Budget Projected To Blow Out By $26.1 Billion Over Four Years

15/12/2015 11:49 AM AEDT | Updated 15/07/2016 12:51 PM AEST
Fairfax/ Phillip Gostelow

CANBERRA – A “workman-like progress” is how Treasurer Scott Morrison is describing the long path back to budget surplus as he reveals a projected budget blow out by $26.1 billion over the next four years.

Australia’s books have moved deeper into the red, with the Mid-Year Economic and Fiscal Outlook (MYEFO) released Tuesday showing this year’s budget deficit of $35.1 billion has worsened by $2.3 billion since May to $37.4 billion.

In the last budget update before an election year, the deficit is projected to narrow to $14.4 billion by 2018-19, but this figure is more than double the $6.9 billion detailed in May.

scott morrison

Treasurer Scott Morrison delivering his first budget update

In the last budget update before an election year, the deficit is projected to narrow to $14.4 billion by 2018-19, but this figure is more than double the $6.9 billion detailed in May.

Billions of dollars’ worth of savings include welfare integrity measures, the removal of bulk-billing incentives and a cap on the number of Green Army projects.

Labor Leader Bill Shorten has described the cuts as “horrible.”

“The lesson of today's MYEFO statement is that Malcolm Turnbull and Scott Morrison are proposing cuts which are harsher than those of Tony Abbott and Joe Hockey,” Shorten told reporters in Sydney.

“After two and a half years the budget's going nowhere. The liberal Government have achieved precisely nothing.”

“And Australia's going backwards.”

Morrison, delivering his first major economic update, told reporters in Perth that a "significant budget challenge" remains, but he said he will not put the safety of growth and jobs at risk to get the budget back to surplus faster.

"That's what Australians expect of the Government. They don't think there is any magic solution to this," he says.

A balanced budget is now predicted to occur one year later, in 2020-21.

“The way we go about it I think is continuing to make this very workman-like progress on this year by year,” Morrison said.

“I'm pleased that this year's Budget position as forecast will be better than last year and the better the year after that. “

“That shows we are making progress towards our destination.”

That claim has been ridiculed by Shadow Treasurer Chris Bowen.

“Today Treasurer Morrison's been reduced to promising a return to surplus "as soon as possible", when revenue exceeds expenditure,” he said.

“Their fiscal strategy is simply non-existent.”

MYEFO reveals revenue write downs of almost $34 billion due to falling commodity prices, a declining terms of trade and weaker global growth, while growth forecasts have been revised down by a quarter of a percent to 2.5 percent in 2015-16, and by half a per cent in 2016-17 to 2.75 percent.

Unemployment, which was 5.8 percent seasonally adjusted in November, is forecast to remain around 6 percent in the June quarters of June 2016 and 2017.

Government revenue has also taken a $7 billion hit over the next four years with further steep falls in price of the key commodity, iron ore.

Treasury’s iron ore price assumption in Tuesday’s MYEFO has been reduced from $US48 to $US39.

However, the price of the key source of government tax revenue last week hit $US37 a tonne.

Six year low oil prices as well as falling coal prices are also impacting on the budget bottom line.

New budget savings include an extended plan to tackle welfare fraud, which is expected to save $1.3 billion over three years, starting from July 2016.

The Government expects to recovering money from a greater number of people through improving compliance and identifying Tax Office and Centrelink discrepancies.

The cost to pay for the settling of 12,000 refugees fleeing conflict in Syria and Iraq has risen from the initial estimate of $700 million over four years to $909 million over the forward estimates.

MYEFO reveals $158 million in extra funds will be spent on the humanitarian refugee program during 2015-16.

There’s a cut to the Medicare Benefits Schedule in the health budget with $650.4 million projected to be saved over four years by removing bulk-billing incentives for pathology services.

The measure, which won’t apply concession card holders and children under 16 years, will start in July 2016.

Green Army projects are to be capped at 500 per year saving $317.5 million from the program.

Look out for a new national security awareness campaign across all media. The Turnbull Government is spending $10 million to encourage citizen to report suspicious activity to the National Security Hotline.

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