It’s been a difficult year for Joe Hockey and it’s not about to get any easier.
The treasurer on Monday will have to explain why his budget has deteriorated more than forecast at the time of its release in May.
Mr Hockey has promised he won’t be making any significant budget cuts in his mid-year budget review despite a softening economy.
That looks more likely to happen in the budget next May.
Mr Hockey insists the government has to reduce spending and live within its means.
“The only way to reduce expenditure is to ask people to make a contribution along the way,” he has argued.
“If we don’t … it is going to become much harder and much more expensive in the future.”
Labor expects the treasurer to use the mid-year review to blame everyone but himself and the government for his budget woes.
Economists expect the budget deficit to be more like $35 billion in 2014/15, rather than the $29.8 billion shortfall predicted in May.
They also expect the deficit to have blown out by around $10 billion in each of the three following years.
It means by 2017/18 the deficit will be around $12 billion, and not the “broadly balanced” budget the government had talked so much about.
Falling income tax revenues from rising unemployment and weak commodity prices are to blame for the huge dent in the government’s finances.
There’s also been some slippage in budget savings, including concessions to get the abolition of the mining tax through the Senate and tinkering with yet-to-be-legislated measures in a bid to make them more palatable.
The mid-year economic and fiscal outlook will contain Treasury’s latest economic forecasts.
They come at a time when a growing number of economists are tipping interest rate cuts in 2015.
Westpac senior economist Andrew Hanlan is expecting two cuts to the Reserve Bank’s cash rate, already at a record low.
“There is no doubt that growth is very uneven at the moment,” he says.
The recent national accounts showed a sombre economy running below three per cent and putting upward pressure on the unemployment rate.
The jobless rate struck a 12-year high of 6.3 per cent in November, above Treasury’s forecast of 6.25 per cent for mid-2015.
National Australia Bank economists now expect the rate to peak at 6.75 per cent.
On the up side, inflation is expected to remain benign thanks in part to the government’s scrapping of the carbon tax, which has triggered a fall in electricity prices.