The Federal Government is set to sink $14 billion deeper into deficit next financial year, according to an independent budget analysis.
The Deloitte Access Economics report likened the 2015-16 deficit figure to the work of horror writer Stephen King and Norwegian artist Edvard Munch, who is internationally famous for his tortured artwork The Scream.
Deloitte said the retreat of the Chinese commodity boom could be a “budget bust” for Australia.
It also identified the pressures in Australia’s domestic political climate, and the resulting gridlock for the Government in the Senate on a range of significant savings measures.
The Coalition also remains locked into some big spending policies that were finalised in healthier budget times.
Deloitte has readjusted the budget projections to take into account the latest economic news.
Last year’s budget deficit was $48.5 billion.
Deficit expected to be worse than predicted
Deloitte is predicting this year’s deficit will be $5.5 billion worse than predicted a year ago, and will be close to $45.9 billion.
The biggest adjustment is forecast for next year.
In the Mid-year Economic and Fiscal Outlook the Coalition Government projected the deficit would shrink to $31 billion in 2015-16, but Deloitte is now warning of a $14.1 billion blowout.
“2015-16 looks like it has been written by Stephen King and painted by Edvard Munch,” the report said.
It adds wage growth is now “limping” as businesses try to revive competitiveness.
“That’s set to tear a hole in the budget,” the report said.
Budget repair at ‘snail’s pace’
The report said Australia has been trying to adjust to changing international conditions, but China keeps moving the goal posts back faster than the Government can steer the savings through the Senate.
Considering the figures over three years, between financial year 2013-14 and 2015-16 the deficit would have been reduced by less than $3 billion overall.
“That’s budget repair at a snail’s pace,” the report said.
Deloitte has identified potential good news in the fall in the Australian dollar and record low interest rates on federal debt.
Capital gains taxes are also likely to provide extra revenue through the share market and high house prices.