Joe Hockey: More budget blow-outs on the table as revenue shrinks

Treasurer Joe Hockey during House of Representatives question time. Stefan Postles/Getty Images

The federal government is preparing for bigger budget blowouts as falling commodity prices shrink the revenue base.

Up to $25 billion more in revenue could be lost over the next four years if iron ore, now trading at around $US47 a tonne, gets as low as $35-a-tonne.

Treasurer Joe Hockey, speaking to the Australian Financial review before the May 12 budget, said the loss from iron ore would be on top of write-downs in income tax revenue due to flat wages growth.

“There seems to be no floor. We are contemplating as low as $US35 a tonne, ” Mr Hockey told The Australian Financial Review.

The budget would have a “credible path back to surplus,” Hockey said.

However, he could not guarantee the deficit would not worsen again.

“We’re still working through the numbers,” he said. “There are many, many, moving parts.”

The deficit was forecast in December to be $40.4 billion this year and $31.2 billion next financial year.

Hockey also said he has no choice but to continue with last year’s budget cuts to welfare, health and the growth of the pension despite them being stuck in the Senate.

“The moment you walk away from structural savings is the moment that you concede you’re never going to get back to surplus,” he said. “They stay on the books to be delivered and we are looking at compromises to get those outcomes.”

These measures, worth $27 billion over four years, are stuck in the Senate.

Hockey said the government could campaign for the measures or alternatives at the next federal election due in 2016.