The Labor Goverment has downgraded its economic outlook, admitting that higher unemployment and slower GDP growth will slow its return to a budget surplus.
Here are the economic forecasts it released today:
And here is what it forecast in May:
The economic outlook for this financial year is particularly bleak: real GDP is now expected to grow 2.5% instead of 2.75% and unemployment will shoot up to 6.25% instead of 5.75%.
The 2013-14 budget deficit will be $30.1 billion, up from $18 billion forecast in May.
Private sector economists have said that the revised forecasts are closer to their predictions.
The Government now expects to return to a budget surplus of $4 billion in 2016-17, which is a big change from its May projection of a $6 billion surplus by 2015-16.
Echoing statements made by RBA governor Glenn Stevens on Tuesday, the Treasury noted that Australia was transitioning from an “abnormal period of heavy reliance” on the mining sector, and future economic growth would increasingly depend on other sectors like manufacturing, tourism and services.
The government has downgraded its revenue expectations by $33 billion over 4 years, including $8 billion in 2013-14, while announcing new revenue-raising measures like an increased tobacco tax (to raise $5.3 billion) and a bank bailout levy (to raise $733 million from 2016).
Meanwhile, it planned to shave $1.8 billion off public service costs between 2014-17 and “rebalance” its foreign aid budget so that it would avoid spending $879 million between 2013-17 while meeting its target of dedicating 0.5% of the Gross National Income to foreign aid by 2017-18.
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