The Federal Budget will show the deficit is $10 billion worse than last forecast, according to a leading economic forecaster.
Deloitte Access Economics expects the budget to be $51 billion in debt this year, predicting a $22 billion deficit for the next year before a surplus of $710 million in 2012-13.
According to economist Chris Richardson, the global financial crisis is continuing to have a negative impact, and the recent natural disasters will deliver a $6 billion hit in the next financial year.
“Floods and cyclones are a part of that story but… the biggest single factor is that the global financial crisis was a bigger crisis for the budget than it was for the economy and is still having lingering negative impacts,” Richardson says.
Richardson says while it’s bad news in the short-term, the outlook will improve in the future.
“The Government’s going to have to announce bigger deficits than it was forecasting the year just finishing and the one just to come, but by 2012-13 it is [in] surplus and the year after in quite comfortable surplus,” he says.
According to Federal Finance Minister Penny Wong, the report highlights issues that the Government has been raising.
“We’ve got a short-term challenge, which is softness in the economy, which is reflecting in lower revenues to government,” Wong has said.
“But we have to keep our eyes on the long-term, which is a very strong wave of investment in the mining sector that’s going to reflect through the whole economy and that’s why we’ve got to bring the budget back to surplus.”
Wong has also challenged Opposition leader Tony Abbott as to how he would bring the budget back to surplus a year earlier than the Gillard Government.
The move comes after shadow treasurer Joe Hockey said if the Coalition was in government, it would deliver a surplus “as quickly as possible – perhaps even earlier than 2012-13.”
Wong said the sloppiness of the Opposition’s economic work is “extraordinary”.
“They think you can simply wish your way back into surplus by rocking up to a press conference and telling people that you are going to achieve it, without doing the work, without doing the savings, without doing the costings,” Wong said.
Wong said the opposition has repeatedly failed to present a credible set of savings, including a $10.6 billion black hole during the Coalition’s election campaign, and double accounting when it opposed the flood levy.
“In eight days time, Mr Abbott stands up as the alternative Prime Minister… He will have to outline to the Australian people just how he is going to get the budget back to surplus earlier than the Government,” Wong said.
To cover the cost of Australia’s natural disasters, namely the Queensland floods, the Government announced cuts and delays to multiple projects, funds and grants on top of its controversial flood levy.
In order to keep its promise to return the budget to surplus, around $3 billion was slashed from government initiatives, including $1 billion from infrastructure, $88 million from education, and more than $1 billion from environmental initiatives.
CPA Australia said in its pre-budget submission that while it supports the aim to return the budget to surplus, there is a “real danger” of trying to do so in record time.
“[It] would come at the expense of a far-sighted, measured approach, with the serious consequences for Australia’s economic strength over the next five to 10 years,” it said.
“Extending the return-to-surplus deadline would enable the Government to address the immediate issue while ensuring a solid platform for sustainable economic growth and addressing medium to longer-term challenges.”