UPDATE:
The Federal Government announced today that the expected 2014-105 budget deficiet would rise to $40.4 billion.
A sum much larger than Tresurer Hockey’s initial prediction of $29.8 billion in May.
Mamamia previously reported…
By ABC POLITICAL REPORTER James Glenday
Treasurer Joe Hockey will slash foreign aid and reveal a massive blowout in this year’s deficit when he hands down his mid-year budget update today.
The ABC’s AM program understands the aid budget will be reduced to Howard-era levels and more than $3 billion will be cut over the next four years.
The cuts in today’s Mid-Year Economic and Fiscal Outlook (MYEFO) come on top of a $7.6 billion cut to the aid budget in May.
Some of the money will be redirected to fund new spending decisions, such as a $630 million boost to national security and the deployment of troops to the Middle East.
This year’s budget deficit, which was forecast to be $29.8 billion in May, is now set to exceed $40 billion as “global headwinds” continue to batter the Australian economy.
“We remain on a believable and responsible path to surplus, but we will get there slightly less quickly than we would have liked,” Finance Minister Mathias Cormann said.
Shadow Treasurer Chris Bowen has criticised the cut to foreign aid.
“They just treat our foreign aid, our overseas development, as their ATM,” he told Radio National.
“It is just their cut of first resort on every occasion.”
Senator Cormann told AM Senate compromises and delays, as well as falling commodity prices, would hit the budget hard over the next four years.
“There’s been a significant drop in revenue on the back of a sharp fall in terms of trade and also on the back of wages growth being lower than expected,” Senator Cormann said.
“We are not going to chase down the fall in revenue.
“There’s been a decision to participate in efforts in Iraq … and then finally there’s been some decisions in the Senate where there have been either delays or outcomes of various negotiated arrangements where there was a cost to the budget from that as well,” he said.
But Labor argued that any measures held up in the Senate are still on the budget books and therefore cannot be counted towards the ballooning deficit figure.
Government sources said the MYEFO contains the steepest fall in the nation’s terms of trade in more than 50 years.
Any hope coalition MPs had of a return to surplus before 2017-18 has now been abandoned.
Budget shows ‘Hockey’s hypocrisy’, Opposition says
But “economic headwinds” also plagued former Labor treasurer Wayne Swan, and in Opposition Mr Hockey had little sympathy.
Last year, he said: “Old Swanny likes to blame everyone else.”
“The trouble is he gets his numbers wrong in the first place and again if you were a company director you would go to jail.”
Labor’s finance spokesman Tony Burke said the budget update shows the Treasurer is a “complete hypocrite”.
“If Peter Costello could deal with an Asian financial crisis, if Wayne Swan could deal with the Global Financial Crisis then surely Joe Hockey should be able to deal with commodity prices,” Mr Burke said.
But Senator Cormann insisted the Abbott Government’s situation was “quite different”.
“[Last year] Labor was saying we were deliberately taking a too pessimistic view to make the numbers look worse than what they were and of course as it turns out we weren’t aggressive enough in downgrading the revenue assumptions that we inherited from Labor,” he said.
“Furthermore, when revenue was starting to fall under the previous Labor Government they decided to ramp up expenditure further to unsustainable levels whereas we are making the difficult but necessary decisions to get spending under control.”
This post originbally appearred on ABC and has been republished here with full permission.
Top Comments
And now they're spending millions on an ad campaign promoting a pay-as-you-go university fee policy that hasn't even made it through parliament and quite likely never will.
And they still want us to believe we're almost broke!
We're not broke yet but if they carry on cutting revenue streams and wasting millions on no-go policies, we soon will be.
The key problem is revenue is falling. Can the government sensibly save 40 billion a year without having a massive impact on everyone's quality of life? No, of course not its ridiculous. Both Labor and Liberal are trying to fudge and hope things get better - not much of a plan. There are some big decisions to be made, and neither side is offering a solution as far as I can see. Our GDP is rising but revenue is falling surely that means someone is not paying tax, I imagine its big business. In the end its simple, the government are spending more than they are receiving. They need to increase revenue (tax) and put a stop to big business tax evasion. Labor needs to explain how it will raise taxes to provide the type of Australia I want. The Liberal party needs to stop mucking about and really start smacking people around to shake the $40 billion out which will cause HUGE pain or explain how it is going to raise taxes.
"The key problem is revenue is falling"
And so the first thing they do is dump a major revenue stream because it's raising too much money. They slso want to cut corporate taxes. That's more revenue gone.
They also plan to introduce a Medicare co-payment because we can't afford the current subsidy, but they don't plan to put the money toward relieving debt.
Meanwhile, they still hope to pass a policy to spend billions on rich couples who have a baby but don't need welfare.
And now they're spending millions on an ad campaign to promote a university fee-paying policy that doesn't even exist outside the minds of Liberal MPs.
And doesn't Hockey keep telling the rest of the world how amazing our economy is?
So who do you suppose they should smack - and how?
And let us not forget, all of their harshest cuts and increase run absolutely contrary to their election promises. For that, they should call a new election and put their "smack the poor" policies to a real test.