Australia's fiscal trajectory has sparked warnings from leading economists, who highlight rising deficits, unsustainable government spending, and the economy's structural weaknesses.
While Labor has unveiled minor improvements in the short term, long-term forecasts reveal a troubling scenario of escalating debt and stagnant productivity.
The government's latest Mid-Year Economic and Fiscal Outlook (MYEFO), released by Treasurer Jim Chalmers, predicts a slightly reduced deficit for this financial year at $26.9 billion (US$16.7 billion) -- $1.3 billion lower than earlier estimates.
He notes that the 2023/24 deficit has surged from $29 billion to $46 billion, largely due to initiatives like the HECS handout for university graduates.
"The projected 2025/26 deficit of $47 billion is unjustifiable and unsustainable, especially given the government's massive increase in tax revenue in recent years," Humphreys stated.
He criticised the absence of clear budgetary discipline, warning that additional spending, including $9 billion in 2025/26 alone, is exacerbating fiscal instability.
Humphreys also expressed scepticism about the government's long-term plans to achieve fiscal balance within a decade, describing these as overly optimistic.
He said expenditure is growing faster than income, a problem compounded by the volatile nature of resource revenues, which have often been used to fund new benefits rather than reduce debt.
"Instead of banking resource revenues to stabilise the budget, we've used them to expand government projects, shifting wealth from the private sector to the public," Young said.
He warned that this trend is shrinking the economy's productive base, with fewer people engaged in wealth creation and more reliant on redistribution through government programs.
Young also flagged the risks posed by runaway costs in areas like the National Disability Insurance Scheme (NDIS) and childcare subsidies, which, coupled with an ageing population, are driving spending higher.
Humphreys advocated for substantial tax cuts to spur productivity, citing the stagnation of the past eight years and the ongoing per-capita recession. He argued that high income taxes are discouraging investment and innovation, further hampering economic growth.
Young called for a reversal of policies that prioritise government expansion over private-sector growth.
"Without bold steps to rein in spending and stabilise the economy, we risk passing on a legacy of perpetual debt and low productivity to our children and grandchildren," he warned.
With deficits ballooning and economic pressures mounting, the economists agree that Australia's fiscal policies require a dramatic course correction to ensure long-term stability and prosperity.