Coalition targets big deficit cut

THE Coalition is looking to significantly reduce the deficit forecast for next financial year as it begins the process of repairing the federal budget.

THE Coalition is looking to significantly reduce the deficit forecast for next financial year as it begins the process of repairing the federal budget.

The Australian understands a deficit figure of $20 billion for the 2014-15 financial year has been discussed in meetings earlier this year, meaning cuts of almost $14bn in the budget.

Joe Hockey’s office denied the $20bn figure had been discussed. But sources present in budget meetings said the Treasurer hoped on budget night next month to announce he had significantly reduced the deficit left by Labor from the 2013-14 financial year by about half. The deficit is $47.6bn, which includes a one-off grant to the Reserve Bank of $8.8bn.

The deficit projected next fin­ancial year is $33.9bn, according to the mid-year economic and fiscal outlook released in December. This means savings of about $13.9bn would be required to bring in a $20bn deficit.

With five weeks to go, the budget document is still in negotiation. The decisions that will materially change the final deficit amount have not yet been taken.

A spokeswoman for the Treasurer would not comment on the size of the deficit but said “it’s true that the Treasurer wants to reduce the deficit left by Labor, which is at historic highs”.

“You’re reaching that point where the hard work is being done at the current time to repair this structural mess that Labor has left and we are trying to get on to a more sustainable footing,’’ the spokeswoman said.

“The Treasurer is driven to do that repair. The Treasurer wants to repair the budget and address a significant overspending undertaken by Labor.”

The final report from the Commission of Audit, which will inform the expenditure review committee razor gang preparing the budget, was delivered to the government this week.

While the government is committed to finding significant savings across government, Tony Abbott has repeatedly said all election promises would be fulfilled and has denied there would be any major changes to the paid parental leave scheme, which the government promised to introduce in its first term.

Parliamentary Secretary to the Prime Minister Josh Frydenberg said deregulation and reducing red tape would create an annual saving of $1bn. “It’s going to significantly lift productivity, so you create jobs, which leads to more revenue and a healthier economy,’’ Mr Frydenberg said.

The budget announced in May last year under Labor forecast a deficit of $18bn for 2013-14.

The deficit remained consistent in the Pre-Election Economic and Fiscal Outlook but in the MYEFO released on December 17, Mr Hockey revised this figure to $47bn. Some of this was due to increased government spending, including the Coalition’s $8.8bn grant to the RBA, along with higher unemployment benefits and lower tax revenue from a weaker economy. At the time, Mr Hockey said that combined deficits over the four-year period would be $123bn.

Mr Hockey also revealed government revenues had collapsed by about $1bn a week since Labor’s last budget and said total tax revenue was forecast to fall 1.3 per cent to $343.5bn.