The combined budget deficit of commonwealth, state and territory governments is growing, thanks in part to an increase in infrastructure spending, new figures show.
The Parliamentary Budget Office released its national fiscal outlook on Wednesday, running the ruler over the latest commonwealth, state and territory budgets, and mid-year budget updates, to reveal the size of government debt and deficit.
Looking at the years between 2015-16 and 2018-19, it says the projected national deficit in those years will be $14.9bn worse than expected. This means the national deficit is likely to be $137.1bn by 2018-19, rather than $122.3bn.
It says the $14.9bn “deterioration” between 2015-16 and 2018-19 is due to large falls in projected revenue ($18.1bn) and an increase in net capital investment ($2.8bn), partially offset by a decrease in expenses ($6bn).
It also says 60% of that deterioration is due to a downward revision of $8.9bn in the projected balance of the federal budget. “The downward revision primarily reflects lower forecast wages growth which is forecast to reduce individuals and other withholding taxes,” the report says.
As a consequence, the PBO says national debt is projected to rise to $428.5bn (22.6% of gross domestic product) in 2018-19. That is compared with $397.6bn (20.8% of GDP) at the time the 2015-16 mid-year budget updates were delivered.
The PBO says national debt is now projected to plateau at $428.8bn in 2019-20.
The vast majority of that increase in national net debt lies with the commonwealth government. Commonwealth net debt is projected to increase to $356.4bn (18.8% of GDP) in 2018–19, compared with the 2015–16 mid-year budget update estimate of $346.6bn (18.2% of GDP).
The PBO says that as a proportion of GDP, commonwealth net debt is projected to peak at 19.2% of GDP in 2017–18, before improving to reach 17.8% of GDP by 2019–20.
It says there has been a deterioration in the state budgets for New South Wales, Western Australia and Queensland.
But the projected increase in NSW’s budget deficit since its mid-year update was mainly driven by a “significant increase in infrastructure investment”, particularly in rail projects and justice facilities.
It said this was funded, in part, from the proceeds from the long-term lease of Transgrid (the state-owned electricity transmission network) which were included in the mid-year fiscal update.
It said the projected increase in WA’s budget deficit since its 2015–16 mid-year update was primarily driven by a decrease in the tax revenue that can be collected by the state. WA has slower forecast employment and wages growth (reducing payroll tax) and a decline in expected property market activity (reducing transfer duty).
The amount of money the state receives from the commonwealth was also predicted to be lower than in the mid-year update, reflecting a reduced share of GST collections for WA.
The projected increase in Queensland’s budget deficit was driven by a combination of new policy initiatives, lower royalty revenue and increased infrastructure investment in the latter half of the forward estimates, the PBO said.
