Treasurer Joe Hockey to reveal Budget 2014 deficits set to double

THE deficit forecast for the federal budget has blown out much more than expected. What does this mean for Australia’s bottom line?

THIS year’s deficit has blown out to more than $40 billion, as the Federal Government’s budget woes in the Senate hurt its bottom line.

Failure to fully negotiate or get measures through the Upper House has cost the budget more than $10.6 billion, over the forward estimates.

The mid-year economic update shows a deficit of $40.4 billion is now expected this financial year, narrowing to $11.5 billion in 2017/18.

A return to surplus has been further delayed, but the government hopes they will build to at least one per cent of GDP by 2023-24.

CUTS LOOM: $4 billion to go from foreign aid

Forecast ... Treasurer Joe Hockey has delivered his mid-year economic update.

The outlook confirms the abolition of 175 bodies, including 138 government bodies and consolidating others.

It also reveals a $3.7 billion cut over four years to the foreign aid budget.

The report says a 30 per cent collapse in the iron ore price and weaker-than-expected wage growth has resulted in tax receipts being revised down by $31.6 billion.

Delays in passing legislation and negotiations with the Senate have cost the budget more than $10.6 billion over the forward estimates, “keeping debt and interest payments higher for longer”.

Cuts slammed ... Shadow Treasurer Chris Bowen and Opposition Leader Bill Shorten chat during Question Time.

But the budget review says a wafer-thin surplus of 0.8 per cent of GDP is projected for 2019/20.

Mr Hockey delivered his mid-year economic update today, amid reports of a forecast of $379.5 billion in receipts following a figure of $385.7 billion in May.

News Corp Australia says deficits over the period will almost double to $100 billion, signalling little hope of economic improvement without unpopular reforms to taxes and spending.

Fairfax Media says the outlook will point to tens of billions of dollars in lost revenue over the next four years as a result of falling commodity prices.

PM’s woes ... the mid-year economic update shows a deficit of $40.4 billion is now expected this financial year.

Despite the deficit blowout and “work to be done”, Treasurer Joe Hockey insisted they “are on the right track”.

“The Commonwealth Budget is stronger today than it was last year, that is despite a fall in expected revenue of around $100 billion since the 2013 budget,” Mr Hockey said.

“Whilst we’ve faced many challenges, we’ve made a good start fixing the budget.”

He noted the “unforeseen” and largest fall in the terms of trade since records began, over the past six months.

Mr Hockey also said there’s been an increase in family welfare and childcare payments.

“We will announce a comprehensive families package in the new year, including childcare and parenting leave initiative,” he said.

Challenges ... the Treasurer has already warned of job losses due to falling iron ore prices. Picture: Toby Zerna

Mr Hockey warned on Sunday of job losses and an end to Australia’s prosperity ahead of the update, with plummeting iron ore prices the chief cause.

Shadow treasurer Chris Bowen, however, hit out at the cuts to foreign aid, saying the coalition was treating overseas development as an ATM. “It is just their cut of first resort on every occasion,” he told ABC radio.

Mr Bowen acknowledged Australia’s finances were suffering from falling iron ore prices.

But he said the government’s budget was also responsible for the deterioration.

“Since (Mr Hockey’s) own budget we’ve seen employment growth slow, we’ve seen consumer confidence smashed,” he said.

“His blunders and his bluster, his words and his actions, have affected the real economy.

Prices have dropped to $60 a tonne — halving in a year — with the resultant fall in the terms of trade the largest since records were first kept in 1959.

“If we don’t use the budget as a shock absorber for this extraordinary fall in the terms of trade, then Australians will lose jobs and we will lose our prosperity,” Mr Hockey said.

The midyear statement will show the economy growing at about 2.5 per cent, strengthening to three per cent over the next few years, he said.

However, it will also forecast unemployment to increase further, “to levels that are a tick higher than what we forecast in the (May) budget”.

The announcement comes in a rough end to the Abbott government’s first year in power, ending well behind Labor in the polls.

Despite the prime minister’s so-called barnacle-clearing strategy to change unpopular policies, the survey shows the opposition has a two-party-preferred lead of 54 to 46 per cent. The result is almost the reverse of the election result 15 months ago.

A Newspoll of 1084 voters published in the Australian reveals primary support for the coalition up one point to 38 per cent in the past fortnight but Labor has gained two points to lift its primary vote to 39 per cent.

The Greens have dropped one point to 12 per cent while support for minor parties, independents and others has fallen two points to 11 per cent.

National support for the Palmer United Party is less than 1 per cent

Originally published as Treasurer Joe Hockey to reveal Budget 2014 deficits set to double