Commonwealth revenues have fallen by $2.3 billion since the federal government’s budget was handed down in May, according to the Mid-year Economic and Fiscal Outlook (MYEFO) released today.
This means the budget deficit is forecast to grow to $37.4 billion by the end of the 2015-16 financial year, which compares to the $35.1 billion deficit forecasted in May.
The budget deficit is now expected to come in at $33.7 billion in 2016-17, $23 billion in 2017-18 and $14.2 billion in 2018-19.
Government revenues have dropped due to falling commodity prices, particularly the price of iron ore, according to the mid-year update.
In addition, the federal government has announced a number of measures since the last budget, including Prime Minister Malcolm Turnbull’s $1 billion innovation statement and accompanying policies.
This includes spending $112.1 million over three years to promote digital literacy among school-aged children and $16 million over three years to establish the Tasmanian Jobs and Investment Fund.
The government has also downgraded economic growth forecasts to 2.5% in the current financial year and to 2.75% annual growth in the 2016-17 financial year.
Speaking at a press conference in Perth this afternoon, Treasurer Scott Morrison said despite the expected budget blowout, the economy is heading in the right direction for the long-term.
“We need to take a safe and careful route and one that does not put at risk our jobs and growth,” Morrison said.
“Despite revenue write-downs of almost $34 billion caused by falling commodity prices, a declining terms of trade, weaker global growth and the adoption of a more realistic domestic growth outlook, we continue patiently and responsibly on the path to budget balance.”
In a statement issued this morning, Alex Malley, chief executive of CPA Australia, said today’s mid-year economic and fiscal outlook will confirm what many have suspected in regards to commodity prices and the budget’s bottom line.
“As an accountant, I am naturally concerned over the deterioration in the budget’s financial position,” Malley said.
“However, a bigger concern would be for our political leaders to continue the trend of chasing a surplus for surplus’s sake. Since 2010 I have said loudly and often that a surplus or a deficit is not a plan. It is an outcome of a plan.”
Malley said today’s MYEFO removes any doubt that the economy needs to diversify away from mining.
“Initiatives such as the Government’s innovation and science package last week will play an important role in helping that structural economic adjustment to happen,” he said.
“Further, the business case for holistic tax reform expected to emanate from the tax white paper process is more important than ever.”