The finance department has warned the re-elected Turnbull government that a number of “significant downside risks” may prevent its planned slim surplus in 2020.
The risks include blocked “zombie” budget savings measures and cost blowouts in the national disability insurance scheme.
Although the $18bn of savings measures held up in the Senate has been reduced by a $6.3bn savings deal between the government and opposition, the shadow treasurer, Chris Bowen, has ruled out accepting the remaining $12bn which he said were unfair.
The incoming government brief from the finance department warns of “a significant fiscal challenge for the government”.
“The underlying cash deficit is expected to be $37.1bn in 2016-17, with forecast improvements to the fiscal position over the forward estimates subject to a number of risks,” it said.
The brief noted the government planned to achieve a 0.2% budget surplus by 2020-21 and to shrink payments as a proportion of GDP from 25.8% to 25.2% in that time.
The “significant downside risks” which might ruin the planned surplus included:
- The risk of a “significant negative economic shock”
- Failure to pass $18bn of savings booked in the pre-election economic and fiscal outlook but still unlegislated because they are blocked in the Senate
- Growth in the number and package costs of clients of the NDIS
- Potential increased costs for defence operations, new drugs on the Pharmaceutical Benefits Scheme and disaster relief
The finance department also noted since 2009-10 deficit reductions “have not been achieved at the pace of to the extent expected, largely related to downward revisions to revenue”, in part due to “the impact of demand-driven programs”.
The omnibus savings deal between the Coalition and Labor includes a $500m cut to the Australian Renewable Energy Agency, retains the clean energy supplement to welfare recipients but scraps a planned $1.4bn “baby bonus” to some families on family tax benefit B.
On Wednesday Bowen told Radio National there was no room for compromise on the remaining $12bn of blocked savings measures.
“We’ve been very clear and consistent about those,” he said.
Bowen said the 2014 budget measures were “unfair” including making unemployed people wait for the dole or making people work until 70 to get the pension.
On Tuesday the finance minister, Mathias Cormann, said the deal meant the government had made “immediate and tangible headway in the 45th parliament towards balancing the budget”.
“Of course there is more work to be done and the government will continue to work with all parties … to secure the passage of all the savings measures reflected in the budget,” he said.
On Wednesday cabinet minister Josh Frydenberg said the government had to work with Labor, the Greens and crossbenchers to pass savings “because 89% of spending is tied to government legislation” and only three governments since the second world war had control of the Senate.
The finance department noted commonwealth government debt was projected to reach recent historic highs, both on a gross and net basis.
In 2016-17, net debt for the Australian government is expected to be $326.1bn, or 18.9% of GDP.
