Thursday, May 05, 2011

Hockey said what? He'd get the budget to surplus earlier

New private sector forecasts showing a dramatic deterioration in the government’s budget position suggest the Coalition is promising the impossible in saying it could bring the budget into surplus one year early.

The Access Economics forecasts released this morning say this year’s budget deficit will be come in at $51 billion instead of the government’s most recent forecast of $41 billion; the 2011-12 deficit will be $22 billion instead of the officially-forecast $12 billion, and the promised 2012-13 surplus will be a paper-thin $710 million instead of the officially forecast $3.1 billion.

“The surplus will be a rounding error,” said Access director Chris Richardson. “But then so too was the government’s November surplus forecast of $3.1 billion. We don’t expect a sizable surplus until 2013-14.”

Coalition Treasury spokesman Joe Hockey turned attention away from the government towards himself yesterday when he might be able to bring in a surplus earlier...

“When we laid down our plans at the last election, we outlined $50 billion of savings, hard measures that included a reduction in the Commonwealth public service of more than 12,000 people,” he said.

“Given that, and given the rules that we applied to ourselves in Opposition, we would be delivering a surplus as quickly as possible, perhaps even earlier than 2012-13.”

Finance Minister Penny Wong pounced on the claim asking his leader Tony Abbott to explain where the Coalition would make the extra savings.

“In eight days’ time when Mr Abbott stands up as the alternative prime minister before the Parliament, 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,” she said. “That’s the test that Joe Hockey has now set.”

Mr Abbott replied he had already outlined savings during the 2010 election campaign and would do again “in good time before the next election”.

“But I’m certainly not going to respond to cheeky challenges from a minister who is going to be guilty of helping to bring down a budget without the carbon tax in it,” he said.

Senator Wong said the $50 billion of savings the Coalition identified in the election were later costed by Treasury and found to contain errors including double counting.

“We saw a $10.6 billion black hole which Tony Abbott has never accounted for. The Coalition thinks it can simply wish its way back into surplus by rocking up at a press conference and telling people it is going to achieve it without doing the work, without doing the savings, without doing the costings.”

Deloitte Access said flood reconstruction and the delayed flow-through of corporate losses sustained during the financial crisis would be a drain on the budget on 2013-14. From then on the budget would be healthier and surpluses bigger as the mining income flowed into tax revenue aided by the new minerals resource rent tax.

“But those surpluses will be hostage to China’s demand for our resources,” Mr Richardson said. “Future budgets will come with a Made in China stamp.”

Published in today's SMH and Age

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