News National Decade of deficits as Hockey updates budget

Decade of deficits as Hockey updates budget

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· Deep cuts to the federal budget to come: Chris Bowen
· ANALYSIS: Aussie dollar and house prices crucial in 2014

The Abbott Government’s first budget statement has revealed an economy in dire trouble with historically deep deficits, more people out of work, slower wage growth and massive revenue write-downs.

Treasurer Joe Hockey has unveiled the Mid-Year Economic and Fiscal Outlook (MYEFO) in Canberra, warning that wasteful spending will have to be “eliminated” but that Australians will also wear some hip-pocket pain. 

“Much of the projected growth in spending is from social programs, including welfare, education and health,” Mr Hockey said in his speech at the National Press Club.

“Spending reform will inevitably require difficult choices about the policies that Australians need now and in the years to come.

“Australians will have to adjust their expectations of what government can sustainably provide otherwise our nation’s prosperity and our people’s quality of life will be at risk.”

Trade training centres scrapped

Detailed cuts are expected in the May budget but MYEFO has revealed that trade training centres, mostly based in high schools and brought in by Labor, have been scrapped to contribute $1 billion for the Gonski school funding agreements.

The Government decided not to scrap the agreements last month, after protests from states and territories.

The schools funding gap will also be covered by dumping the $528 million Building Stronger Communities Fund – slated to pay for small programs and services.

Finance Minister Mathias Cormann says Labor’s funding plan left the Coalition with a Budget “challenge”.

“If you have to increase spending for a purpose like this within the budget then you’ve got to find offsets elsewhere,” he said.

“And the Government has re-prioritised spending in the education portfolio in order to ensure that we can provide funding to schools across Australia in a way that is nationally fair and equitable.”

‘Maximum efficiency’ from NDIS funding

Mr Cormann also flagged changes to funding the National Disability Insurance Scheme, a popular policy which won bipartisan support and passed Parliament last May.

The Labor government committed $14.3 billion over seven years in the 2012-13 Budget. But Mr Cormann says the Coalition is looking for maximum efficiency in funding the scheme.

“We are committed to deliver it but we are also committed to deliver it in the most cost-effective and efficient way possible,” he said.

“So there is some work being done now by the Assistant Minister responsible for this, Senator Fifield.

“We are having conversations with the states and territories as well on how the efficiency and cost effectiveness of this very important commitment can be maximised.”

Figures a ‘cheap trick’: Labor

The Opposition says the Government has painted the bleakest picture possible, in a “cheap trick” to justify widespread cuts in the May Budget.

“Let’s be clear about what’s going on here: Joe Hockey is softening up the Australian people,” Labor’s Treasury spokesman Chris Bowen said.

“He’s preparing the ground for deep and brutal cuts come budget time – cuts to come which will affect every Australian.

“This is Mr Hockey’s attempt at an alibi but it’s also his attempt to soften up the Australian people for the true Liberal agenda – which is cuts across the board.”

The concerns are echoed by Greens leader Christine Milne.

“What Joe Hockey has really set out today is to lay the groundwork for a budget next year of slash and burn – we can’t do that,” she said.

This year’s deficit blows out by $17 billion; surplus promise dumped

The figures show this year’s deficit will blow out to $47 billion, $17 billion higher than forecast in the last major budget update in August, the independent Pre-Election Economic and Financial Outlook (PEFO).

The combined deficits over the four years of the forward estimates total $123 billion, with the small surplus forecast in August for 2016-17 of $4.2 billion blowing out to an $18 billion deficit.

The figures have forced the Government to dump its election promise to deliver a surplus in the first year of a second term, saying only that it is committed to “returning the budget to sustainable surpluses that build to at least 1 per cent of GDP by 2023-24”.

It has blamed a “softer” economic outlook, high demand for government programs – particularly health care – and “essential steps” it has taken to address “inherited” issues.

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