It’s going to be a long Tuesday for the Coalition, which is widely-expected to admit the budget won’t be back in surplus for at least a decade.
This will be a tough pill to swallow for a government that, while in opposition, constantly criticised Labor’s economic track record.
In the lead-up to the update, cabinet members have reportedly been told to expect deep cuts to their budgets as the Treasurer tries to get the situation under control.
Ministers told The Australian they had been warned the cuts were coming early next year after they were examined by the “razor gang”.
Senior business executives and economists have also expressed their dismay in an article in the Australian Financial Review, lambasting the Government for the bad news which has more or less, already been announced.
Meanwhile, the latest poll shows if an election were held today Tony Abbott would probably lose, after a series of backtracks, as well as diplomatic and economic mishaps.
Here’s what you need to know:
Tuesday’s budget update is widely expected to show the Federal Government’s deficit forecast blowing out from $30.1 billion to about $50 billion.
Or more than $1 billion a week since the last forecast, the pre-election economic and fiscal outlook, in August
MYEFO (Mid Year Economic and Fiscal Outlook) will also show that it will take much longer than expected to return to a budget surplus.
The new Coalition Government has been talking down the budget deficit since it took office from Labor in September.
Yesterday Prime Minister Tony Abbott said: “What is going to happen tomorrow is that we will be ruling a line under the fiscal damage that Labor has done. Sadly, the economic damage will continue for some time.”
JP Morgan’s Stephen Walters says:
Treasurer Hockey reveals the updated Budget position Tuesday; it will be ugly. We forecast a deficit of $50 billion, with lots of nasties packed into the accounts for the current fiscal year which, conveniently, started under the previous goverment’s watch.
And UBS’s George Tharenou says gross government debt could now peak at $452 billion in 2016-17, a rise of $51 billion.
Watch for recalculated forecasts on GDP (currently 2.5 per cent), employment/unemployment and the Consumer Price Index.
This chart shows the latest official figures for government net debt. MYEFO will show a deeper fall below the line for 2013-14.
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