Economic commentators have predicted a blow to the government’s coffers.
Treasurer Scott Morrison and Finance Minister Mathias Cormann will release the Mid-Year Economic and Fiscal Outlook (MYEFO) in Perth on Tuesday afternoon, which experts said would cause a budget blowout.
Deloitte Access Economics predicted the budget deficit in 2015-16 would increase to $40.3 billion, not the $35.1 billion forecast in the May budget.
Meanwhile, Stephen Anthony, chief economist at Industry Super Australia and a former Treasury official, said MYEFO was an opportunity for the Treasurer to “dump” some of his predecessor Joe Hockey’s failed savings measures.
“What I expect the Treasurer to do in MYEFO is essentially to take out the trash,” Mr Anthony said.
“To discard some of the controversial saving options that have been blocked in the Senate to do with higher education and family and other budget savings, and to look to reboot the savings process around areas that are more measured, more balanced and sharing the load of adjustments across the community.”
But the Finance Minister played down predictions of horrendous debt figures.
“We have been able to improve the budget bottom line, by offsetting any spending increase,” Senator Cormann told the ABC on Tuesday morning.
“Overall spending will be lower in this budget update than what was anticipated at budget time.”
Mr Cormann said there would be “significant focus on integrity measures” to ensure welfare was directed to those who were entitled and most in need of government support.
“We’ve made a real concerted effort to improve the integrity of the payment system to ensure spending is efficient and effective as possible.”
The Finance Minister ruled out further cuts to the foreign aid budget, which had been raided previously.
There would be new expenditure to resettle 12,000 refugees from Syria and for cancer drug treatment subsidies, he told the radio station.
Industry Super Australia’s Mr Anthony expected a further downward revision in iron ore price forecasts so that the government does not have to further increase its deficit predictions in an election year if the commodity rout continued into 2016.
“You would expect that Scott Morrison will do his best to include an iron ore price that is somewhat lower than even that,” he said.
“The idea being that he should try to produce budget forecasting, but actually undershoot so that next year he’s not constantly put in this position where there is bad budget news because of unfavourable parameter variations, particularly in the lead-up to the next election.”
Mr Morrison said on Monday he would seek savings for recent spending measures and “any new spending must be fully offset”.
He promised early in his new job to decrease government spending as a percentage of GDP from its current level of 26.2 per cent. It was 25.9 per cent at the May budget.
Shadow Treasurer Chris Bowen said the government was softening up the public for further cuts, but that Labor was prepared to support any cuts as long as they were fair.
– with AAP/ABC