AUSTRALIA’S deficit is now forecast to be more than two-and-a-half times the level predicted earlier this year, according to a leading financial expert.
Deakin University accounting chief Graeme Wines said mining industry slowdown was one of the main factors behind the $123 billion deficit over forward estimates revealed yesterday.
Treasurer Joe Hockey released the federal government’s mid-year economic and fiscal outlook statement, projecting slower wage growth and substantial revenue write-downs.
Professor Wines said the 2013-14 deficit was now forecast to be more than two-and-a-half times the level originally forecast in the May budget delivered by former treasurer Wayne Swan only seven months ago.
The Warrnambool-based lecturer said the gloomy forecast was due to a combination of a 4.3 per cent increase in forecast spending as well as a 3 per cent fall in expected receipts.
“The deterioration is the exact reverse of what was occurring in the late 1990s and early 2000s,” Professor Wines said.
“In those earlier years, surplus estimates were continually revised up-wards due to booming economic conditions.
“Now it is worsening deficits that are being forecast.”
Professor Wines said the effect of the increasing level of government debt was starting to hit home.
He said an annual interest bill of $12.4 billion for the 2013-14 financial year represented slightly more than one quarter of the deficit amount.
“This especially reflects the hangover from the high government spending in the wake of the 2008 global financial crisis,” Professor Wines said.
Mr Hockey told the National Press Club that social welfare, education and health programs and infrastructure contributed to the bulk of expenses shouldered by the federal government.
The federal Treasurer said Australians would have to adjust their expectations of what services the government could provide.
Professor Wines said the federal government was using the update to soften up the Australian public for significant spending cuts.
“The worsening budget position reflects the difficulty the government faces in decisions such as continuing subsidies for Australian car manufacturing,” he said.