A critic of the way governments spend money won't argue for big expenditure cuts in the budget. Source: AAP
A FEARSOME critic of the way coalition and Labor governments spend money is reluctant to argue for big expenditure cuts in the budget.
But Chris Richardson does warn Treasurer Joe Hockey that taking a softly-softly approach to his first budget because of a fragile economy would be merely repeating the Labor experience of big talk, small action.
The Deloitte Access Economics director is yet to be convinced Mr Hockey will live up to his own budget rhetoric.
Instead, he believes the treasurer might cut back less than he should.
Mr Richardson, in his latest quarterly business outlook released on Monday, predicts the economy will be stuck a tad below its long-term growth pace through to late 2015.
The trend pace is considered to be around 3.25 per cent.
"We wouldn't argue for big (budget) cuts tomorrow - that would indeed unnecessarily hurt the economy," he says.
However, the government must start making the case to the electorate for budget cuts and tax increases and announce those measures in the May 13 budget but have them taking effect over a number of years.
Even though the recent run of economic data has been particularly good, the economy still faces a "construction cliff", Mr Richardson warns, with the fall-off in resource-related construction about to gather pace.
Still, low interest rates have boosted retail spending to its best result in years and while home building may not accelerate at the pace of times past it too is set to soar.
While governments from "Washington to Wellington" are bracing for higher interest rates, Mr Richardson says he doesn't expect the first rate rise by Australia's Reserve Bank until well into 2015.
"The winding back of resource-related construction is enough of a growth negative to keep inflation on a leash, and hence the RBA too," he says.
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