Australian Budget Talk: Experts Say Scott Morrison Should Lift Taxes For Good Budget

Australian budget

The upcoming Australian budget will risk Australia’s credit ratings if it fails to raise taxes and shore up revenue, warned rating agency Moody’s. The agency predicts that the credit rating will nosedive if the budget lacks substance. It called for concrete revenue-raising steps, including new taxation plans.

Moody’s said Malcolm Turnbull government is yet to show up tangible measures in revenue-yielding plans and warned that the government would be caught in a debt trap.  The current Triple A (AAA) credit rating of the country will be put at risk.

Prior to Moody’s caution, the Commonwealth Bank, NAB and J.P. Morgan also raised similar concerns, reports The Age.

Moody’s warned that unless the government shows the political will to increase taxes and revenue it will also miss out on the self-imposed deadline of 2020-21 for a surplus budget.

According to experts, the median debt to GDP ratio of 13 AAA rated countries is above 40 percent. In Australia’s case, the same is 36 percent and will touch 38 percent in 2018. Unless early efforts are made, Australia will become “credit negative” by 2021, said a report in The Australian.

However, Australian budget watchers expect some token tax initiatives in Morrison’s budget such as cutting the perks of the rich superannuants and at the same time raising of excise rates on tobacco.

Moody’s is wary about backtracking in relation to the lifting of taxes and shunning tax reforms promised by the Coalition. It points to the abrupt dropping of increase in the goods and services tax.

However, Morrison sees no problem on the revenue side.  In a preview of the May budget, he explained his prognosis: “Revenue will rise to the long-run average of 24.1 percent. On the current estimates, revenue is forecast to rise over the next three or four years. … our plan is to see revenue rises through growth and ensuring a better-targeted tax system.”

He said the revenue measures to be announced in the Australian budget would re-deploy revenue in such a way that it will mitigate the tax burden and foster higher investment, growth, and jobs.

According to the Australian Treasurer, enough work has already gone into curbing the government spending.

However, the warnings of an impending risk to credit rating should raise the hackles of any government as it is fraught with deeper ramifications in terms of spiraling costs of debt and risk on the credit ratings of state governments and state-owned corporations.

According to analysts, if the Treasurer is ignoring the signals and is seeing revenue as a non-issue. They see it as a denial mode or a result of time warp.

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