Put taxes on budget repair agenda: Access

A LEADING economist is urging the federal government to make sensible repairs to the budget and believes it's "dumb" to leave taxes off the agenda.

The government has a Commission of Audit working on recommendations to cut commonwealth spending, faced with the potential of a decade of budget deficits and ballooning government debt.

The Commission was due to deliver its initial interim report by Friday, but was granted another two weeks by Treasurer Joe Hockey.

In his latest business outlook released on Tuesday, Deloitte Access Economics economist Chris Richardson says the focus needs to be on sensible repair of the budget.

"All programs need to be assessed on merit, rather than just focusing cuts on the newest programs," Mr Richardson says.

"Taxes need to be on the table too; it's dumb to pretend they can't be touched."

While the government has promised a review of the tax system, its recommendations would be taken to the next election in 2016.

The potential for government cutbacks to address the budget black hole, along with the continued caution of businesses and households, should keep overall economic growth a bit below a trend rate of 3.25 per cent through to late 2015.

But Mr Richardson says the "Big Daddy" of negatives facing the economy is what he describes as the "construction cliff" - the peaking of resource-related investment and its fall from heady heights.

This is already hitting business with soft revenues and stagnant profits.

However, he says there are some "powerful positives" in play for the Australian outlook.

"The (Australian) dollar is finally starting to take its foot off the throat of Australia's economy," he said.

At the same time, the US recovery is accelerating, China is hitting its growth targets, and there is a growing dividend in export volumes from Australia's newly built mines.

Still, an overall weak economy should keep interest rate rises at bay until 2015.

"With the world's central banks winding back their stimulus, the Australian dollar will remain under pressure in 2014 and 2015," Mr Richardson said.

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