Deficit blows out to $30 billion with unemployment to rise
TREASURER Chris Bowen has unveiled $17.4 billion worth of savings as the Rudd government deals with a significant fall in tax receipts since the May budget
The economic statement handed down by Mr Bowen on Friday revealed the revenue forecasts contained in the 2013/14 budget delivered by former treasurer Wayne Swan just 11 weeks ago were way off the mark, with the latest document showing a $33.3 billion write-down over the next four years.
Consequently the budget deficit will blow out by almost $11 billion in the current financial year to more than $30 billion, before improving to a $24 billion deficit in 2014/15, $4.7 billion in 2015/16 and a "modest" $4 billion surplus in 2016/17.
Unemployment is also expected to exceed 6.25% in the next two years - up from the forecasts of 5.75% in May - before returning to 5% the following two years.
Mr Bowen's statement , thought to be the last major act before Prime Minister Kevin Rudd calls an election, contained few surprises.
Many of the major changes had been flagged, including the increase to tobacco excise (generating $5.8 billion over the forward estimates), changes to fringe benefits tax ($1.8 billion) and introducing a levy on banks ($733 million).
But the statement also revealed the public service would not be exempt from the savings measures, with the efficiency dividend to be increased to 2.25% from July next year (saving $1.8 billion) and increasing the threshold below which small inactive superannuation accounts can be reclaimed by the government ($582 million).
Finance Minister Penny Wong said it was hoped the efficiency dividend would be achieved through natural attrition and not job cuts.
The statement also revealed the cost of the government's asylum seeker deal with Papua New Guinea would come in at $1.1 billion over the next four years, plus $420 million in additional aid for PNG.
This cost will be offset by a $632 million saving in a reduction in onshore processing costs.