New Zealand Markets open in 37 mins

Economist warns revenue surge may not last

Economist Chris Richardson expects a burst of company tax revenue will support the federal budget bottom line both this financial year and next but says it would be wrong for politicians to bank on such wealth beyond that.

Mr Richardson, an avid watcher of budget deliberations, says the accumulated losses suffered by companies and superannuation funds during the 2008-2009 global financial crisis have finally worked their way through the system.

"It was always going to happen and the expectation was it would have kicked in before now and a bit more gently," he told AAP.

He says it means billions of dollars in additional revenue have allowed the Turnbull government to ditch its planned increase in the Medicare levy while keeping the budget on track for a surplus by 2021, albeit likely now smaller at $3.7 billion than the $10.2 billion surplus predicted in December.

In the Deloitte Access Economics Budget Monitor released on Monday, Mr Richardson is forecasting a $7 billion improvement in the deficit for 2017/18 to $16.8 billion and similar narrowing of the deficit in 2018/19 than Treasury had predicted in December's mid-year review.

But Mr Richardson says the budget position will worsen in 2019/20 when the Medicare increase would have kicked in and has reiterated his objection to the government announcing personal income tax cuts in the May 8 budget.

"The oldest budgetary mistake in the book is to take better economic news and promise it away," he said.

"We recommend just wait a bit and see the whites of the eyes of a couple of surpluses."

He would prefer to see a comprehensive tax reform package but in its absence backs the government's company tax cut proposal, saying it would deliver benefits to the economy that personal tax cuts don't.

While a strong supporter of budget repair, he says there is more to reform than taxes and is calling for a lift in unemployment benefits.

He says Newstart hasn't kept up with national living standards for more than a quarter of a century and has become "embarrassingly inadequate".

He wants to see a $50 a week increase to these benefits and immediately index them to wages.

"That would be $3 billion well spent," he said.

"As a nation, we can and should do better. History will judge us harshly if we don't."



$16.6 billion deficit versus $23.6 billion deficit at time of December's mid-year budget review.


$13.3 billion deficit versus $20.5 billion deficit.


$5.3 billion deficit versus $2.6 billion deficit.


$3.8 billion surplus versus $10.2 billion surplus.