The Liberal Party's longest-serving treasurer, Peter Costello, has suggested the Turnbull government's projected budget surpluses will not be enough to pay back Australia's ballooning debt.
But he has praised Treasurer Scott Morrison's "politically smart" second budget, suggesting it had "blind-sided" Australia's five biggest banks by imposing a 0.06 percentage point levy on their liabilities, which will rake in about $6 billion over four years.
Australian Bankers Association chief executive Anna Bligh has already hit out at the levy and warned it could threaten Australia's financial stability, but it is expected the measure will pass the parliament with the support of the ALP.
In a post-budget breakfast address to about 100 guests at accounting giants PwC in Canberra, Mr Costello said the government's strategy seemed to be simply to rely on the economy growing, and debt as a share of the economy to fall.
He said that it now appeared "no-one now is talking about paying back debt. The surpluses projected are not enough to pay back debt. The plan is that as the economy grows, the debt to GDP ratio will fall".
"There is no such thing as a good tax, there are only less-worse taxes, such as the GST."
As well as taxing the big five banks, Mr Morrison's 2017 budget unveiled a rise in the Medicare levy to 2.5 per cent from July 2019, raising $7.8 billion over two years.
The budget deficit will be $29.4 billion in 2017-18, improving to a surplus of $7.4 billion by 2020-21.
At the same time,Mr Morrison raised Australia's debt ceiling to $600 billion - effectively increasing the size of the nation's credit limit - on Tuesday, as debt continues to rise.
The budget also saw about $13 billion in so-called "zombie" saving measures, many of which date back to the notorious 2014 budget, finally dropped in favour of new revenue measures.
The Abbott-led opposition and government, for years, warned of a debt and deficit disaster facing Australia, but the 2017 budget saw new spending on infrastructure and a move to highlight "good" debt spent on national building, and "bad" debt funded out of revenue.
Mr Costello suggested that repaying a 20 per cent debt - as a proportion of GDP - could be done in a variety of ways, including running a two per cent surplus for 10 years or a 0.4 per cent for 50 years.
He also gave the major banks both barrels at the breakfast.
"There is no rhyme or reason to the bank tax, it is not a deposit guarantee scheme. The banking industry was completely blind-sided by this, which shows how much influence they have in Canberra and how tapped in they are in Canberra," he said.
On the government's move to hike the Medicare levy, he suggested the move would not cover the full cost of either the health system or the National Disability Insurance Scheme.
"Both Medicare and the NDIS are funded out of consolidated revenue. The Medicare levy does not fully fund either and therefore the remainder has to be pulled out of general taxation," he said.
