Treasurer Joe Hockey is set to unveil what he says is the true state of the books after six years of Labor governments.
The mid-year economic and fiscal outlook (MYEFO) on Tuesday will show deficits totalling more than $120 billion over the next four years, starting with a figure close to $50 billion in 2013/14.
Without radical repair work, the deficits could run for a decade, Mr Hockey will tell the nation in his first major economic statement since the September election.
The coalition will sheet home the blame to Labor’s spending spree, revealing that rather than the two per cent average talked about by the former government its annual spending rise over the five years to 2012/13 averaged 3.5 per cent.
Labor says the government is using scare tactics to disguise the fact that Mr Hockey has added $20 billion in spending since the election and is no longer on track to deliver on Treasury’s forecast $4.2 billion surplus for 2016/17 in its independent pre-election fiscal outlook (PEFO).
Economists now don’t expect a return to budget surplus until at least 2017/18.
Shadow treasurer Chris Bowen says the $8.8 billion given to the Reserve Bank and other post-election spending measures of the coalition massively blew out the PEFO forecast of a $30 billion deficit for 2013/14.
The full details of how the Abbott government plans to rein in spending won’t be revealed until the May budget, which will draw on advice from reviews including the national commission of audit.
But some initial savings are expected to be made known, while revenues will be conservatively under-estimated.
Economists expect gross debt to climb above $420 billion within three years and growth to moderate before recovering in 2014/15.
The average jobless rate is expected to rise to 6.25 per cent in 2013/14 and remain that high for another year.
Meanwhile, two polls have found coalition popularity dropping in the people they recently surveyed.
On a two party preferred basis a 7News ReachTel poll puts Labor ahead 52 per cent to 48, while a Morgan Poll says Labor is in front 52.5 per cent to 47.5.