policy if the need arises,” he said.

But Labor Treasury spokesman Jim Chalmers will say in a speech to the National Press Club on Wednesday that the $ 100 billion in spending is a “missed opportunity” delivering generational debt without dividends.

Shadow Treasurer Jim Chalmers criticizes the federal government’s lack of details on the return on its $ 100 billion spending.Credit:Alex Ellinghausen

Dr Chalmers will also highlight the significant cost of the third stage tax cuts, which is an income tax cut for high earners that will take effect from 2024.

“What worries me and my colleagues is that this year’s budget is spending … without any lasting social benefits or long-term economic dividends,” Dr Chalmers will say, according to excerpts from his speech. . “Of course, this is in addition to the Third Stage tax cuts for high-income earners, at a cost to the bottom line of over $ 130 billion.”

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While he recognizes that borrowing to invest and absorbing economic shocks is justified in a crisis, he criticizes the federal government’s lack of detail on the return on that investment and when the debt will be serviced.

“The level of debt matters, but the quality of spending matters more,” he said.

Despite a better-than-expected recovery from the coronavirus pandemic, the Reserve Bank meeting minutes released on Tuesday show the board of directors expects GDP to remain below expected levels before the pandemic ” mainly due to lower population growth “.

But closing borders could have other effects on the economy, such as helping to drive up inflation.

The May minutes, which reflect pre-budget discussions, said that a combination of higher commodity prices, supply chain bottlenecks and the limited ability of companies to fill supply shortages. Labor with foreign workers could lead to an earlier and faster than expected increase in wage growth and inflation. .

However, the most likely outcome predicted by the RBA is that core inflation will rise 1.5% in 2021 to reach around 2% by mid-2023. That’s outside the target range of 2 to 3 percent.

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