SYDNEY, Australia - Westpac's No. 1 economist Bill Evans has just presided over the 20th Federal Budget he has surveyed from the Federal Government.
On Tuesday night he was giving his appraisal of the 2015-16 budget to his bank's customers at a dinner in Sydney.
This year's Budget needed to be "a circuit breaker", he said, given the low state of consumer confidence, job security fears, and a lack of investment.
After opening with a rundown on Budget history - including the fact that conservative governments had recorded 11 surpluses out of 21 (10 under Howard and Costello), while Labor had recorded three, all under Paul Keating - he launched into his appraisal of this Budget by saying "the numbers were pretty impressive".
"We were expecting that the deficit would be much more than it turned out to be," he said.
With a deficit of $35.1 billion for 2015/16 compared with an expectation of more than $40 billion, and a forecast of $12 billion instead of $30 billion in four years time "they really did outperform in terms of market expectations".
But he said one of the reasons was that the Government had picked a much higher iron ore price than expected - US$48 a tonne, where the market price is about US$55. They were taking a position that the iron price could fall again, he said.
In terms of Budget initiatives, he said it was a real contrast to last year.
Pensions would be indexed again, and the young would no longer have to wait to get the dole, the auto industry would get a boost, the profits taken overseas by some 30 big multi-nationals would be targeted, and drug companies would not get so much under the Pharmaceutical Benefits Scheme.
New policies were costing $8.8 billion but that was being offset by the winding back of parental pay of $10.4 billion.
Over all, he said there were some great things for small business in the Budget, with the 1.5% tax cut and the $20,000 up-front depreciation allowance, compared to the previous $1000 limit, particularly as lack of investment was holding back the economy.
Infrastructure was "way, way under-serviced" but at least there was a little bit more for Western Australia, the Northern Territory, Queensland and Victoria.
The child care system was an improvement, he said, but there was huge question mark about whether it would be implemented in the current political environment, given that the $3.2 billion cost of the new scheme depended on winding back $4 billion from the old scheme.
Of $36 billion in savings measures over four years, $20 billion was "still hanging around the Senate" and they were unlikely to get through, even though the Budget numbers assumed they would.
While there was some good news in the Budget, he said the issue was whether it would trigger a surge in confidence. Consumer spending was all right in Victoria and New South Wales but dropping away in Queensland and Western Australia.
People felt more sustained concern about job security than they had during the Global Financial Crisis. And that meant when interest rates were cut, they were not spending that extra money and stimulating the economy. They were saving it for a rainy day.
"Wealth has been increasing at 50% of household disposable income for the last three or four years yet they haven't been taking it and spending it because of concern for their jobs," he said.
Confidence was a particular concern for small business - which provides 46% of private employment and makes up 96% of business. Although they had benefited from the Budget, would they invest in more jobs if people were not spending and demand did not pick up?
In fact, he said, many companies were cutting wages.
"That's the problem. Businesses are saying, 'why should we invest and employ when our sales are so weak?
"You're caught in this bind where consumers are cautious and they're not spending and businesses are responding."
He said there was a good story, and it's about building approvals.
"It's on fire. What's driving it is apartments. Normally you build about twice as many houses as apartments and units. Now they're shaking hands.
"We know what's driving a lot of that. High rise. We've never seen a boom in high rise the way we're seeing it today."
New South Wales and Victoria were at the forefront, and part of the boom was being driven by foreign demand, especially Chinese, because their housing market was so weak. With interest rates showing no signs of moving upward for some time, the boom would continue.
He said there was "huge pent up demand in Australia" for new homes to meet population growth, though the problem in NSW was lack of available land.
In other comments, he said the big story has been the collapse in the terms of trade, and there is a direct relationship between income and the terms of trade.
Our export prices have averaged 2% growth in the last 20 years and that's meant that national income has averaged about 6% growth. This year terms of trade have fallen 10% which means national income is going to be a nominal 1.7%, which will not lift consumption.
To compound the problem, whereas the mining boom had been adding 1% of GDP every year for 10 years, it was now taking 1% off a year.
But he said he did not believe the nation's AAA rating was in jeopardy as the rate of deterioration in the deficit was slowing down and our ability to fund our foreign debt was improving dramatically.
The big story for this year, he believed, was America, where wages were rising, unemployment was now in the full employment range of 5 to 5.5%, and inflation was a prospect.
The market was "way, way too complacent" and in denial about interest rates being hiked by the Federal Reserve. But he felt it would not affect our interest rates.