SYDNEY – Australia is facing at least four more years of deficit with a A$17 billion (US$15.2 billion) blowout since September elections as the economy struggles to deal with an unwinding mining investment boom, the treasurer said on Tuesday.
Joe Hockey said the conservative government had inherited a "simply unsustainable" budget from centre-left Labor and warned that without urgent action Australia would be in the red for a decade, with a deficit of A$47 billion this financial year.
"More than half the deterioration in the budget position is due to the softer economy," he said in releasing the new government's first budget update. "This reflects a sharper-than-forecast fall in resources investment and a slower recovery in the non-resources sectors."
Australia is undergoing a bumpy transition from an Asia-led decade of booming mining investment towards other drivers of growth, with key partner China slowing and easing demand driving commodity prices down.
The conservatives had vowed during the election campaign to bring the budget back into the black at least as fast as Labor – a deadline of 2016-17 – but this will not happen with deficits totalling A$123 billion forecast over the next four years.
"We want to get back to surplus as soon as we can. I'm not going to make the mistake (former treasurer) Wayne Swan made (in promising a surplus)," Hockey told reporters when asked when a surplus might be achieved.
He said GDP forecasts for 2013 were unchanged at 2.5 per cent for the current financial year to June 30, 2014, but growth had been downgraded the following year from 3.0 per cent to 2.5 per cent.
Unemployment was revised down from a peak 6.25 per cent to 6.0 per cent this financial year, but the forecasts were more pessimistic in the medium term, seen at 6.25 per cent in each of the next three years.
That contrasts with pre-election forecasts by Labor of 6.25 per cent in 2014-15 and 5.0 per cent the following two years.
Chief among the A$17 billion blowout in government spending since September was an A$8.8 billion cash injection to the Reserve Bank of Australia and A$1.2 billion for the government's military-led people-smuggling crackdown. AFP