Budget faces tough economic choices
ANZ has warned that Budget 2024 marks the beginning of “a very challenging few years.”
Finance Minister Nicola Willis (pictured above) will reveal her first budget next week, where she must balance delivering Coalition election promises like tax relief and reining in spending, all against the backdrop of a weakening economy.
According to ANZ, this might not be the end of spending cuts but just the beginning of “a very challenging few years,” Newshub reported.
ANZ on government spending cuts and economic outlook
In a pre-budget report, ANZ bank economists noted that the big test for the government won’t be just signalling a path to better books but also following through in the coming years.
“While the cupboards may be ‘bare’ from an additional spending perspective, we think there will still be scope for further reprioritisations from within existing baselines as new cost pressures arise,” they said.
The bank also suggested there is scope to speed up debt reduction with “deeper spending cuts if desired.”
ANZ’s report stated that even after National’s proposed tax cuts are delivered, the public service will still be meaningfully larger than it was prior to the pandemic.
“That suggests the government should be able to find further cost savings to replenish the cupboards over coming years if they so desire,” the ANZ economists said. “It won’t be easy, but we think living within a lower operating allowance is certainly achievable provided a really big shock doesn’t come along.”
Economic forecasts and employment data
In February’s budget policy statement, Treasury forecasts showed the government’s tax take is expected to drop by $14 billion over five years, with flat economic growth for 2024 and the unemployment rate hitting 4.9% in 2025.
The latest job seeker data from employment website Seek shows the number of job ads fell 4% in April and are 30% down on a year ago. The industries experiencing the biggest decline are hospitality and tourism, where the number of job ads fell 21% - the largest monthly decline in over two years, Newshub reported.
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