Scott Morrison
Scott Morrison

Federal budget forecast to be an extra $21 billion in red

SLOWER wages growth and falling company tax receipts are forecast to drive Treasurer Scott Morrison's first budget an extra $21 billion into the red by 2018-19.

The prediction in a Deloitte Access Economics report comes ahead of Mr Morrison's release of the budget on Tuesday.

The report shows slow wages growth and falling corporate tax receipts are the main drivers behind what will likely be a $41 billion deficit in next week's budget.

Report author Chris Richardson said although the government needed to raise taxes, increases in social spending over the past decade also needed to be reined back.

Mr Morrison's budget is understood to contain a small cut to both income and corporate taxes, and restrained spending across all federal portfolios.

But the government's pledge of returning to surplus by 2020 would most likely be pushed back further, the Deloitte report indicated.

Mr Richardson also urged the government to be upfront about the true state of the books next week considering the election would then be two months away.

He encouraged the government to focus on real spending cuts and tax increases in the budget, given the common practice of "booking" savings in a budget that have not been passed by parliament and often have already been rejected.

In February, the independent Parliamentary Budget Office estimated the total cost of "unlegislated measures" - or government bills the Senate had not passed - at $9.2 billion by 2018-19, rising to $36.4 billion by 2025-26.

Mr Morrison said yesterday that his budget would ensure the government was not spending more than it saved on outlays, and it could also look at "the tax treatment of loopholes".

But he ruled out raising the "overall tax burden".

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