Paul Bloxham: HSBC Chief Economist on the Australian budget, their deficit

A leading Australian economist says more focus needs to be put on productivity to pull Australia out of a deficit. 

The federal Budget announced yesterday included tax cuts and cost of living relief for households. 

HSBC Chief Economist Paul Bloxham told Mike Hosking with big spending measures announced in the lead up to the election, deficits to the tens of billions are forecast for years to come. 

He says the best way to change that is to boost Australia's slumped productivity, which is at the same level as it was in 2016. 

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Episode Transcript

Speaker 1 (00:00):
For a labor government. It's about as blatant as far
as I could work out as you could get despite
the fact Australia's running massive deficits. This is the budget
last night. They handed out tax cuts for everybody. There's
medical or medicare funding, make a cheaper go to the doctor.
They're going to pay a chunk of your power bill,
going to play a slice off your student loan if
you've got one. It's almost as though there's I don't know,
an election coming up. HSBC Chief economist Paul Bloxham's with us. Paul,

(00:21):
good morning to you. Good morning, So more money as
opposed to politics. But there's this idea that they're going
to run deficits forever in a country that once ran surpluses,
have they sort of given up?

Speaker 2 (00:32):
There wasn't very much in the budget for trying to
deal with this particular challenge and that was actually the
main thing we highlighted when we looked at it and
when we thought about it. You know, the Australia is
running budget deficits, as you say, over the rest of
the forecast horizon. They're what you call a structural budget deficit.

Speaker 3 (00:48):
So really what that means is the government is saying,
for all of the commitments we've got in terms of
spending over the forecast horizon, we're not going to get
enough tax revenue to meet those spending commitments. And that's
going to be the state of affairs overcoming overcoming years.
And they haven't really delivered any solutions for fixing that
structural budget deficit.

Speaker 1 (01:08):
No, exactly, but they're bringing in more than they've ever
brought in, six hundred and sixty three billion dollars from
tax and yet they still can't make ends meet.

Speaker 2 (01:17):
That's right, there is more tax revenue coming through. There
was an upside surprise actually again in these numbers, So
this is the fourth year where there's been an upside
surprise in fact that sort of the three previous budgets
delivered really substantial upside surprises to revenue. A lot of
it's been funneled back into commitments to spend. I think
underpinning the numbers also, there's an assumption that productivity picks

(01:40):
up in the economy that's quite strong, and there's an
assumption that there is actually still quite a bit of
trimming going on in some of the bigger items like
the National Disability insurance game. So there's a lot of
there's questions as to whether even the numbers that are
presented are actually necessarily going to get even the structural
budget deficit that's there. So, you know, the way you
fix this problem, you've got three things. You can only

(02:02):
do it three ways. You either find ways to trim
back on spending, you find ways to get more tax revenue,
but the tax revenue is actually pourcasts to rise anyway,
or the third one, which is very very much you
know what ought to happen. You try to boost the
economy's growth. If you can boost growth in the economy,
that's the best way to do this, absolutely hands down.

(02:22):
But to get that to happen, you've got to take
action on reform that gets productivity to list. And this
is the big this is the big, fundamental underlying challenge
Australia faces. That productivity is very poor. It's been going backwards,
not forwards. It's been falling over the past year. It's
been to the same level right now that it was
in twenty sixteen. We haven't had any productivity growth in
eight years in Australia and there's very little there's you know,

(02:44):
the budget is very focused on spending measures as you describe,
as we head towards an election before the seventeenth of.

Speaker 1 (02:50):
May, Grave Insight, Paul appreciate it very much, pull blocks
them out of HSB. See the forecast for growth has
gone from one point five to two point two five.
So this question mark as to whether that's believable or not.
But as I've said on this program for many, many years,
not that I suspect that many voters really care about it.
But if you think Australia is great, it's not. There's
a lot wrong with Australia. And if you look at
the documentation in the budget last night, it's all laid

(03:12):
out there, but they'll pretend that it's all good and fantastic.
And as long as you're getting a little bit of
something in your back pocket, what do you care? Anyway?

Speaker 3 (03:18):
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